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November 3, 2004

Tim Finchem


BOB COMBS: Welcome to the TOUR Championship by Coca-Cola, the fourth playoff event here at East Lake Golf Course. As we've done the last few years Tim Finchem takes a look back at the season's past and the season upcoming, so let me introduce PGA TOUR Commissioner Tim Finchem.

COMMISSIONER TIM FINCHEM: Thank you, Bob. Good afternoon, everybody. I guess everybody had a nice good night of sleep last night, or maybe not. I want to state first off, I'm not here to concede anything or declare victory. That's being done in the other room.

Today we'd like to do just a review of where we think we are on the PGA TOUR. I'll take about ten minutes and then I'll try to answer your questions. I'll try to be brief.

This discussion is going to be largely about momentum. We think we have momentum in the competition area and momentum in sponsorship, momentum in the area of the TOUR and charity dollars and really every facet, and I'd like to go through all that.

First, let me just thank everybody here at East Lake for hosting us this week. Tom Cousins I believe is in the room, Ray Robinson, the foundation here at East Lake, and what has happened is what attracted us here six or seven years ago. We wanted to try to come and help tell the story of what using golf, a golf setting, can do for urban renewal, and certainly East Lake is a shining example in the country of what can happen, and we're delighted to be back, and I guess we now will be back at least in 2010, 2011 and maybe into the future to continue to tell that story because it is an important story to tell, and of course, as a by-product we get to play this terrific golf course which has gotten better every year, and Tom Cousins and I were talking coming in and even after the rain the golf course is in terrific shape. The new work done on the drainage is just another enhancement of what we're dealing with here.

Let me come back to the state of the TOUR. As I said, we're talking about momentum, and let me start with momentum in competition. We had one of our best years competitively this year with a tournament -- Vijay Singh of course an incredible record this year with nine wins already and breaking the $10 million mark, but right behind him, great performances from the other perennial top players, Ernie and Phil and Tiger and Sergio and the younger players, Adam Scott, Todd Hamilton, have really added to the mix. We had great performances this year by players over 40, great performances from players someplace else, 70 players not on the PGA TOUR from 20 different countries. We have a great international field week-in and week-out.

Looking ahead to next year, we think that momentum competitively is going to continue when we move to the World Golf Championship American Express Championship to Harding Park in San Francisco, which we have rebuilt in partnership with the City of San Francisco, and along with it is a great First Tee facility, and when we go to Robert Trent Jones in Washington for The Presidents Cup for some unfinished business in South Africa, so we're excited about '05.

On the Champions Tour we had a really good year or two years in a row. We've had in excess of ten percent increase in galleries, the closest race in the four-year history of the Schwab Cup. We had 20 different players win. Craig Stadler had an outstanding year, Mark McNulty, who is going to be a great addition to that Tour had a great start as a rookie, and I think that tour has really hit a stride, continues to grow, has solid sponsorship for the future, and we're delighted with the pace and the momentum of that tour, as well.

The Nationwide Tour had some incredible performances, and I think that gradually the Nationwide Tour is being recognized as really competitively as strong almost as any Tour in the world. When you consider the quality of play and the players coming right off of that tour and not just playing well but playing superbly on the PGA TOUR, and as I explained to the class of '04 last week in Alabama, they have a high standard to measure themselves against when you think that the 20 card winners on the Nationwide Tour from '03 this year won over $16 million with five victories. It's pretty impressive, and I'm anxious to see whether the class of '04 can come close to that. 159 players have won on the PGA TOUR who are alums of the Nationwide Tour, and the partnership has really worked well. That tour has the greatest financial stability it's had. It had record charitable giving this year, and it's in solid shape.

