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October 31, 2001

Tim Finchem


BOB COMBS: Appreciate all of you coming in here for the annual state of the Tour press conference that we traditionally held at THE TOUR Championship from Commissioner Finchem. We are joined on AT&T conference call by national media from around the country that were not able to be with us today. The format for this morning's presentation, the Commissioner will give us update remarks, we will have a Q and A session for the media here in Houston, then we will flip it to the media around the country on the AT&T call. Commissioner Finchem.

COMMISSIONER FINCHEM: Thank you, Bob. Good morning, everybody. We haven't visited in a while. Delighted to see everyone here to be with us during THE TOUR Championship this year. Let me say that I want to stress and talk mainly this morning about a couple of major points, but I'd like to start off this session by talking about this week and THE TOUR Championship presented by Dynegy before I get into the general business of the Tour. First of all, I'd like to comment about Dynegy. This is our inaugural year with Dynegy as a sponsor of the PGA TOUR, and more importantly, THE TOUR Championship. I am delighted that Chuck Watson, the CEO of Dynegy, is with us, and he's available to chat with a few of you after, if you'd like to do some individual time. But the reason I raise this is not just that Dynegy is a sponsor. I think this is a unique sponsorship relationship. Never in my tenure have I come to one of our golf tournaments, gone out to the pro-am and discovered that -- the entire season I don't remember executive staff for our sponsoring companny is caddying in the pro-am. I had a CEO of another one of our clients yesterday who played in the pro-am who has been a very difficult guy for me to get ahold of or spend time with. He flies all around the world. He actually came and played in this pro-am because the caddies in the group were the people he wanted it do business with. This is an ingenious way to involve the company in the sponsorship and in the tournament and, also, relationship building that I think, now going forward, may serve as a model for many of our other companies. The energy that -- no pun intended -- that Dynegy is putting into this championship is very special. We are going to be together for a good number of years, and I am quite confident that the leadership of Chuck Watson and his team is going to mean that this championship is going to get even better in growing stature in the years ahead. Along that line, Chuck has indicated his interest since our discussions began about trying to come back to Houston. Of course, we cherish our relationship with the Houston Golf Association and Jackie Burke and Champions, so we are delighted to announce this morning that we will be returning here with THE TOUR Championship presented by Dynegy in 2003. I'd also like to comment about the announcement that Chuck and Jackie made yesterday with respect to the involvement over the years by Dynegy and junior golf and their utilization of a relationship with The First Tee in those programs, The First Tee facility now functioning in Houston. I think it is a terrific idea. I really didn't know about it until I got here, Champions being involved, providing two days of the year from kids from First Tee programs and challenging other clubs in Houston, and I guess eventually around the ccountry, to do the same thing. I am often asked, you are going to have all these First Tee facilities around the country, where are the kids eventually going to play? First Tee facilities are designed to be able to learn how to play, but to have kids who get to a certain point in learning the game to be able to come out and play a Champions Golf Club is going to take that program to a whole other level. And if the response is very positive, and Chuck tells me this morning they have already heard from some other Houston clubs that are saying we are in, we will donate some days. This could be the answer to the question about where are the kids between the time they get interfaced to the game and start to learn how to play the game and when they are a little older and they have access that they develop themselves. So Chuck, we are delighted for that and your commitment to junior golf and what is happening in that regard. We have had a good year this year on the PGA TOUR. Certainly highlighted by Tiger's five wins, win at The Masters, win at THE PLAYERS Championship. Phil's consistently good play, and I might say that we fully appreciate Phil's reasoning for not being here this week, with a new baby, a new baby that had to go back to the hospital for a few days. His priorities are situated correctly. David Toms' special performance at the PGA Championship and developing into not just a real champion, but a fine young man, as well. And the other great performances, we are delighted the Tour has performed very well. I'd like to make today just two major points and give some reasoning behind those points. We haven't been together in a while. This has been a strange year for our country, a difficult year for our country, and one that where we have had an interruption in our play for the first time that any of us can remember after the attacks in New York. But as I stand here today, I am confident of two things: One, the PGA TOUR is stronger than it has ever been; and two, over the next five years, it will be stronger still. I have read some things recently about the recession, about the new television arrangements on the PGA TOUR driving costs up, the questioning of our sponsorship base. I want to allay these questions, answer those questions to the extent that they are legitimate, if at all, by saying that we are stronger than we have ever been and we will be stronger in the next five years, and here's why: Why are we stronger than we have ever been? No. 1, first and foremost, the image of our players and our overall structure conditions to continues to be very special in sport. These tournaments this year have raised, with players' support, over $65 million for charity. Yet again, this year in every single poll I have seen that evaluates the opinion of sports fans in America, PGA TOUR players, SENIOR TOUR players are rated 25 to 30 percentage points above athletes in any other sport in terms of role models. These are players who do not resist the idea of being viewed as role models, they welcome it, and these are tournaments who cherish their relationship with the sport that's dedicated to charity. I think, more than ever, that that image distinguishes us as a sport in a very positive way. Secondly, our field quality, the list of stars, well-known players, players who have impact, continues to strengthen. Why is that? First, players are playing more. Last year for the fourth straight year -- this year for the fourth straight year, the top -10, the top-30, the top-50, the top-70, the top-125 played more golf tournaments. The top-10 played almost an average of an event more a player. For four straight years we have had a strengthening of our fields because of players playing more. Secondly, the PGA TOUR has become very much the