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September 9, 2009

Tim Finchem


JOEL SCHUCHMANN: We'd like to welcome PGA TOUR Commissioner Tim Finchem to the BMW Championship, the third event in the PGA TOUR Playoffs to the FedExCup. If you'd like to start with some brief opening comments.
COMMISSIONER FINCHEM: Thank you, Joel. Thanks for joining us. Really just making myself available to see what questions you might have.
I've been around the property. We heard that the golf course had come in very well, and obviously that's the case. I think the bunkering out there is as good a bunkering job as I've ever seen. So yeah, it looks great, and we're poised to have a great field. We've got a lot on the line this week, getting ready for Atlanta, and the players seem to be particularly excited.
We've had two good weeks of Playoffs. I think the finishes have been really good, in both cases just a hair away from a playoff, which kind of hurt me, but nevertheless the finishes were still good. A lot of players in the hunt coming down the stretch. Hopefully that will play out again this week and position us for a week off and then coming back into East Lake.
I'm sure there's other things you might want to talk about, but I'll be happy to try to answer your questions.

Q. Do you get a sense there's a lot of fatigue out there with playing not only the last two weeks, this being the third, but going back even to Bridgestone, is there any thought to changing it up next year and maybe putting a break in the middle?
COMMISSIONER FINCHEM: Well, you know, every year we evaluate it after we get done, and we take input. We've had the suggestion from a number of quarters over the last to or three years, instead of going three off and one, going two off and two. We can continue to take another look at that.
I just was out, saw Dustin Johnson tee off at 10. He didn't look very tired to me. (Laughter.) But that's Dustin Johnson.
It's one of those factors that we will obviously look at as we try to -- each year try to make it a little better than the last.

Q. What would be the pros and cons?
COMMISSIONER FINCHEM: Well, I think that since we cut -- since we reset for the final event, getting the word out about what the reset is, explaining it during that week is something that we kind of like. A plus to -- if you look at this year, a plus to going two off and two would be similar in the sense that we've had two good weeks. We've had some new faces move up because of the volatility, so letting that sort of get digested before you come in here as the lead-up to Atlanta has some positives.
I don't think there's any real huge positive or negative. I know from a player perspective, it varies, because some players would just as soon play three and have the week off. Other players would prefer to play two. We're coming off a pretty strong stretch here going back before the PGA Championship.
You know, I don't think there's a huge variation in the impact, but it's something we'll talk to the players about, talk to you all about when we get done and look back on it and see what makes the most sense.

Q. What's been your reaction to the TV ratings and overall level of interest so far?
COMMISSIONER FINCHEM: Well, we've had a -- to some degree, and a good degree, because Tiger is back this year, we've had a good ramp-up of television ratings during the course of the year, particularly the last -- in the summer coming into the fall, which is really good. We've had nice increases. It's been actually a good, solid trend for us.
And our cumulative -- some people talk all about ratings. We like to look at cumulative audience during the course of an event, is up nicely, as well. So that's good. We're real pleased about that.
And so for, you never know until it's over, but so far we like the way that -- the changes we've made in the structure for the Cup are playing out thus far this year. But like I say, it'll be two more tournaments until we really know how that comes out.

Q. I don't want to bog you down, but how do you measure cumulative audience?
COMMISSIONER FINCHEM: Cum audience is the total number of number who are into the telecast for any -- incremental based on times during the course of the week. If you take a PGA TOUR event as an event, one event over four days, that event has the second-highest number of people as a television audience, second only to an NFL game. So that's a good barometer of overall interest.
It's of particular interest to our sponsor group because they look at -- they're actually increasingly more interested in cum audience than rating. Rating is an average point in time number of people who are watching. Total people in and out of the telecast is a different metric.