Let me shift from competition and talk a little bit about sponsorship. We're often asked the question -- I think two or maybe three years ago in Houston when we were in the recession, we predicted that the TOUR would continue to be fully sponsored. It has been fully sponsored through these years, but beyond that now, we have over 10 or 11 tournaments that have a sponsorship now that's extended all the way through 2010. We expect that number to double by the end of the first quarter. We have really a stronger group of sponsors in companies than we've ever had in the past, and the quality of our sponsorship, the way sponsors are approaching what it means to be a sponsor on the PGA TOUR has really changed in the last three or four years. You're seeing companies do a lot more beyond the traditional role of sponsorship to impact on giving back, on promoting the tournaments that they sponsor and things of that nature, and of course, we were delighted last year in the Sports Business Journal we were in a survey of 1,400 companies, we were ranked No. 1 as the most attractive partnership to have in sports by companies that invest in multiple sports.

So our sponsorship situation is very strong indeed.

On the charity side, another record year this year will be over $85 million in charitable giving, and I think the important thing to recognize about giving back is that -- not just the number, although toward the end of '05 or early '06 we will be approaching the $1 billion mark and we will probably begin to focus on that as an objective as we get into the first quarter next year.

I think it's important to note how much more focus there is on giving back today throughout everything the PGA TOUR does. It's become part of our mission as an organization. As I said earlier, a lot of our sponsors, many more of our sponsors, are taking it to heart and making it happen. That's why these charity dollars continue to grow.

Interestingly enough, there has been a direct relationship -- I think this is important. There has been a direct relationship between the way in which sponsors have come to the PGA TOUR, even in down times the last three or four years, and the relationship with giving back. More and more companies want to be associated with giving back. They want to be involved in giving back. They see value from being involved, and that has had also a positive effect on our overall business situation.

In addition to those things, I'd say we have momentum in the area of our image. We'd like to think that we have the best image in sports, both from the standpoint of the sport itself and the players who play it, and the data that we put together this year, we're in the 93-94 percentile among Americans over the age of 12 who have a very positive attitude toward the image of the PGA TOUR and its players, and 18 to 20 percentile above the next highest sport among Americans who believe that PGA TOUR players are appropriate role models for their kids. This is something we look at closely. We think the increased focus on giving back helps that, but mainly it has to do with the way the players handle themselves, carry themselves, the way they act out here and outside the ropes, and that continues to support the ability to have those kind of numbers.

Our fan base has continued momentum with respect to its diversity. We continued again this year to see additional double digit increases in the percentage of our fan base that is Hispanic, African American, female, Asian and young under the age of 21 years of age. So the diversity of the fan base continues to grow, and at the same time, we've maintained the core of our fan base, which is traditionally the more upper income, more educated individual, but at over 105 million Americans now over the age of 12, it's a sizable fan base and it's a much more diverse fan base than it's ever been in the past.

Lastly, I would just say that we've had solid momentum with respect to our tournaments. Our tournaments have set records for overall financial performance, net financial performance, work in terms of staging the tournaments, improving the communication with the communication where we play, integrating the communities from a marketing standpoint. We're very pleased with the momentum that our tournaments have in the markets where we play.

A good example of that is this week, the last week of the season. I think when you look around and you see the improvements that have been made here by East Lake and the foundation and the golf course outside the ropes and the staging and the continuation of that kind of momentum, it will pay us real dividends as we go forward.

Let me just shift then and just say in summary, we have solid momentum across the board, and as we look at this year, 2004, we're very pleased in each of these areas. As we look forward, we can see momentum continuing, but we also recognize that there is stiff competition out there. It's harder and harder to maintain the interest of the American public, and there's so many choices, whether they're observing us on television or being asked to come out and buy a ticket, it's just tougher work. In spite of that, we are growing, and I think that will be the case over the next five years.

Before I take your questions, let me mention three or four other subjects to lead into that. One is we're delighted to have a lineup of inductees into the Hall of Fame in a couple weeks for induction. We invite all of you to come. Marlene Stewart Streit will be introduced to the Hall of Fame by JoAnne Carter; Tom Kite will be presented by Ben Crenshaw; Isao Aoki will be presented by Greg Norman; and Charlie Sifford will be welcomed by Gary Player. We think it's going to be a tremendous Hall of Fame induction ceremony and we urge you to come in a couple weeks down to the World Golf Village and the Hall of Fame.