center point of professional golf in the world. We have 49 players from somewhere other than the United States. We have great champions now in Jose Coceres and Sergio Garcia to reach out to our Latino and Hispanic fan base. We have great Australian players in Robert Allenby and Appleby. We have Retief Goosen to join Ernie Els and Nick Price from Southern Africa as a great champion. We have Maruyama for the first Japanese player to win in the continental United States, our international television as a result of that is very strong. The extent to which we can grow our fan base in some of those areas is stronger than it has ever been. But in the short-term it means more quality fields, more stars. Thirdly, we have good, young players coming up in numbers that are greater than ever before. When you look at players like Howell, Gossett, and Kucera this year, three players who had no access at the start of the year and earned their access, it is very much the -- maybe not the beginning, but certainly the recognition of a growth of a friend where we will have more and more good young players, very athletic players coming forward in the years ahead. All of this results in when we come to Houston or Chicago, we have stronger fields, more named players and a more diverse amount of star players who speak to our fans in lots of different ways. The third reason: Our fan base continues to increase. I think we all recognize that our television ratings are up against this year. Some 7% over 2000, 11 percent over 1999. But perhaps even more interestingly is that on an apples to apples basis, the fan base generally, the number of Americans over the age of 12 who call themselves fans of PGA TOUR SENIOR TOUR golf, has increased over the numbers that we presented at the 2020 Conference last fall, by another 13 or 14 percent. Extrapolating that would mean that our fan base has moved from somewhere around 96 million Americans to almost 110 million Americans over the last twelve months. So for all those reasons, we look at 2001 and we look at the last ten years and we see a stronger Tour than we have ever had before, without going into things like prize money and things of that nature. The next five years, my second point are going to be stronger yet. Why is that? No. 1: We have a stronger television position. Yes, television will generate more financial strength and yes, the players will receive more benefits, but charities also; charity dollars will also continue to grow on the PGA TOUR and the SENIOR TOUR. But more importantly than the dollars is the positioning of our sport over the next five years on television. We will have less commercialization in our telecasts which will make it better for the viewers. We will have stronger production values. We will have a stronger tie in with new media capability and we will have a stronger tie-in with high technology that conveys data of interest to our fan base in a more specific manner. In addition to that, we have a huge array of increased promotion, premier shows, lead-in shows that will better position our sport on television and bring -- give us the capability to tell the story of these great players and who they are in a more cohesive way to -- and more consistent way to our fans than we have ever before. Secondly, the cost of television is -- there are caps on the networks as to what they can charge our title sponsors for television over the next four years. This is a key ingredients of our negotiations. It assures that the costs to our title sponsors is going to be very reasonable in the next five years. Thirdly, the value to our title sponsors is going to increase. I mentioned less clutter in the telecast. A title sponsor will share less of the commercialization with other sponsors because there will be less commercialization in our telecast. We have a stronger fan base. We have higher ratings and we have very reasonable, comparatively, cost to pass on to our title sponsors. So the value ratio of value versus cost is very positive for the next four years. Now, where does that lead us? We just sent our contracts out to our tournament organizations in the last 30 days. We have just begun, in the last 30 days, specific discussions with our title sponsors for the next five years. We have already gotten commitments of renewal for well over half in 30 days of those sponsors. There is no question in my mind that -- regardless of the recession, that our tournaments will be fully sponsored, fully sponsored, commercially over the next four years. I think I can say that unequivocally. It is true that we, from time to time, lose sponsors. We have lost sponsors during the '90s when the economy was roaring for 10 straight years. We lost sponsors like Ryder and United and Motorola. Companies make strategic changes in how they want to be involved in sports marketing enterprises. Companies do better or worse financially and they react to that differently. So we will always have some turnover, and during this period we will lose a couple of sponsors too. Maybe a little bit more, given the recession in the past. But the point is that the strength of the product is going to allow us, just as we always have, to fully sponsor our Tour and to fully sponsor it in a way that we will be able to continue to increase financial benefits back to players and contributions to charity. So we are at a point where we feel like we are stronger than we have ever been, and there's no question in our mind that we will be stronger in the next five years and fully sponsored as a Tour. Since we haven't been together in a while, I wanted to hit that point directly because I have seen some commentary creeping in of questioning the direction, and I won't be as optimistic as I am if I didn't have a very sound basis to be so. Beyond that, our focus over the next three or four years is going to be to grow our fan base at an ever-increasing rate. Last year at the 2020 Conference we pointed out that among African Americans, Hispanics, women, and young people, we had seen significant growth in the prior three years. We attribute that to the interest of Tiger Woods, of kids in Tiger Woods and our younger players. We attribute it to having a stronger representation of star Latino players on the PGA TOUR. We attribute it to the overall recognition that this sport has taken on a bigness that it didn't have before which appeals not just to kids but to other areas that, historically, haven't paid us that much attention. Our focus is going to be to utilize those players who appeal to those groups and really work hard directly to grow our fan base. The fan base growth that we have seen in the last 3, 4 years has been virtually a product of what the status quo is in terms of the way we promote. We are going to promote differently to really focus on moving our fan base and move those numbers really farther that will generate more value to our sponsors and secure our future. There may be other areas of the Tour that you would like to talk about, there may be other things with respect to the other Tour that you'd like to talk about, but at this point I will throw it open to questions and do my best to answer any questions that you have.

