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February 24, 2009
LAURA HILL: Thanks for joining us this afternoon. I know you have a couple remarks and maybe some announcements you'd like to make.
TIM FINCHEM: Thank you for being here. I'm going to be brief, answer a few questions. Generally I'm here on the question of trying to get you up to speed and everybody on the same page as to where we are with the economy, sponsorship, economic impact from the downturn, which I'll get into in just a minute.
I would like to, first of all, thank Accenture for their partnership in bringing this Match Play Championship to where it is today. I'd also like to thank everybody with Dove Mountain for the hard work on the infrastructure here and moving this facility to the point where it'll be just a couple years now, when we get the hotel open, just a world-class spot for competitive golf at this level.
We've had a good start to the year here on the West Coast, culminating last week coming into the Match Play with Phil's 35th win and a very solid tournament for us, good telecast, good numbers, and certainly we're pleased with the direction of the Northern Trust Open. Northern Trust has turned out to be a fantastic partner, as we thought there would be, but also there's a lot going on to help build the quality of our tournament in Los Angeles.
This week I believe I'm correct when I say I think it's the first time we've had all 64 players off the list with nobody hurt, nobody injured, nobody pulling out, so all the top players here. You couldn't ask for anything better for Match Play.
To set all that off, Tiger coming back after being gone for, what was it, four, four and a half years now (laughter), and we're delighted to have him back and look forward to, as everybody is, how he performs his first time back.
On to business, I want to give you sort of an overview and I'll try to answer some of your questions. I think that, first of all, we continue to be in this economic downturn. It continues to worsen. There is obviously an awful lot of activity going on to pull us out of this eventually, and kudos to governments in the United States and around the world who are pulling together to put together stimuli packages and tinkering to see if we can get things back on track.
From the PGA TOUR perspective, obviously we are impacted. Very few companies aren't impacted. And since we're a sponsor-centric and an advertising-centric organization in sport, we are subject to the vagaries of the economic climate to some degree.
We take this very seriously. I've seen some reports recently that perhaps we have conveyed the impression that somehow we're immune. I think we've been pretty consistent, going way back, well back into the first part of 2008, when housing started down big-time late in '07 that we were taking this very seriously, and we do.
I think to date we've had, if I can get us sort of to stop right at this point and see, where are we today, we've obviously had and are having some bumps in the road.
First of all, of course, the U.S. Bank determining not to extend after 2009. Not a particularly large sponsorship, but nevertheless a financial service company. The Ginn Championship going off our schedule as we came into the year because of Ginn being unable to fulfill their commitments, which resulted in a lawsuit; and then today I will tell you that FBR is not going to continue beyond 2010, and a press release will be forthcoming after this press conference.
And then lastly, not so much related to the economy, but questions raised about the viability of Stanford as a company, given SEC action and resultant questions arising out of that.
Now, to put these bumps in perspective, however, in no particular order, as we've already indicated publicly, we will be playing, because of the strong support we have in the community of Memphis for St. Jude's and the relationship with St. Jude's, the Stanford St. Jude Championship will be played this year without question and in my judgment going forward, regardless of -- I'm not going to comment on the difficulties of Stanford, but regardless of the outcome of that situation, we're going to play.
Obviously in Phoenix, arguably our strongest community-based tournament on TOUR and a tournament that raises significant sums for charity every year and a tournament that actually progressed for over 60 years without title sponsorship, I don't have any hesitation in saying that that's not going to have an impact on our calendar.
We, of course, have some time until '11 and we'll be working with the Thunderbirds to bring in new sponsorship because that helps generate additional support for the community.
When I look at these bumps, I don't see any huge disruptions at this point.
On the flipside of the coin, we have had and continue to have some good news in a very bad climate. A couple weeks ago we announced an extension out of 2014 with Travelers. The CEO of that company is standing up in Hartford and saying, look, this is good business and this is good for the community, and we're there for the long-term.
