Category: Business
Golf is big business. The most recent figures shows that the golf economy comes to more than $60 billion. Compare that the movie industry’s $57 billion. That’s bigger than the Gross Domestic Product of Peru, Romania, Ukraine or Morocco. How big has golf become? In 1958, Arnold Palmer was the PGA Tour money leader, with $42,000 in winnings. In 2005, Vijay Singh won a little over a million in just two tournaments. This section is devoted to the business of golf.
Retired Michigan Teacher Sues First Tee
A retired Ann Arbor area teacher is suing the PGA, claiming that the First Tee program stole his ideas.
As the PGA Championship gets under way at Oakland Hills Country Club, most fans are focusing on the game and big-name golfers.
But Don Simons, a retired physical and special-education teacher from Ann Arbor and an avid golfer, isn’t fixated on what’s happening at Oakland Hills. Rather, for the past several months, he’s been working to resolve an issue in which he claims the PGA of America and the World Golf Foundation pirated his idea for teaching young people about golf, character and life.
“By design or by oversight, someone took my visionary concept,” Simons, 65, said this week about the World Golf Foundation’s popular First Tee program.
Simons said he created the nation’s first formal at-risk-youth golf curriculum in the late 1980s to introduce young people to golf while teaching about honesty, integrity and responsibility. He said the foundation used his ideas in creating the First Tee, and he wants to be credited and compensated for his work.
The smoking gun here may be that Simons has letters from the PGA praising his program, and asking for his further participation.
“We’re hopeful that there are ways in which Inbounds and the PGA can continue to work together. I don’t know quite how specifically ... but one thing we could possibly consider is to allow the two of you to travel on behalf of the PGA promoting ‘teachable moments’ with character building concepts.”
It’ll be interesting to see how this turns out.
Tour Edge Signs LPGA Pro
Tour Edge golf has signed LPGA Pro Stacy Prammanasudh as the first of their pro staff.
I normally wouldn’t comment on such things, but Tour Edge has over the years has been a bit of an iconoclast in that they made a point of NOT signing pros. Their literature in the past has pointed out that by NOT paying the pros to play their clubs, Tour Edge could pass the savings onto its customers.
I guess that strategy wasn’t working.
Majoring In Turfgrass
US News and World Report has an article debating the merits of a degree in turfgrass.
Hosting US Open Pays Off For San Diego
A study by San Diego State University has found that hosting the US Open at Torrey Pines brought $142 million to the city of San Diego.
The study is based on a survey of 1,450 spectators. San Diego state estimated that there was $74 million in direct spending, including lodging, shopping, entertainment, food and beverage.
The direct spending, in turn, led to an “indirect impact” of $68 million, which went to local labor, goods and other business items needed to run the open.
It probably goes even further than that, though. Every local who picked up some extra money working on something related to the Open, then will take that money home and use it to buy something they otherwise would not have had. That, in turn, puts extra money in the pockets of others, who turn around and spend that money, and so on.
Then there’s the extra tax revenue generated by the event. That, presumably will be spent on projects various and sundry. And those projects will generate a trickle down effect.
It’ll be interesting to see the effect of the PGA Championship on the Detroit Area in August.
Analyzing Increase In PGA Tour Purses
That loud gasp you heard last week was the golf industry learning that Tiger Woods will be on injured reserve for the rest of the season, undergoing his fourth knee surgery—reconstruction this time—and recovering from two leg fractures.
The Tour, television and the media, manufacturers and other industry fixtures are worried because of a collective belief that Tiger Woods IS golf. Indeed, it’s become an article of faith that Tiger Woods has single handedly revived golf’s flagging fortunes, turning it into the multi billion dollar industry that it is today.
An oft-cited statistic is that since Tiger became a professional, tournament purses have risen 300 percent. That’s an impressive number, but alone it tells us nothing.
To determine whether three hundred percent represents a significant increase, I decided to do a comparison for the years 1997 (when Tiger became a professional) to 2007 for golf, and several other sports.
In 1997, the total PGA Tour purse was $70,800,800. In 2007, it was $272,300,000. That’s a percentage increase of 284.60%—not quite the cited 300%, but close enough.
It’s a little less impressive when the 2007 figures are recast in 1997 dollars. When adjusting for the rate of inflation, PGA Tour purses are up “only” 193%.
(I am always amazed when reporters try to compare prices across the decades and forget about a little thing called “inflation.” Often, what looks like an increase is not that at all.)