BOB COMBS: We will take questions from the floor here. Before we move to the AT&T teleconference.

Q. When the previous TV contract ended in 1998, the new one started in 1999, total purse on Tour went from about 96 million to something about 135, ballpark figures. Do you expect a similar increase when the new contract kicks in in '03?

COMMISSIONER FINCHEM: Well, the final year of this television agreement, which is next year's prize money, will go from about 180 to 200 million. We will be at about 200 million next year. I think it's reasonable -- I think -- there are a variety of factors that impact prize money levels. The recession is going to have some impact, but we don't see significant impacts. I think it is not unreasonable to assume that our prize money the next fours years would grow to somewhere upwards of $300 million by the end of that cycle.

Q. As you pointed out, you have got some great young players that have earned their Tour cards this year -- I mean earned then the hard way -- and you have -- are you planning to make any more changes there which will allow more of these younger players to come out and earn their Tour card that way by maybe allowing more sponsor exemptions?

COMMISSIONER FINCHEM: We don't have any plans in the immediate future to change our regulations. Ever year -- I think right now we are at 50% plus turnover of the 125 every five years. So there's an enormous amount of access to this Tour today. I think the difference is that the younger players -- you know, I am speaking now over the next five or ten years. We are attracting now -- well, let me put it this way: We are competing better. If you recall, when I became commissioner, I'd said that raising prize money was something we needed to do for the players to compete with the other sports. But, also, in the long-term, if we can get dollars up, we would compete for the interest of younger kids who are good athletes that they wouldn't just think about the team sports. If the financial benefits were there, they would start to think more about golf. I think what we are seeing, if you go to First Tee facilities or junior golf programs or look at what is going on in high schools, you are seeing more athletic kids who can play baseball, they play second base, they could play wide receiver, thinking more about this game. That progression is going to be -- mean that more, over time, we are not just going to have more young good players because of the growth of the interest in the game, we are going to have better athletes who are trying to become good players, and that's going to long-term put more pressure on players who are already out here. I think that's already begun, if you look at the kind of young players we are getting today. I don't think we need to do anything there to help that along. I think they have plenty of access. I just think they are going to take more advantage of it.