Today I will tell you that we have completed work on an extension with Accenture to 2014, as well, and we are delighted and continue to be delighted with our partnership with Accenture and now are pleased that we can look forward to years to come of playing this very special match play format as part of the World Golf Championships on the PGA TOUR.
In addition to those title positions, we will have some additional extensions to announce as we go into the spring. But right now, as if we stopped right now, I could tell you that we have about two thirds of our title sponsors on the PGA TOUR secure through '12 or beyond, which makes us feel very good about the viability of our overall schedule.
In terms of additional sponsorships outside of titles that really are fundamental to our ability to support our television partners, support our telecast, and to support our tournaments, we, as well, have some good news in the sense of our new sponsor, DePuy Mitek, for our exercise vans out here on TOUR, a major new relationship with Kodak, a new relationship with Mitsubishi Electric, another new relationship with Dow Chemical, and Johnson & Johnson, as well.
When you stand back and look at that in addition to title sponsors, we actually as we sit here today are in the strongest sponsorship position we've ever been in. We're in a record level number of sponsors and total investment in the TOUR.
If I had to look at it today, and you asked me a year ago and painted the economic picture of what we would be facing at the end of February 2009, I would not have been able to project us doing this well.
That's not to say, however, that we are not going to have more bumps in the road, I suspect we will; that we're not going to have more turnover, I suspect we will, as well. There's just too much pressure on too many companies. It would be unrealistic to think that we're not going to have turnover, we're not going to have problems.
The good news in that area is that I think I'm being candid when I say that, to a sponsor currently on the PGA TOUR, 100 percent of them want to stay involved with the PGA TOUR. These are companies that have concluded that it's good business from a branding standpoint, it's good business from a business-to-business aspect of generating business on-site, it's good business from an advertising standpoint given the audience that we reach, and it's good business to be associated with charities. Those are the four pieces of the value proposition.
That doesn't mean that all these companies are going to be able to stay with the PGA TOUR. We have companies that are faced with potential bankruptcy, et cetera, and we'll just have to see how that plays out. But right now we're pleased with their efforts to figure out a way to keep us in a reduced marketing budget in some cases, figure out a way to move forward with extensions, and it gives us heart that we have the companies of the caliber that we have that are making these efforts.
We have a long way to go through this. The only thing I can hope in the short-term is that President Obama tonight does a good job and starts to create more confidence in the country, because I think that's a missing ingredient of any turnaround; we have to have some confidence. We hope to see that turnaround. And if we see it, we'll start to move the other way. Right now we're dealing with issues and problems, but we're making great progress.
With that, I'd be happy to try and answer a few of your questions.
Q. I have several questions. You have obviously signed up several sponsors as you just detailed, but how do you characterize -- I can't ask you specific numbers because I know you won't share, unless you want to share -- but could you characterize the value of those sponsorships as compared to prior sponsorships of that magnitude, a percentage increase -- essentially every other industry out there has said there's negotiating room, and I wonder if the PGA TOUR has negotiated a little bit more favorably in order to have the sponsors sign on.
TIM FINCHEM: Well, yes and no. We never really release dollar figures on any deals, past or future.
I will say, however, one, that we're very, very pleased, very pleased with everything that's been extended, number one; number two, I think I've been consistent over the last year and a half of saying that in my view the best case scenario for us is if we maintain some level of growth. In these times, any level of growth is a victory, and if I had to guess right now where do we come out after another year of this, I would still say we are in a position where we can see lesser growth but growth.
If that's where we get given all of what's going on here in this downturn, I'd be very pleased indeed.
Q. And the other part of that, when you look back five, six years ago, the banking industry was where all sports were going as far as sponsorships go. Having too many eggs in that one basket is obviously a risk. Did the PGA TOUR fall into that category of having too many eggs in the financial basket?
TIM FINCHEM: Well, you know, that remains to be seen. I mean, luckily some of the companies that have taken the biggest brunt of the downturn weren't companies that were on our particular customer list. You know, two years ago, three years ago certainly it didn't look like that, although we did reduce our reliance on autos about five years ago. It's just something we'll look at as we go forward.
