PGA Tour Expects Flattened Revenues

It should come as a surprise to no one that the PGA Tour expects revenues to flatten over the next several years. Although all of the tournaments have sponsors and television contracts through 2012, PGA Tour Commissioner Finchem says that the Tour is preparing for the loss of either. In a Bloomberg radio interview, Finchem said:

“I suppose if the economy continues to spiral away from us, if we get significant difficulties with sponsorships, anything is possible. That would be the worst-case scenario. We don’t know how this is going to play out. Right now, we seem to be weathering the storm pretty well.”

The long-term is a different story. Past 2012, Finchem says he expects revenues to flatten.

“It will certainly flatten. Whether it will go down, I’m not prepared to go that far. ‘I don’t see the kind of growth that we’ve had these next three or four years versus the last six or seven, and it might be a flat period.”

Such a prediction is, of course, predicated upon the idea that the economy will continue to falter. But the calculus no doubt also includes the Tiger Effect variable. I’m sure that Finchem and company think the boost the tour got from Tiger Woods has just about run its course, and that barring the introduction of another superstar, things are bound to level out.

But I don’t think there ever really was a Tiger Effect. While the PGA marvels at its revenue increases over the past decade, a comparative analysis shows that the Tour didn’t grow any faster than other major sports. On the chart at left you can see the increases in the average NASCAR Purse, PGA Tour Purse, average salaries in the NBA, NFL, NHL and Major League Baseball, as well as revenues from NCAA Basketball and the Summer Olympics.

(You can read my full analysis of the Tiger Effect here: Analyzing Increases In PGA Tour Purses)

I think that the real reason for the PGA Tour increases (as with the rest of the sports) was the media boom of the last ten to fifteen years. With hundreds of new television channels and other media outlets competing for content in a 24/7 world, there was bound to be an increase in revenues. For all his talent, Tiger would not have caused a similar “boom” in golf if he had appeared in 1977; there just simply weren’t enough media outlets.

The lesson for sports is that you can increase revenues by expanding the number of potential outlets. Satellite and cable tv probably are tapped out. Live streaming on the internet, and various interactive online media are the next wave. I can envision various games that viewers could play online where the outcome depends on player performance during a tournament. Much like fantasy football has done for the NFL, it would both increase interest in existing product and create new revenue streams.

So rather than planning for an inevitable flattening and possible reduction, Finchem and company should be thinking expansion.