WHY STRUCTURE MATTERS...FOR TELEVISION, SPONSORSHIP AND MARKETINGTim Finchem - Commissioner, PGA Tour
THE PGA TOUR EXPERIENCE
Tim Finchem: Thank you, Tim, Mr. Chairman, ladies and gentlemen. Thank you for your hospitality. I can already tell by being here last night that a good number of you are golfers or golf fans and I appreciate the opportunity to share some thoughts with you.
Obviously your sport has had an interesting few years, [it's been] tremendously impressive. I have a hard time with my young children...I have three daughters -- 16, 14 and 12 -- one of whom is showing some interest in the game of golf but all of whom love Seabiscuit and all of whom talk incessantly about Smarty Jones.
We're doing okay too and I want to share a few thoughts about our structure. To do that though, I thought I might put in perspective kind of quickly where we are in today's sports world. To start that off I'm going to show you a brief clip.
You might notice we talk about core values -- even in that little spot. I think when you look at the success of the PGA TOUR, it is fundamentally related to the images of the players. That combined with our television partners who capture the essence of the competition and translate it so well are the two things that really have driven our success.
Let me give you two or three quick indicia of how we're doing:
Number one, in terms of global interest, we have now virtually every good player in the world playing on the PGA TOUR. If you look just in the past five years at the number of countries represented on the PGA TOUR in terms of our membership, we've gone from 10 to over 20. The number of players who are exempt from other countries has gone from just over 20 to 70 players. So this translates into tremendous exposure and interest worldwide. Our television product is stronger in Japan and in Europe than the Japanese and European tours.
Secondly, in terms of our fan base, we now have over 100 million Americans over the age of 12 who follow the game at some level. Obviously this has been a pattern that's gone on for 20 years and continues to accelerate.
Thirdly, in terms of television...I was watching your numbers with interest a few minutes ago...but of primary interest to our sponsors is the fact that, in any given week, we are reaching a total number of households in the United States that's second only to the National Football League in terms of total household penetration. This allows us to attract a significant amount of sponsorship and when you combine that with the fact that our fan base is not only growing but diversifying in terms of Hispanics, minorities, African Americans, kids, young people, women...the combination of those two things has driven our overall sponsorship strength.
Lastly, I'll just comment that in terms of sponsorship strength we went through the recession with 100 percent sponsorship of every facet of our game and have come out of the recession with our sponsorship stronger than ever.
With that said, I again have to point to the quality of our players -- the way they conduct themselves, the excitement they generate, the image they convey -- as the fundamental value in our sport and the thing that drives everything else. And with good television partners we've communicated that reasonably well to be able to grow interest.
But there are things that are structurally related to the PGA TOUR which I think have significantly over time had an incredible impact on the ability to effectively market, communicate and draw sponsorship to our sport. We are not like the NBA, Major League Baseball, the NFL or even the National Hockey League. We are jealous of these sports in many ways because they have a monolithic control of everything that relates to the positioning, the communication, the advertising, the television relationships and the overall sponsorship development of those sports.
We're fragmented, just like you are. We have the major championships marketing their product somewhat separately although now somewhat in coordination with us. We have two different groups that rule the rules of golf in the United States and another one outside the United States in the USGA and the Royal and Ancient. We have tours all over the world. And then we have the participation side of the sport. So we are heavily fragmented.
If you look back at the history of the PGA TOUR you will see a slow but steady growth in the ability to coordinate the activity more effectively which has allowed us to generate the kind of growth were seeing today [and] the kind of success. Just like any business, we face the challenge of setting our priorities, creating a strategy, executing, recognizing opportunities and challenges, doing the research to allow us to look into the future and recognize what's out there. But the extent to which we can draw on the resources - the incredible resources - of the game of golf domestically and internationally and pull together toward those aims determines the extent in the final analysis of our success.
Let me give you some examples of where we came from and then some examples of where we are today.
First of all, the PGA TOUR was started in 1968. It's a trade association much like the American Dental Association. Our players are independent contractors and not unionized athletes. Our tournaments today are largely run by charitable organizations. We don't have a for-profit ownership versus athlete-union kind of tension in our sport. That is a huge advantage.
Secondly, when the TOUR was formed, one of the great things our "founding fathers" -- which happen to be Arnold Palmer and Jack Nicklaus - did was to create a board that included an equal measure of PGA TOUR player representation elected by their peers and outside independent directors. These independent directors have no business interest in the PGA TOUR whatsoever. They play golf - or at least most of them have over the years. But they have brought three real advantages to our structure.
One...obviously an outside independent view.
Secondly, a business expertise...and we've been fortunate in bringing some top quality CEO's from around the country to our sport over the years.
But in addition to that, they balance the interests from an outside perspective of the player versus the sponsor versus the tournament. And they also, because of their own credibility, give us a leg up in terms of the image of our sport as it is organized and managed which effects, obviously, our ability to deal with CEO's and board rooms around the country.
So that step was very important.
A little bit later, in the mid-1970's, when Deane Beman became commissioner, one of his first objectives was to bring together the television rights of the tournaments on the PGA TOUR. To have various tournaments negotiating their own television relationships was fraught with weakness.
First of all you can't leverage your ability to get what you want from the networks...not just financially - everybody always talks about money - but the ability to position the sport on television is fragmented tremendously if you have multiple entities negotiating your product. That was put together largely by the mid 1970's.
