PGA Tour Prize Money to Flatten Out Due to Recession

After more than a decade of PGA Tour prize money increasing by leaps and bounds, a deep recession could cause a freeze or even decrease in the amount of available prize money.

Since 1997, the amount of yearly prize money available on the PGA Tour has increased by more than 300 percent.

In 2009, there will be $229 million in prize money available, not including the major championships.

That is a 3.25 percent increase over the amount of money available in 2008. 

The amount of prize money is also likely to increase between the 2009-2010 seasons. But that may be where the buck stops—literally.

Almost all PGA Tour contracts, whether that is title sponsorship contracts or the extremely lucrative television contracts, are locked up through the 2010 season. 

The only way the PGA Tour could loose a title sponsor before 2010 is if that company files for Chapter 11 or goes out of business completely, in which case the PGA Tour would simply dip into its massive monetary reserves that are estimated to be somewhere in the vicinity of $200 million to ensure the tournament’s survival in the short run.

However, come 2011, a large number of PGA Tour events could be played under completely new names—or cease to exist at all—if new title sponsors are not secured. 

Twenty of the PGA Tour’s 48 title sponsors currently come from either the financial or auto industry, both of which are likely to be completely demolished before this recession finally ends.

PGA Tour title sponsors pay anywhere between $6-12 million and are also responsible for supplying half of the money for the tournament’s purse.

If the current recession extends into 2010, which terrifyingly enough is not that far fetched, the PGA Tour could face the very real possibility of loosing 20 or more title sponsors, not to mention the loss of many lower-level sponsorship deals, thus creating a perfect financial storm.  

Now, on the contrary, if the financial climate improves before the end of the 2010 season, which is also possible, this recession will have fallen at the absolute perfect time for the PGA Tour. 

If banks and financial institutions are once again making money by 2010, the PGA Tour will have an excellent chance of renewing many of its current sponsorship deals.

However, if banks and automakers are still struggling in 2010, those companies will have a very hard time justifying a $6-12 million sponsorship of a PGA Tour event, particularly if they are using taxpayer’s money to do so.

If this current recession extends to 2010, the PGA Tour will have to undertake a massive search for new title sponsors, possibly even signing them at a rate lower than what the sponsors today are paying. 

Television contracts could also be renegotiated at a lower rate in the coming years.

The PGA Tour’s current television contracts are extremely lucrative for two main reasons: the recent increase in golf's popularity and the cost of advertising sales.

First, the popularity of the game experienced an explosion in the late 90s, which resulted in a larger number of people watching golf on television.

This, in turn, resulted in more attractive advertising space for television networks to sell during PGA Tour events. 

If the recession last into 2010, the adverse effect could be twofold for the PGA Tour.

The number of people playing golf is likely to decrease.  We have already seen a freeze in the number of Americans taking up golf over the past few years.

Second, networks will have a much tougher time selling advertising space due to the fact that many companies will simply not have enough money to spend on television advertising. 

That scenario makes the purchase of covering PGA Tour events less attractive than it was five years ago, which could result in a significantly less lucrative television contract for the PGA Tour.

However, the PGA Tour does have one massive selling point in their back pocket, that being Tiger Woods' pursuit of Jack Nicklaus' record of 18 career major wins.

Tiger’s pursuit of 18 major wins will draw the attention and viewership of every golf fan on the planet, thus offering a very unique and attractive selling point for television networks who might be reconsidering their contract to cover PGA Tour golf.

Simply stated, the PGA Tour, along with everyone else in the country, is going to have to keep a very close eye on the economy over the next two years. 

If the economic climate improves, the PGA Tour will have avoided a disastrous situation. 

However, if we are still in the midst of a very deep recession, the PGA Tour’s schedule could look significantly different in 2011 and for the first time in a very long time, we could see a decrease in the number of PGA Tour events. 

We could also see tournament purses remain stagnant for several year and even possibly decrease. 

Time will tell how this will all play out, but one thing is certain.

The future of the PGA Tour is very dependent on the U.S. economy.