I think I did say last year that we are putting more energy into different industry sectors than perhaps we've enjoyed partnerships with in the past, and we continue to do that. We'll see what develops.
Q. And last on that subject, I promise, you had said, I think it was at TOUR Championship last year, you addressed the reserves of the PGA TOUR. You have enough reserves to withstand this. Obviously in the past eight months or so since Tiger has been gone, the Dow has gone down 5,000 points in the last eight months. How has that affected your reserves and are the reserves adequate to withstand this?
TIM FINCHEM: Well, on the one hand the reserves have been impacted negatively because those are invested dollars. However, we've done a lot of work, going all the way back to '07, to reduce our cost structure, and that's helped a lot.
We are in a -- depending on, when you say "this", I don't know what "this" is, because I don't know how long it's going to last. But if it's anything resembling a normal downturn in length, we'll be fine. If it gets out to an extra couple of years, it may be different. Anything in between, we'll have to see. But right now I'm reasonably optimistic, especially if we continue to generate new business and extension of current business.
Q. You went through all the title sponsors, but a lot of the tournaments, in fact all of your tournaments, are dependent on more than just that. With lower level sponsorships, pro-ams, corporate chalets, that sort of thing. A lot of tournaments seem to be hurting in that regard, too. Is there anything you can do to help them? That's a significant amount that they have to raise to run their events.
TIM FINCHEM: Sure, we're working with all of our tournaments on a daily basis to generate more opportunities in the marketing and sales area, share information on the ways other tournaments are dealing with the issue. But I think it would be a mistake to characterize all of our tournaments as hurting. We have a number of tournaments where our pro-am has been oversubscribed this year.
We haven't been off -- the number of weeks we've already played, we know enough about the numbers to know that while we'll be off some in general revenue, we're not necessarily off on the charity side yet. So that's very, very positive.
But it's still early in this, and we'll have a better picture probably when we get into the summer.
Q. Are you aware of other potential sponsors or current sponsors that might be a little bump in the road still where they might have an issue of staying on or not, and if so, how do you deal with those before they decide to actually pull out?
TIM FINCHEM: Well, some of our sponsors -- it's not a question of dealing with them. I mean, we have partnership agreements with all these companies, so we're working closely with them to understand where they're at. But until a company calls us up and says, you know, we just are -- it's impossible for us to proceed, we're assuming we're going to move forward. And of course we've only had one of those situations arise, and that was the Ginn Corporation.
Like I say, every other company, they may be challenged, they may be in an industry sector that's very challenged, but thus far, to a sponsor, they are focused on figuring out ways to move forward. Some of these sponsors have been with us for a long time.
Until such time -- I was at the 50th anniversary of our General Motors relationship last year in Detroit, and half a century is a long time. As long as General Motors is viable, and this is a business platform that works for them, it's demonstrated over the years that it works for them, then we're going to be there until such time as something gets in the way of that happening.
Q. Just to follow up, as you mentioned, with FBR leaving, can you say if you have any potential sponsors in the wings? Have you been actively going after that, as well, and how is that going?
TIM FINCHEM: Yes and yes. We have some. We've been extremely active. We've made some progress. It's, as you know, a very difficult climate, but we don't have yet -- we're not at a point where we've started to say, well, Company X might be a good fit for Y because we haven't had to do that, and of course, it's one thing to identify a company that might want to use our platform, wants to sponsor. It's another thing to figure out the right market, the right date. They all have their interests about what they want to see, so it's one thing to create interest; it's another thing to fit a sponsor with a tournament. We haven't had to go down that path just yet.
Candidly or not, that point, even a couple tournaments where we know we're going to have to change sponsors, it won't be until the '11 season, so we have some flexibility, so we're not rushing out the door saying, let's get Sponsor X in there, because we don't have to. Although sometimes it's better to move ahead.