Second thing is we have the Payne Stewart Award in a couple of hours over here in the pavilion across the street. We think recognizing Payne for what he meant, what he represented, is appropriate, but also, we actually use the recognition of a player who has a focus on comportment and presentation and professionalism with our younger players, and that's paid real dividends for us. We encourage you to come over there at 4:00 o'clock.

Thirdly, we have the 20/20 conference in a couple weeks at the World Golf Village. We'll be talking this year about marketing golf to women, about progress reports in some of the other initiatives that we've begun, and certainly a lot of focus on the new initiative to roll out the First Tee in school program, which is an effort to reach into public and private schools in grades K-5 with the First Tee program which we've tested now in over 100 schools and have had terrific response, so we'll be talking a little bit about that.

Lastly, before I take your questions, I do want to talk about the golf ball and equipment. Three or four years ago in Houston, we talked about the focus we had put on equipment, the discussions we had ongoing with the USGA, the need for the USGA to invest more dollars in these areas of improving their testing techniques, of investing dollars to properly be able to measure what's really going on with respect to equipment impact, whether it's the distance of the golf ball or other factors. A lot of that has come to pass.

Here we are three years later, and as we look back at this year and where we are, I think it's important to note several things. Number one, I think when you take all of the different aspects in the equipment area, it has significantly impacted distance, whether it be the club head, the club face, the golf ball. All of those areas or virtually all of those areas are now regulated by the current grouping of regulations promulgated by the USGA and the R & A.

In addition to that, the USGA has invested significant sums now in upgrading their testing techniques, and that testing combined with those regulations leads us to a set of assumptions that we should return to the kind of distance increases that we saw from 1981 to 1996, which is on the average of about a yard a year. It was from 1996 to 2002 that we saw significant jumps in distance from a number of different -- for a number of different reasons. We think those things have gone away, and based on that, we believe those assumptions are reasonably accurate, and we believe the shift now will be to focus not so much on equipment development, although we assume that the improvements in equipment will continue to occur mainly from the standpoint of making the game more playable, which we applaud, but we don't see changes which will result in and of themselves in creating more distance.

If those assumptions are correct, and we will measure them very carefully because in 2003 last year was the first year we were fully operational with ShotLink, and with ShotLink data we know exactly what's happening with the golf ball. If those assumptions are correct, it would mean that we would return to that 1981 to 1996 time period. Having said that, we also recognize that a lot of adjustments to golf courses between 1996 and 2002, 2003, have been made. In fact, it's been a challenge for us as an organization to keep up with a number of the changes because we play in a number of golf courses, many of which we don't control day-to-day.

We recognize that a number of those golf courses probably putting Augusta National at the top of the list and right on down, there is simply no more room. We also recognize that the athleticism which will now be the focus of what's happening with the golf ball, is continuing on average to increase overall on the PGA TOUR and probably will continue to increase. It is likely that average distance will continue to grow because average club head speed will continue to grow, and the reason for that is better athletes are entering the sport at this level.

So we continue to believe for two years that it's important that the USGA move forward and complete the research necessary to determine what options are available to us if we were to determine at some point in the future that it was important to make a change with the golf ball; that is to say, deaden the golf ball, bring the distance back, regulate it back, what are those options that are available to us? How do the various options impact players at this level competitively? And based on that, what options we'd want to choose.

The reason for that is that if we get to a point where we are concerned about some of the older golf courses and we think an adjustment should be made, it may be a situation where we don't want to wait three or four years to do research and haggle about what options or option we would go to. We are pleased that in this area, again, the United States Golf Association has expended and is expending significant resources in this particular area, and we anticipate that at the end of next year or so, they will conclude their work, and we are very much abreast of the work that they're doing in terms of giving us and providing us options.

So we will be monitoring carefully, annually looking at the data, asking ourselves what's happening, working off of a base year probably of 2003, and at the same time looking at the options available to us going forward.