Q. What are you seeing on the sponsor front? Stock market has come back a little bit. We've seen that effect trickle down to corporations. What's the impact been on that front?
COMMISSIONER FINCHEM: Well, there's not a lot of change, but I do think that the environment is better. The underlying economic indicators are not any better. But I do think that the shock of last fall has sort of subsided and worn off. The realization that we're in a very difficult downturn has set in, but there's more and more companies thinking about the future is what I see, particularly the last 60 to 90 days, thinking about how they're going to grow their market share, how they're going to do business and change the environment and how they're going to grow.
And so that's very good. So if you think that way, you're going to do business.
As opposed to obsessing about the problems with the financial sector and how we got into this mess and whether or not the Obama/Geithner initiatives are good, bad or indifferent, rather than that, there's more of a forward-thinking approach, and that's good. So we've been writing business, and we've been extending some tournaments out well into the future, and we plan to continue that, and we hope we can.

Q. Seth Waugh said last week, sounded rather adamant, in fact, that he thought purses should have stayed the same for this year instead of the incremental increases built into the contracts. Was that given any consideration?
COMMISSIONER FINCHEM: Not any real serious consideration. You know, our purses have flattened considerably. If you go back six or seven years, there were fairly steep increases. That has flattened out now. I think you'll see relatively flat going into next year.
The increases have been slight, but we wanted to continue to grow. And our plan is to continue to grow. And that means purses and charity dollars. Charity is going to be off a little bit this year, not as much as we thought in January.
But our objective is to do the things that we need to do to continue to grow as we come out of a downturn, and it's not our intention to go backwards to get ready to go forwards. Our intention is to slow our growth during this period and then come back and grow more, and that's what we want to do.
But overall I'd say over the next five or ten years, you won't see the kind of increases we had the last ten years, even in an up economy; they'll be more modest. But that's our intention is to continue to grow. Again, that means prize money and charity, because charity is part of our corporate mission.

Q. There was a couple tournaments that were able to stay the same. Congressional was one, and I want to say Wyndham. I'm not talking massive, $100,000 or $200,000 or whatever.
COMMISSIONER FINCHEM: We had two or three or four what we call unique situations during the course of the year that we addressed, and we have a couple for next year. But what we look at is our overall prize money, whether we're moving forward. Within that we've got 47 tournaments. They all have different issues and questions.
But the idea that we would sort of just generally roll back really doesn't accomplish anything. It just sets us back on a basis from which to move forward, and we don't feel the need to do that.
Now, having said that, we have done a lot of things in reducing our overall cost structure, as tournaments have, because of more challenging times on the revenue side. We've had good success in that regard. So as we approach the end of this television cycle in '12, we will be -- based on the way the economy is performing today, we will be in reasonably good shape and then in a position that we're very comfortable with.

Q. What kind of feedback are you getting from institutions, particularly financial institutions, who used to be a big part of sponsoring these events and buying corporate hospitality and who have said for various reasons that they couldn't do it anymore, couldn't do it this year? Are you getting feedback that they might come back in, or is that an entity that might be lost for a while?
COMMISSIONER FINCHEM: Well, it depends on the extent to which a company is going to start investing in growth. There was so much publicity about the U.S. Open having corporate tents significantly off in New York at Bethpage, which is just one example. The reason for that is really one thing. Some people get this idea that because there were some comments about corporate entertainment that has spun off into these decisions; that's not the case. It has to do with companies reducing their marketing and advertising budgets significantly, 40, 50, 60, 70 percent in some cases. So if you're going to take $100 that you were spending, now you're going to spend $40; $60 isn't going to get spent. So those choices are being made.
The good thing about the PGA TOUR is that the big decisions are being made in our favor at this point. We're staying in the shrinking budgets during this period. But corporate hospitality buys per se are a function of a marketing budget that's smaller, and companies just aren't doing as much right now in that regard.
Now, as we move into a growth cycle, yeah, we think it'll come back. Whether it's going to come back strongly in '10, I'm not sure. But if you look at our tournaments, 100 percent of our net proceeds going to charity, the reason charity is off is just exactly for that reason. Largely it's because of reduced hospitality and entertainment expenditures in the local area with tournaments. It hasn't affected us as much, but it's affected the bottom line of tournaments. That's what we need to work on.
Now, the good news is a lot of tournaments have lost a lot of revenue from that, but they've picked up a lot of revenue, and that's why the overall charity numbers aren't going to be as bad as we thought a year ago. In fact, they'll be north of $100 million this year. So for our tournaments to raise over $100 million in this environment, that means they're very healthy. That means they're doing a good job in the marketplace. But we've got to see that corporate hospitality come back to be able to grow.