Q. From time to time in the past you have mentioned that golf is not a ratings-driven sport. In light of Tiger and this new TV contract, how has that changed, or has it?

COMMISSIONER FINCHEM: It's not a rating-driven sport in the sense that historically, whether or not we had a good rating, you could always reach a certain audience, and it happens to be the upper end audience, so that, historically, the base of our sport has been satisfactorily sponsored by companies who are comfortable reaching the upper socioeconomic end of the spectrum. Big ticket, things like that. I think what is changing, as our demographic spreads, we have access to sponsorship that's more interested in more than that, not dependent upon ratings. But certainly ratings allow us to reach a broader demographic, and broader demographic reach allows us to entice the support of a different kind of sponsor group. That's a very important thing, and over the next ten years, if that trend were to continue, it put us in a very different position in terms of the ability to generate significant financial growth.

Q. My newspaper, and I know other publications, have had headlines recently about security and concern about that. What about the PGA TOUR and possible security for its players? It seems like a difficult thing for you to do. I wondered if you could comment to that for me.

COMMISSIONER FINCHEM: Well, I have commented in the past. I have commented about it to a couple of times since the attacks. And so let me just restate, I think -- maybe I haven't said all of this, but certainly going back five years, we had an incident at Akron, NEC Championships that brought pretty close to home the reality that we are out here on 240 acres. If we don't have security measures, we could have a problem. Over those 5, 6 years we have gradually, but regularly, I think, each year increased our security capability and the kinds of things we do on property regarding security. During those five years we also had an increase in our fans and the attendance at our tournaments which makes security issues more difficult to administer. I think we made a lot of progress. The fact that on September 11 we realized that, you know, we can suffer severe terrorist attacks within the confines of our country, and given the Anthrax campaign that seems to be still a question mark where it's coming from, all of that has focused us on renewed interest in security. We have taken steps in a number of areas because of reevaluations that have gone on, and are going on with respect to security. The ones that we have announced include the fact that we will not allow on property backpacks or packages of any significant size and we will search smaller parcels and carry on things into the tournament specifically. Those procedures are being implemented today. They are not being implemented yet at a level of sophistication that we are comfortable with yet, but we are getting there. We also will have, certainly starting the first part of this next season, significant increase in the ingress and egress presence at secured areas for players of uniformed police officers. Beyond that, we have a variety of additional personnel on the property, and we have taken and are taking significant other steps that, frankly, we see no reason to share with the public. We have also heightened and put significant additional resources into our internal security capability in terms of monitoring these and additional efforts and external security consultation with top security people in terms of additional steps we should consider. It has now become a full-time part of our business. I don't think that's inconsistent with any other sport. All sports feel like they are high profile and it could be a target, and as a consequence, we have to take every precaution necessary to be able to explain to our players and our fans, or tell our players and our fans that we have taken every precaution to make sure we have a safe environment for our tournaments. Since September 11 I am pleased to say that when we came back to play on the SENIOR TOUR in Raleigh and the PGA TOUR in Pittsburgh, our fans have come out -- we don't seem to have suffered any slippage at all in terms of our galleries, which is delightful. I know -- I would say, finally, to that that we certainly are 100% supportive of President Bush in his encouragement for America to get back to it and not be derailed by terrorists' threats. Stay on a high state of alert, but do not allow the terrorist to take away our way of life, and we are committed to that. At the same time, we pay a great deal of attention to and our communications with law enforcement agencies as they communicate the potential of something happening.

Q. In light of what has happened, obviously, with the Ryder Cup being postponed, the LPGA had cancelled a tournament in Korea, how concerned are you about these players that are going all over the world, Tiger and Duval going to Japan, you have got the Sun City coming up in South Africa. How concerned are you about your marquis stars travelling all over the world? Is there anything you can do about that?

