More Money, Less Problems for the PGA?
During the average week on the PGA Tour, players fight hard for a purse. But where does that money come from? And why are some tournaments able to pay out more than a million to the winner, while others can only pay out a few hundred thousand?
The prize pool in each PGA Tour event is tied in some respects to the amount of television interest that event can generate. As one might suspect, television advertising drives purse money, and marquee events are able to offer substantially more to players because of the additional advertising revenue.
According to a report from Forbes, nearly 60-percent of all tour prize money comes from the large television deal the PGA Tour has with a number of networks. The PGA Tour has major deals with CBS, NBC, and the Golf Channel, with those CBS and NBC contracts totaling somewhere in the neighborhood of $28 billion. From there, the rest of the money comes from the title sponsor of each event. What this means is that when the PGA Tour tees it up for the World Golf Championship Bridgestone Invitational at Firestone County Club each year, around $5 million of the $8 million dollar purse comes from money paid by the major networks for the right to broadcast the event. Those networks, in turn, get to sell ads to their own advertisers, and they take advantage of an arrangement where the PGA Tour sells ads to its own sponsors. In the case of the Bridgestone, the remaining $3 million comes from that tire maker, which coughs up the money for the right to put its name all over one of the game’s most prestigious events.
The rise of Tiger Woods has helped to boost prize money on tour. As more people have tuned in to the game on television, the networks have been able to command more money from advertisers. This gets passed all the way up the chain, with the PGA Tour demanding more for its television rights, and players benefitting significantly from a rise in purse money, even for those average events. Because networks have a significant desire to broadcast golf’s biggest weeks, they are willing to pay more for a multi-season deal in which they broadcast even the events that people aren’t watching, like the Northern Trust Open, which featured a $6.5 million purse this past year. The end game? It’s a good time to be a PGA player right now. And it’s even better to be a winner.
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References
Burke, Monte. “The PGA Tour’s Biggest Purses.” Forbes. http://www.forbes.com/sites/monteburke/2011/06/15/the-pga-tours-biggest-purses/
Burke, Monte. “The Biggest Tournaments on the PGA Tour.” Forbes. http://www.forbes.com/sites/monteburke/2012/05/08/the-richest-tournaments-on-the-pga-tour/
The Economist. “The Business of Golf: Beyond Tiger.” http://www.economist.com/node/18805531