I'm quick to point out, I don't assume anything here. The only assumptions we're making at this point is that athleticism will play a role in generating average increase in distance. There isn't any reason to believe that distance will increase at the highest level, but we don't know that. It is prudent for us to be active in terms of researching options as we look out into the future.

With that said, I'll be happy to take your questions on those or other subjects.

Q. The momentum you spoke of, do you anticipate that that will translate to increased -- an increased TV contract next time, or do you think there will be a leveling off in the TV money and hence the purses?

COMMISSIONER TIM FINCHEM: Well, I don't think that we'll see the kind of increases that we saw the last period of negotiations. I think the reality is that in the last negotiations, a lot of the margins that were in the overall business model were reduced. We want our television partners to be in a profit situation. What we are looking for is a combination of television arrangements along with our other businesses that allow us to look out the next five to ten years and see growth, and when I say "growth," I don't just mean purse growth, although we'd like to see a continuation in purse growth, but I also do mean an equally important charitable growth as well as investing in the ability of our tournaments to be very effective in the markets where they play, and I do see those three things happening as we speak.

Q. This sort of speaks to momentum, too, although kind of side arm. Would you have thought it would be conceivable based on the way Tiger is playing 99-2000 that we'd be sitting here looking at a guy possibly winning his next tournament this year, Vijay's incredible second half this year?

COMMISSIONER TIM FINCHEM: No (laughter). It's amazing. The other thing about it is it's like he doesn't seem to be any more nervous or -- he just takes it so much in stride playing at this level. It agrees with him. He's really played this level for two years. He didn't quite win as many last year, but he won a lot. Those of us who see him a lot, and of course he lives around here, see his work ethic and it's phenomenal. His work ethic hasn't fallen off a bit. He's very flexible, he stays in great shape, so one of the interesting things will be how long can he play at this level, which is always the interesting thing. I always said in 1997 to 1999-2000 that the interesting thing about Tiger was really how long can he play at that level, and now the question is can Tiger come just a touch up from where he is now to be back at that level.

But the interesting thing about Vijay will be can he stay there. He's enjoying himself right now.

Q. I got a little bit lost on the ball. I wonder if you could very simply explain what might have to happen hypothetically for you to consider working with the USGA in scaling it back or deadening it or whatever the word is that you used?

COMMISSIONER TIM FINCHEM: Well, we are working with the USGA and the R & A and the other golf organizations. I think the change in the industry the last ten years has been -- in all of these kinds of areas, that's much more discussion, much more interrelationship between the various entities about these kinds of issues. I don't think there's a particular litmus test. I think with ShotLink -- the interesting thing about ShotLink is we created ShotLink really to help the television and to help with the Internet in communicating what's happening, and we found that an equally vital role of ShotLink is the ability to use it as a tool if you're changing a golf course or evaluating the competition.

So what do we measure? We measure public opinion and attitude. Golf course owners and organizations are looking at it, as we are, from a competitive challenge standpoint, shot values, how the golf course was designed versus how maybe it's being played now, given where the golf ball is going and what it does and how equipment performs, plus how the athleticism of the players. So all those things combine to create some questions; are you comfortable with the way the golf course is playing, is the fan as excited about the golf course playing this way versus some other way, what things would you have to do to the golf course to get it to a point where you are comfortable, and do you really want to do that.

Obviously when the changes were made at Augusta National, there were a lot of people in the mix, and certainly a number of players, who felt like there had been a movement away from the traditional way that golf course had been played, and when you have to move away from tradition, at least at this point, it troubles people. I think you take all those things into consideration and ask yourself do we need to make a change, and that will be a conversation that goes on every year among a variety of different parties. There is no litmus test.