Purses reflect player income, so the natural starting point is to compare an increase in Tour purses to the increases in player incomes in other sports. However, it’s difficult to compare other sports directly to the PGA Tour.
Players in mainstream sports, such as baseball, football, basketball and hockey earn salaries, not purses. Further, they operate under collective bargaining agreements that serve to control and reduce player income. In a sense, these sports are not particularly good comparisons because in a free market, player incomes likely would be much higher.
My initial thought was to compare salary caps; hockey, however did not have a salary cap in 1997. Further, salary caps vary; some are more strict than others. Some baseball owners, for example, are notorious for exceeding the “cap.” Caps also are circumvented with signing bonuses and deferred salaries.
A more reasonable approach, I decided, was to compare average player incomes. Tour purses represent what the players take home; so too does the average player salary. As you can see in the chart below, I collected 1997 and 2007 average player salaries for Major League Baseball, the NFL, the NBA, and the NHL.
In addition to the major sports, I also was able to obtain data on total NASCAR prize money for 1997 and 2007. In some ways, NASCAR may be the most direct comparison to PGA Tour. Like the PGA Tour, NASCAR consists of a series of events, each of which offers a sum of money to the winners.
Finally, I decided to include television revenues for NCAA Basketball and the Summer Olympics. These, I thought, would reflect the increasing value of these otherwise unpaid—or underpaid—athletes. At least in the case of NCAA basketball, the television revenues appear as income for the member schools, if not the athletes.
All of the numbers were taken from online sources. When the initial source was not authoritative (such as the New York Times, where I found several of the figures, or the official sites of the respective sports), I tried to get several confirmations. The actual numbers are shown in the figure below:
To compensate for the effects of inflation, the 2007 figures were reset to 2007 dollars, using an online inflation calculator.
For each of the sports, I calculated a straight percentage increase based on constant dollars.
The greatest percentage increase between the years 1997 and 2007 was experienced by NASCAR (243%) and NCAA Basketball (203%). Golf followed next, with a 193% increase.
Looking at the other sports, it seems as though golf showed greater growth—at least from a player income perspective. The NBA had a 94% increase; MLB, 73%; the NHL, 48% and the NFL, 45%. The summer Olympics experienced a 49% increase in television revenues.
The results are shown in the figure below:
I believe, however, that the numbers for the team sports (MLB, NBA, NFL, NHL) are artifically low, thanks to collective bargaining agreements that restrict free agency and suppress salaries with mechanisms such as a salary cap.
At any rate, given the numbers posted by NASCAR and NCAA Basketball, the increase in golf’s total purses does not seem nearly as impressive.
One way to analyze the growth is to calculate a mean and standard deviation (although with such limited data, a statistician will argue that they are not particularly meaningful.)
For the period studied, the mean increase was 81.20%, with a standard deviation of 119.19. NASCAR and NCAA Basketball fell outside a single standard deviation. Golf fell inside that line.
That might suggest that while NASCAR and NCAA basketball experienced abnormally high growth, golf did not.
So what of the Tiger Woods effect? The mantra has been that Tiger is responsible for skyrocketing PGA Tour purses. If, as the data suggests, golf has not achieved an extraordinary increase, then perhaps there is no Tiger Woods effect. Even without Tiger, it’s possible that golf would have experienced the same triple digit increases.
Another explanation may be that the Tiger Woods effect has been offset by similar effects in the two other sports that experienced even greater growth.
There may in fact be a parallel in NASCAR, the sport that experienced the greatest growth during the period 1997 - 2007. Call it the “Jeff Gordon” effect: Jeff Gordon was a rookie in 1991, won his first Sprint Series in 1995, and his first Daytona in 1997. It could be argued that Gordon—who certainly opened up the new markets to NASCAR—has had a Tiger Woods effect on his own sport.
NCAA basketball? I have no idea. It’s a case that would seem to dismiss the “great man” theory.
Whatever the explanation, I think that this analysis at the very least corrects the notion that golf has experienced a “300%” increase in the Tiger Woods era. When correcting for inflation, it’s more nearly 200%.
More tenuous is the data that suggests golf’s growth was not particularly strong when compared to other major sports. NASCAR and NCAA Basketball showed much greater growth. And golf may not be statistically ahead of MLB, the NBA, NFL and NBA.
As for the Tiger effect, more study is needed. I have a couple of ideas for a regression analysis that could test that theory.