Thirdly, the charitable relationship we have in our sport. This goes back some 50 years and it grew gradually over the years. But about seven or eight years ago we really institutionalized it as part of our sport. We made it part of our mission. We passed resolutions which said that any new tournament coming on the PGA TOUR must be organized for a charitable purpose. And today we have 110 official money events on three tours - the PGA TOUR, the Champions Tour and the Nationwide Tour. Of those 110, 100 of them are organized with 100 percent of the net proceeds going to a charitable purpose. It is now very much a fundamental part of our sport.
Let me give you an indication of the dollars that are involved. If you look back in 1997, we were raising $30 or $35 million. Today it's $83 million. We will reach the $1 billion mark in total giving sometime late next year or early 2006.
What are the advantages of this structural change?
One: huge advantage in terms of the support of the communities where we play...for our tournaments generating volunteers...the overall positive feel in the community.
Number two: an image impact that really complements what we already know is the image of our players. Ninety-one percent of Americans believe that PGA TOUR players are good role models for their kids, and generating significant benefits for local charities just aids that.
Finally, and very importantly, is the appeal it gives us to the public sector. You have, as I've noticed this morning, significant public sector challenges. I can't tell you how important our charitable relationships have been in terms of generating the support we've needed on Capitol Hill. We have one issue out there right now but we have eight that have been handled positively over the last 15 years which have had huge impact on our sport.
Lastly, we actually use this relationship to try to tell a little better the story of our players. One of the things we're always trying to do is personalize our players to the public and let me show you two examples of how we've done this in the last year or so.
So we've done some things structurally and organizationally that have helped us move along over the years but we still continue to face this fragmentation in the sport. As we look forward to the next 20 years, how do we garner more of the assets of our sport to move in one direction?
Five years ago we started something called the International Federation of PGA TOURs where we brought all of the major TOURs of the world together...we systematized the local rules in addition to the USGA and RNA rules...we created the World Golf Championships...we created the President's Cup...and we are on a path now of increasing integration of the marketing, television and sponsorship aspects of professional golf on a worldwide basis. It has been a very positive movement.
Secondly, we created a board to monitor the world golf rankings. On that board are represented the major championships, the TOURs from around the world, the USGA and the RNA. And these kinds of things, in addition to having the impact to give us credibility with the world golf rankings...getting those organizations to do things together has other spin-off benefits.
These led to the creation of the World Golf Foundation in 1996. We created the World Golf Foundation originally to build our Hall of Fame in Florida which has been successful but we spun out of that a couple of other things which have had a real impact.
Number one...in 2000 we started something called Golf 20/20 which is an industry-wide annual review with day-to-day full-time staff support to evaluate where we thought we could be by 20/20 in two different areas...the area of fan base from the professional entertainment side of the sport and the area of participation because a big chunk of our industry is focused on how many people are playing golf and how much. We set some objectives for participation and we set some objectives for fan base. And by the way, the objective for fan base was to have our fan base outgrow the NFL-level fan base, which is the largest sport fan base in America, by the year 20/20.
Now some people looked at us and said, "How can you look ahead 20 years?" and "What do these projections really mean?" That was less important than getting the industry together, pooling resources to do the research we really needed to do to understand what's happening behaviorally...whether it's on the entertainment side or the participation side...to set some objectives and to set some programs that could get us there. Play Golf America arose out of that...Link Up to Golf arose out of that...[and are] just starting now, four years later, to take a foothold and have an effect.
The third thing that that foundation does is manage First Tee...and the First Tee program started in 1997. It's chaired by President Bush 41. It has generated an enormous amount of interest. Tomorrow in Canton, Ohio I will open our 143rd facility. We will reach over 180,000 kids this summer. Next year, First Tee in schools will inaugurate another phase of the program. We tested that program in 100 schools this year and we reached 75,000 kids. We hope to be in 5,000 schools within four years with a preliminary involvement from kids in kindergarten to grade five with the game of golf.
The other thing it has done is brought the industry closer together because First Tee obviously has been successful. Ninety percent of the ground that these facilities sit on has been donated by counties, cities or states. It has generated over $250 million of cash and in-kind contribution. And just by coming together and making a program that effective has helped bring the industry together.
Let me show you one example of industry cooperation during the Master's this year. Augusta National, which contributes $1 million per year to First Tee, showed this spot and, as you know, they have limited television inventory.
That effort has obviously brought us together as has the World Golf Foundation...the Federation of PGA TOURs...and that's where we are today.
But as we look out over the next 15 years and we see the studies that tell us that the behavioral patterns in the United States and globally are changing, that getting people's attention is much more difficult, that everybody's capsuling their day in 15-minute segments, the competition given that behavioral change with everything else that's out there in terms of opportunity to spend your time as opposed to playing the game or going to a golf tournament or watching it on television are enormous.
And we know that we can't sit back and say that we're doing okay. We have to fight for our position in the future. And the strongest way we'll be able to fight for our position is if all of the assets in our industry come together and stay together and focus on clearly defined objectives to get us there. And I can't say too strongly the benefits that we've seen but I also know that there's significantly more that we can do.
Any organization that's worth its salt is changing all the time and we like to think that we're changing. We like to think that in five years or 10 years we will have more cooperation within the industry than we really do today. We're off to a good start. We have a ways to go. I hope these thoughts help you in your deliberations for the future.
Thank you very much.