Q. Is that all it's ever going to be is a conversation; can you ever see the tournament taking some action?

COMMISSIONER TIM FINCHEM: I think if we concluded that for any number of reasons it was the right thing to do for the sport and necessarily to maintain and grow the health of the sport, sure, we wouldn't hesitate to argue for a change, but we're a ways away from that. What we have been arguing for is to get everybody on the same page, to get some things in place where we know what's going on with the equipment from a sanctioning body standpoint just as much as the manufacturers do, to put some things in place where we're really measuring effectively what's happening, so you take the rumor out of the equation and have some sensible conversation about it instead of certain people running off and arguing this, that and the other with anecdotal information. I think we're about there.

We're setting a base, and now we can have some intelligent conversation and we can invite everybody in this room and others to participate in that and make your own comments because a lot of it has to do with what the media and the fans think about what's happening. Perception is reality. We will have the facts out there systematically and we will not rely on other organizations to put the facts out there. We will be aggressively putting the facts out and say this is what's happening, this is where the ball is going, this is how it's being played, this is the effect on scoring, what do you think, and getting some feedback.

Q. I've seen a considerable scaling back on these prodigious commercials in which one golf ball is the longest golf ball of them all, and I just wonder if that's a precursor of the manufacturers seeing something in the distance.

COMMISSIONER TIM FINCHEM: I wouldn't speak for them. I do know that those commercials have been around for a long time. Less lately, but I wouldn't speak to their strategies. Your assumption is logical.

Q. I think I get the gist of what you're saying, but I wonder if it's a combination. When it comes to how the course is being played, when Augusta made the changes one thing that was brought up wasn't so much how low the scores were but guys hitting driver, wedge, driver, 9-iron. Is that what you're speaking about when it comes to the ball is how the course is being played, or is that a combination of what the scores are?

COMMISSIONER TIM FINCHEM: A combination. Let me just give you one example and maybe this will put you in perspective. At 16th hole at the Players Championship, reachable par 5, on occasion there's been discussion that we should lengthen that hole, the reason being the ball is going farther, and my response has always been, yeah, but how many players are trying to reach the green in 2, how many players are successfully reaching the green in 2, what does the fan see, what's happened five years ago, what's happening today, has it really changed, is the fan less interested, is the player less challenged, more challenged? Those are questions that are more difficult to answer until ShotLink. ShotLink tells us a lot of those answers.

Now, let's say that at the 16th we concluded that instead of 50 percent of the field trying to reach the green, which is roughly the case now, and 50 percent of those being successful, that 96 percent of the players were trying to reach the green and 90 percent of those were successful. Well, you might want to bring the tee back to a point where you've got numbers that you used to have arguably if that's what you wanted to do. I'm just giving you a real example for a hypothetical question. Let's say you couldn't take the tee back, that there was no room to take the tee back. We have a little bit of room there. We could take the tee back. On another golf course you may not have that option.

So the shot values have changed over the years. You're not comfortable but you're -- those are some of the constraints that some of the older golf courses that we have on the TOUR are facing as they do those kind of evaluations.

One of the things ShotLink does is it provides them the tool, however, to really know whether it's their gut that tells them something has changed or whether something has really changed, and hopefully we can come behind that and do some reasonably big research in terms of what kinds of people in this room think as well as the fans generally. I think that we can't wait around until we know we have a problem and get ahead of it a little bit because sometimes in sports if you wait too long, catching up is tougher. That's why we've been more aggressive in this area, but we're not making any assumptions that X needs to happen, either. We're just saying let's get all on the same playing field, get out there and evaluate what's happening as things develop and as these players continue to come to the scene with more athleticism, as they will.

Q. Could you clear up -- there was some discussion, some stories written over the last couple months on the notion of a possible consideration of rotation in the early Florida swing events. You discussed that in March briefly at that time. Was that discussed and dismissed or discussed at what length and where does that stand?

COMMISSIONER TIM FINCHEM: Well, I was quoted -- it might have been your story -- as saying that, when we look at the strength of the west coast and we look at Florida, which has been less consistent now the last five years, the early Florida schedule, Bay Hill, The Players Championship, that it might be prudent at some point to look at the way the schedule flows at the end of the west coast. That's all I said. Somehow from that came a suggestion that what we were doing was flipping the schedule around. That's not where we are. As it relates specifically to Bay Hill, I don't think we would even contemplate that. But how the west coast ends with the Match Play and how it begins is something we might look at for after '06, but we're just in the very preliminary stages, and it would be highly speculative to suggest that any switcharoo was in the offing. There isn't any model that we're working off right now that suggests a change.