COMMISSIONER FINCHEM: First of all, we have a good number of our members playing in the World Cup in Japan. As far as international travel, goes we are in touch with the state department. We are in touch with our outside international security consulting people in terms of trying to guide the players with respect to anything they should know about security risks in certain areas. There's no reason for us to believe at this point there's a security risk in Japan. We plan to go ahead fully with the World Cup. To my knowledge all of the players are going to attend. And frankly, you know, to be honest, these attacks happened in the United States. They didn't happen in Japan. So here again, I think we need to not be dissuaded from moving ahead with our way of life. But certainly there are some places in the world that would not fall into that category, and I think the main thing is to keep our players and their management teams informed and updated about any security information that would be relevant to a decision to travel to a particular destination.

Q. Are you planning on lowering the age of the SENIOR TOUR?

COMMISSIONER FINCHEM: The SENIOR TOUR -- let me make this comment about the SENIOR TOUR, because I have read a lot. There has been a lot of speculation about the SENIOR TOUR. Let me make one fundamental statement. The SENIOR TOUR today is very strong. It has the highest purses today than it's had in its history, and it attracts good galleries. We had -- the most recent example being Oklahoma City last week where we had excellent galleries. On the other hand, the SENIOR TOUR needs to compete better in the overall sports environment, to some degree with the PGA TOUR, because that's what you all compare it to, unfortunately. But also, with everything else, all other sports, all others, it's just like the PGA TOUR, we compete. We are an entertainment sport. We have to compete. We think it is important to, you know, provide some strengthening of the SENIOR TOUR's marketing capability. We do not think, and our eligibility task force does not think, for a lot of different reasons, changing the age is one of those things, and I am not going to recommend that to our board. We do think, and I think, and I am going to recommend to our board, that it is important that we increase the percentage of players who play that Tour who played full careers on the PGA TOUR. And there are some ways to do that. But that's only one part of the puzzle. The overall structure of the SENIOR TOUR, how it relates to the core fan base of golf is something we have intensively looked at over the last six months and explored ways to do things differently to relate to that fan base. We are not done with that exercise yet, but we are coming closer, and I hope to have something specifically to say about a dozen different things here at the end of the year. So we are in the process. I do not envision an age change being part of that equation.

Q. Are you concerned with international players staying away from U.S. events at all?

COMMISSIONER FINCHEM: Well, sure. I mean, if -- you know, as I said earlier, having top international players play our Tour is a growing part of our success and a key ingredient to the strength of our international television distribution. Our international television distribution, Japan, South Africa, Australia, Europe is very, very positive today. Thankfully we haven't had much slippage since the attacks, but we have had some. There are a couple of players who have called, said, "Look, at this point in time, I just as soon not travel. I would like to be with my family." There is -- as you well know, there continues to be some uncertainty in the world. I see it ebbing. We have, obviously, everyone here who is eligible. So I don't see it as a big problem today, and if the president and his team prevail in terms of putting a better lid on international terrorism, I suspect we will be just fine. And we are all supportive of him in that effort.

BOB COMBS: We have time for just one or two more questions. Why don't we open it up to those callers on the teleconference call. First question, please.

Q. At this moment do you have anything more on the sponsorship (inaudible)and the BUY.COM Tour at this time?

COMMISSIONER FINCHEM: No. As you know, the BUY.COM company has filed a lawsuit against the PGA TOUR, unfortunately, their business has failed or in a failing position. We'll obviously -- we'll obviously transition to a new sponsor as early as the first quarter of '02, as late as but not later than the first quarter of '03. I hope to have more to say about that in a few weeks as well.

BOB COMBS: We have time for probably just one more question. We have got the Payne Stewart Award Ceremony taking place shortly.

Q. The tournament director of the Air Canada championships said a while ago that the PGA TOUR had given them a deadline of tomorrow, November 1, to come up with a sponsor. (Inaudible) I am wondering if you could speak about that deadline and where things stand now.



COMMISSIONER FINCHEM: Congratulations on your book. I look forward to reading it over the holidays. Thanks for the copy. I am not aware of the details of our discussions with Vancouver. I would direct you to Henry Hughes to answer that question. He can give you a call a little bit later after the conference.

BOB COMBS: Those of you on the call or here in person that haven't had a chance to get your question answered obviously give us a call over the next few days and we'll try to work with you to get that done. Time doesn't permit us to go anymore. We hope that you all go to the Payne Stewart Award ceremony. Thanks for your interest today.


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