Q. You mentioned you don't want to take a step back in regards to purses. But could you see any benefit from that in terms of perception? Obviously people out in the real world are taking pay cuts. If PGA TOUR players had to take them, also --
COMMISSIONER FINCHEM: Well, it doesn't work that way, though, because they're not paid; they don't get a salary. They are playing for, competing for prize money. I suppose you could say if Player X played exactly the same two years in a row, he'd make a little bit less money. But this business of cutting $100,000 out of a purse here or there, it's relatively meaningless in the big picture anyway, and it results in having to change all of our contracts to get it done, and it puts us in a position that's not positive from a negotiating standpoint.
The extensions that we've been successful with this year include increases in the out years because these are companies that are not focused on this moment, and we're not focused on this moment. We're dealing with this moment, but we're looking over the long-term.
You know, compensation for world-class players in this sport continues to pale in comparison to the team sports. Pales in comparison. That doesn't mean we wake up every morning and want to get the dollars that the NBA player gets, but we want world-class players in the sport to be able to play for a lot of money.
That means a lot of things. It says that the sport is vibrant. It creates more interest; it draws more young athletes to the sport compared to other sports. That's in our interest.
We have made great strides in the last ten years of attracting a higher percentage of good young athletes who can play baseball, play basketball, play football to this sport. We think that's in our long-term interest. So we don't want to go backwards.
I think that's a reasonable position to take, and as long as we're also fully focused on the charity side of the equation, I think our fans understand that.
And by the way, let me just indicate, we're not seeing big increases here. If any, very slight increases.

Q. You've referenced charity a couple times. If you trimmed purses 10 percent, wouldn't that -- I know there's a wavy line and it's --
COMMISSIONER FINCHEM: No, because every tournament has a different contract structure. If we cut a purse and the dollars are tied to the contract because of the purse level, we have to go back and negotiate with the title sponsor as to where -- that could mean a lot of things. Probably just giving it to charity is not necessarily going to happen.
Our job is to focus on charity. We've done a good job of getting to where we are in charity, and we want to continue to grow charity, and we are. I think by any estimation, the performance we're going to generate this year on the charitable side is very, very strong.

Q. I need to put you on the spot here. A couple players have suggested that some of your bonuses are tied to purse increases. Is that accurate?
COMMISSIONER FINCHEM: No. The bonus structure for our executive team is like any other company. It has to do partly with the overall performance of the company, partly with what management thinks is your particular contribution, partly with how your particular business area performed. Revenue, not prize money. Prize money is a strategic determination we do on a tournament-by-tournament basis with companies based on what we think prize money should be.
Having said that, an objective -- we have three objectives at the PGA TOUR; one is financial strength and benefits to our players and creating a good marketing platform for all the reasons I've suggested. That's important to the sport; two is generating charitable contributions to the communities where we play; and three is helping grow and protect the game. That's why we're involved in things like First Tee and the World Golf Foundation. That's our mission, and we want to grow in all three fronts.

Q. Has this been your most challenging year as commissioner, and what has it been like for you?
COMMISSIONER FINCHEM: I don't -- there's different challenges. I mean, whether it's good times or bad times. Bad times economically create unique challenges. But it also is a stimulant from the standpoint that we all recognize, our entire management team recognizes, that people expect us to deliver in bad times. People expect us to take this enterprise forward and grow it coming out of bad times, and that's a stimulating set of challenges.
It's hard work, but it is very competitive. When you're talking about staying in a marketing budget that's reduced 50 percent, that means you're beating out somebody else. It gets your juices flowing. Nobody likes to see tough times, but this is our business, this is our competition, and it gets you going. And when you start to succeed and make things happen, it's a rewarding experience.
So I don't look at it as the toughest year. Things are harder to get done, but we're getting things done. So I think it's been, thus far, a rewarding period of time for all of us in senior management.

