More Money Than God

Today's required reading is Ron Sirak's heavily reported special report on the economics of the Masters....Ron does a great job of it and though I'll excerpt heavily an discuss in detail, you'd be remiss to not read it in full yourself.

This is a subject of interest to me, as I've long suspected that the sponsorship of golf events is economically unjustified, and it's a subject I'd like to blog further if Ii can access the necessary data.  No doubt corporate CEO's make the case for the value proposition to feed their own golf addictions, but the payback seems, I don't know, speculative at best....

But of course The Masters is a different kettle of fish entirely.... so, let's start with the basic parameters, what's that second week in April in Augusta worth:

The Masters makes a lot of money, leaves perhaps even more on the table, spends a lot

of money to make its tournament better, and gives away a lot to help grow the game. In all, the Masters will generate about $115 million in revenue this year, according to Golf Digest reporting, more than a five-fold increase from the $22 million the magazine estimated in 1997 for the previous year's Masters. And that $115 million in revenue could translate to a profit of almost $30 million, up from $7 million in our 1997 report.

More on the money left on the table below, but Billy Payne is getting high marks:

From the Masters' beginning in 1934 under Bob Jones and Clifford Roberts, the focus of the tournament has been to provide the best experience possible for the players and spectators. From the absence of corporate logos to limiting the number of people inside the ropes, the Masters is perhaps the last major sporting event left where the emphasis is solely on the game. But since taking over as chairman in 2006, Billy Payne has non-intrusively yet dramatically increased revenue and expanded ways in which the club gives back to the game. 

"What Billy Payne has done is incredible," said one source involved in sports marketing. "As the commercialization of sports expanded, through great discipline and vision they were able to increase revenue without harming the experience. People want that Masters experience. They want to hear the roars. There are no logos anywhere. It's all pure."

I'll skip the long discussion on Masters badges, which despite recent price increases remain quite the bargain in the sports world.  But let's return to the concept of money left on the table:

But think of the money Masters officials are choosing not to pursue. They could probably triple the ticket prices and still sell out. (A waiting list for weekly badges opened in 1972 and closed in 1978 before briefly reopening in 2000.) The concessions are likely run on a break-even basis—or even at a loss. And imagine how much more they could make if they opened an online store to augment the merchandise pavilion. "Can you even imagine there being an online store?" says a source who runs other tournaments, laughing with incredulity. "We'd all chuckle."

Well, I'm chuckling now....they've got the most recognizable logo in the golf world, notwithstanding their seeming refusal to sell you anything.  Wouldn't be prudent...

The reader will no doubt know what comes next, discussion of their rather eccentric management of television rights:

But nowhere is Augusta National showing more restraint than with its domestic TV rights. This is the 60th consecutive year CBS has broadcast the Masters on a one-year contract, an arrangement that began in 1956. ESPN has had the weekday cable rights since 2008 on the same basis. "The way the Masters TV deal is constructed is still shrouded in mystery," says a source in the broadcasting business. "The deal changed a little bit when Billy came in as chairman, bringing in a small rights fee, but neither CBS nor Augusta National makes money on the deal."

Ponder that for a moment if you will... it's the most valuable television property in golf by far and no one makes money off it.   Intentionally.... 

"After the Masters, CBS sends an invoice to Augusta National, and they check it out and get the money from their corporate partners to cover production costs," says the source. 

That means that IBM, AT&T and Mercedes-Benz pay about $6 million to $8 million each in exchange for four minutes of advertising time per hour—about one-third of the commercial interruptions of other sporting events. Rolex and UPS are the corporate partners for the international broadcast. "If they ever opened up the [domestic TV] bidding, it would absolutely be worth more than the U.S. Open, but that's never going to happen," said the source, referring to the $93-million-a-year, 12-year deal the USGA signed with Fox Sports in 2013. "There was talk back when the Masters went without sponsors during the Martha Burk controversy [2003-'04] that it might go to pay-per-view," the source said. "If they did, they could get $100 for the weekend and get two million to three million buys. Do the math on that. But they're never going to leave CBS."

I've no doubt that those three corporate partners are getting good value for their money.  Freed from the typical advertising clutter and associated with the most prestigious event in golf sports, how could it be otherwise.  So ANGC gets a failing grade for revenue maximization, but why?

For Augusta National, the trade-off for the one-year contracts and for walking away from such a cash windfall is that the club has complete control over how its event is portrayed on TV. Ask Gary McCord, who was banned for his "bikini wax" description of the greens, or Chris Berman, who is passionate about golf but is said to be too over the top by Augusta National to be part of ESPN's coverage.

What, they have a problem with "Ground Control to David Toms for the 114th time?  Sheesh, the man is an institution....or rather, belongs in one.

Shackelford, in his blogging of this article, calls it the most watchable broadcast in golf by far... and I couldn't agree more.  But, and this is something that I had intended to discuss, some of the control exerted is to the detriment of the broadcast, which could be so much better.

Most of you are old enough to remember that for decades the Sunday broadcast was only three hours in length, showing only play on the back nine.  For eons it seemed they were too embarrassed to show us the front nine, and then they slowly relented and allowed hand-held cameras to show late front-nine highlights.

To this day they refuse to allow coverage as technically proficient as we see at the Hartford Open.  Remember Bubba's epic gap wedge from the trees in the 2012 playoff on the tenth hole...you know, the one he drew 20-40 years depending on the commentator?  Have you ever seen the flight of that ball from a blimp shot?  No you haven't, because the Masters doesn't allow CBS to use a blimp in its coverage.

Similarly, do you remember how David Feherty set up the shot facing Bubba?  If so, you're hallucinating, because on-course reporters aren't allowed.  So we never get a description of a lie from someone on the ground, a perhaps minor point since they're all perfect.  It's the greatest broadcast in golf, but I'm left with the feeling that it could be so much better...

Sirak also gets into the discussion of how ANGC is using its money for infrastructure, including buying up adjoining properties allowing for new media centers and a state-of-the-art practice facility.  Their support of amateur golf is admirable, as well as allowing the Drive,Pitch and Putt event to take place the week before the Masters.

Which provide a good segue into the other valid criticism of the Masters, which is that the field isn't up to the standards of a major.  There was much press earlier this year about their struggles to keep the field shy of 100 players.  We all instinctively love the Masters' support of amateur golf, especially appropriate in view of Bobby Jones' history in the game, as well as the tradition of inviting former champions to participate.

But when you do the math there's barely seventy world class players in the field, and that just doesn't cut it for the most prestigious title in golf.  But I'll be watching anyway...as will you.