Q. Honda, Doral then would be --

COMMISSIONER TIM FINCHEM: It could be something like that, it could be moving the Match Play up a little bit, it could be moving the Match Play -- until we get a little further along in terms of sponsor extension, in terms of getting a better field for the television packages, we wouldn't even begin to look at models.

Right now our assumption is that the Florida layout, which moves nicely geographically, would most likely stay in play the way it is.

Q. I was hoping to get more on the TV contracts, specifically you said it was unlikely you'll see the same growth. What is the likelihood, if any, that you'll actually have to renew at a lower rate?

COMMISSIONER TIM FINCHEM: Well, I don't think we will. I mean, I think that the product is working quite well. We're well-sponsored. We have another year to go, our performance this year is pretty reasonably solid. You know, our focus isn't really about that. Our focus is more on the product and how we present the product, how the product is organized. When I say "product," I'm talking about everything from the schedule to the tournaments and where the tournaments are, field quality and all those things, and if we do our job in those areas, I think we'll come out fine.

Again, our objective is to come out of all of that with the ability to continue to grow, and I feel quite comfortable we will do that. It's a little premature to get into details. Even if we're further along, I won't talk about details until after we're done.

Q. Just to understand this a little better, you indicated earlier that your goal here in the television situation is to have the networks profit as well as yourselves in the arrangement. Are the networks profiting under this TV contract?

COMMISSIONER TIM FINCHEM: Over the long haul our projections have been profiting, yes. I think all sports other than the NFL are pretty much in the same basket with regard to that question. The NFL has the ability to do business -- has a business model. It has most of its television partners -- when I talk about "lose," I'm talking about lose significant sums of money. Nobody else in sports has that luxury, and in today's world they have to demonstrate that it's going to work.

We have put enormous resources behind not just sponsorship but impacting the other side of the equation, and we've done a number of things so that the model we're working off of becomes reality by the end of next year, and if that model does -- I think it will, and I think we'll be fine.

Q. Just to follow up, so today, it would be easy to say -- I would assume from what I'm hearing that maybe they're not profiting currently under the deal, but by the end of next year with your model kicking in place, that they would be?

COMMISSIONER TIM FINCHEM: No, I don't think that's -- you've got to understand how these things are accounted for over a four-year period. Our projections have these packages profitable that we are currently working under, and I anticipate that will be the case, but again, we are in a marginal situation. Let me put it this way: There is no chance we're going to be in a major loss position. That's what I say distinguishes us and the other sports from the NFL. The NFL can sustain a significant loss posture. Nobody else can. We're not going to be in that position.

Q. I'm not positive about the cart issue on the Champions Tour; is that an official thing, that there will be no carts?

COMMISSIONER TIM FINCHEM: Well, policy board passed a policy at the end of 2003 which indicated that beginning with the January 2005 season that there would be no carts with the exception of tournaments where the tournament director made the determination that for topographic reasons or whatever, it was important just to allow carts, and we already know of two for next year.

So what's happened on the Champions Tour is that we've gone from every tournament having carts to this year we have I think 23 that have carts, but those tournaments, the caddie is not allowed to drive the cart, which means we have even less carts than we used to at those tournaments, and now we would take one more step that in competition rounds, Friday, Saturday, Sunday, no carts, even though carts would be allowed during the Pro-Am. That's where it is now.

Policy board has the authority to change that, but if they take no action, that will go into effect January 1 of '05.

BOB COMBS: Ladies and gentlemen, we have some brief time for one-on-ones afterward to take on additional questions. Thank you for being here this week and for covering us all throughout the year. We appreciate that.

End of FastScripts.

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