In a couple of these situations, like today this announcement with regard to Phoenix, I mean, Phoenix is generally regarded as one of the biggest sporting events in the country. It has huge bigness, it has huge crowds, it's got a great charitable organizations, the Thunderbirds. I wouldn't be surprised if their phones are ringing tomorrow with some companies interested, and then we'll go from there. We'll take it as we always have.
We're not panicked. We have a very positive attitude. We've got our heads down and working hard, and we're going to just keep blocking and tackling and working through this.
Q. Does the TOUR have any investments, pension plans, whatever, with Stanford that's in trouble?
TIM FINCHEM: Any investments?
Q. Yeah, pension plans, 401(K)s or whatever you guys do for retirement.
TIM FINCHEM: No, we do not.
Q. Are you talking to FedEx about stepping in in Memphis?
TIM FINCHEM: We are not talking to anybody in particular right now. We know we have a base of support in Memphis that will help us if we need it, but candidly right now we have a contract with Stanford, and they are not in breach, so we will have to take that one step at a time.
Q. Just to clarify, FBR is good through next year, correct? Or are they through?
TIM FINCHEM: Yes, through '10.
Q. So one more time around the block for them?
TIM FINCHEM: Correct.
Q. And Memphis as of now is still going to have Stanford's nameplate on the event.
TIM FINCHEM: The situation of Stanford is volatile given their situation. I don't know where that's going to come out. It would not be appropriate for me to speculate on what their issues are and what actions are being taken and what that means, so I just can't answer that question. It would be speculative at this point. We're just in a monitoring situation kind of mode right now.
Q. Harkening back to the meeting that you had with the players at Torrey when you were trying to encourage them to go the extra yard to shake hands, kiss babies, and kibitz with sponsors and such, I guess there's been some discussion at the PAC on maybe a one in four rule or one in five rule or raising the minimum. What are your thoughts on that? Would those be doable? To the layman they don't probably understand why you can't ask a guy to play more than 15 times a year.
TIM FINCHEM: Well, we can, and we have incentives built in to do so. But we also -- the culture of the sport is that the player/independent contractor can make up those decisions, and it's our job to create enough reasons why they should play to play. That's been the history.
By the way, I don't recall the kiss the baby request. I don't see a lot of babies at our tournaments most weeks.
But the players have been very cooperative, but they're great all the time. Media interviews are of particular interest to us, and I hope everybody is getting what they need from the players. If you're not, let us know.
It doesn't seem to us at this point that moving down that particular direction is necessary, but on the other hand, we've looked at it a couple times in the past, and we're looking at -- we are looking at a number of things we can do with the structure that will generate more value to prepare for the future.
So it's really about the future, though, and in times like this you want to take advantage of the situation if you can to take steps that otherwise might not be that easy to get done, take steps to improve your business performance in the future. And in our case that revolves largely around either more value to sponsors or supporting our media partners more effectively.
Q. We've heard kind of half-jokingly from Calc and Kenny Perry as they're getting closer to 50, hoping there's still a Champions Tour there when they get there. Do they have anything to worry about?
TIM FINCHEM: I don't think so. I think the Champions Tour is performing quite well. I've watched it now for 20 years, and I think we have the best contingent of players from a sponsor-sensitive group since Sam Snead was playing.
These guys step up and do everything that the sponsor wants. It's also an attractive, positive group of players, and I think Freddie Couples by himself going out there is going to be another shot in the arm for that Tour.
You know, here we are well into this downturn, and the Champions Tour has moved along okay. I feel good about it. I think it's a good platform, and we look forward to working with everybody involved on that Tour going forward.
Q. Are you going to watch Tiger play tomorrow? It's on TV, you know.
TIM FINCHEM: I can't remember.
Q. Do you have a meeting?
TIM FINCHEM: I might catch a little bit on TV. I have some meetings, then I'll be out of here around 2:00, and I guess he goes off at noon. I've watched him play before (laughter), but I'm sure it'll be exciting.
LAURA HILL: Thank you.
End of FastScripts