Q. You mentioned cost structure. I'd be curious, how much could you say administrative cost of the TOUR has been cut this year?
COMMISSIONER FINCHEM: I won't say, but I'll say that we've reduced our cost structure in 25 different areas. We're not in a position to lop off employees like some companies do because -- you know, if you're going to sell 50 percent less automobiles, you can let thousands of people go because you're not making any money on automobiles. Well, we have more sponsors today than we've ever had. We have more tournaments than we've ever had. We're more international than we've ever been. We've taken on a lot of projects in the last ten years that require people to support those projects. We have a burgeoning new media area.
We feel like we're lean and mean on the employee side already. We've got great people that work really hard, so it's not in our interest -- kind of back to this purse question, it's not in our interest to come in and say, well, we're going to make people feel better about us, we're going to let 50 people go. We can't get our business done.
Our business hasn't changed. It's more difficult to get out-year decisions done, but our business hasn't changed. So we've tried to save money in other areas. Less travel, less people going to meetings, get people to come to us. We've saved a lot of money in travel; we've saved a lot of money in moving stuff inside from outside; we've outsourced less; we've saved money in communications stuff; we've saved money in some of our operation areas. We've saved a fair amount, and we're working hard on it.
By the way, that is a good by-product of -- there's always silver linings in these things, and when you're pushed, and when you have to in our case maintain an operating reserve that makes sense going into the next cycle, it really tells you what you can do in a cost-efficient manner. You're not just really cost-efficient, you're aggressively cost-efficient. So that's a positive for us.
We feel like we're going to be in good shape financially.

Q. Speaking of which, there was a report in Sports Business Journal about your financial reserves, the value of it down 25 percent. Any of that have any bearing on now?
COMMISSIONER FINCHEM: Yeah, I think I said a few months ago that we have two or three challenges here when you look at our operating reserves. Operating reserves are invested, and investments are off. They're not off that much, but they're off the last couple years. Now, they've come back some this year, but we're trying to grow the reserve, and when the dollars that are invested are getting hit, you have to grow more. So we've had that impact. We've just had to work harder. We've had to find new sources of revenue and we've had to cut costs, and thus far we've been able to do that.

Q. Two things, really: Did you get Arnie anything for his birthday?
COMMISSIONER FINCHEM: Any what for his birthday?

Q. Did you get Arnold anything for his birthday?
COMMISSIONER FINCHEM: We have a little presentation for him tonight that will be discussed at the dinner, which I can't go into right now.

Q. Are you flying back out to Pennsylvania?
COMMISSIONER FINCHEM: I'm going to Pennsylvania this afternoon, yeah.

Q. We won't write it until tomorrow. (Laughter.)
COMMISSIONER FINCHEM: I've heard this before. I used to believe that before the internet.

Q. This is not your decision, but would you be in favor of seeing Tiger Woods on the ballot for Comeback Player of the Year?
COMMISSIONER FINCHEM: Comeback Player of the Year? Sure, why not? Well, let's see. He won the U.S. Open last year.

Q. On one leg.
COMMISSIONER FINCHEM: On one leg. Thankfully it's not my decision, it's the Player Advisory Council that does the ballots, so I'll leave them with that.
Although on Player of the Year, I would think we're looking at the possibility of six people on the ballot, which will be very interesting this year.

Q. Which guys do you see, broad brush strokes at this point?
COMMISSIONER FINCHEM: On Player of the Year?

Q. Major winners, Tiger and Stricker?
COMMISSIONER FINCHEM: If Stricker wins -- well, now that Stricker has won his third event, he might go on the ballot whether he wins the Cup or not. So it could be seven maybe. I think the Cup winner will probably be on the ballot for sure. If it's a multiple winner who wins the Cup, they might be the favorite, I don't know. So it'll be interesting. I think it'll be very interesting to sort of watch it.
I was with Norman and Couples yesterday in Washington, and they thought it would be an interesting race for Player of the Year, as well.

Q. How many are usually on a ballot, since we never see it? Would seven be an inordinately large number?
COMMISSIONER FINCHEM: You know, I don't know if I should -- I don't want to answer that off the top of my head, but yes, I would think that probably is an inordinately large number. It might be the most, I don't know. We'll have to check that and come back to you and let you know. We announce the ballot every year when we have it. So it will be interesting, very interesting.
JOEL SCHUCHMANN: PGA TOUR Commissioner Tim Finchem, thank you.

End of FastScripts

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