Golf Inc pays for Tiger's affairs with millions in lost ads

Tiger Woods’s indiscretions will cascade through Golf Inc, costing the PGA Tour, television networks such as CBS and merchandise vendors like Nike Inc $220 million or more in lost revenue.

Woods’s indefinite leave from the sport, announced on December 11 after he disclosed marital infidelity, deprives professional golf of its biggest draw. In his absence, tournament crowds may be 20 per cent smaller, according to organisers.

Television audiences may shrink by half, based on Nielsen Co data from past events. TV advertising may drop by as much as 40 per cent, said Aaron Cohen, chief media negotiating officer at New York-based ad agency Horizon Media Inc.Nike, which built its golf equipment business around Woods, stands to lose more than $30 million in sales, according to Claire Gallacher, an analyst with San Diego-based Capstone Investments Inc.

“It’s not so much a ripple effect as it is a tsunami,” said Rick Gentile, a former CBS Sports executive producer who teaches at Seton Hall University. “The aura is gone.”

The PGA Tour received revenue of $773 million from tournaments and television in 2008, according to its annual report. In turn, broadcasters received $642.7 million in TV advertising revenue, according to New York-based TNS Media Intelligence. Should Woods sit out the entire year, ad spending will skid 30 per cent to 40 per cent, Cohen said in an interview.

Through October of this year, marketers spent $576.4 million to advertise on weekend golf broadcasts, according to TNS. New York-based CBS Corp and General Electric Co’s NBC had the largest exposure, the researcher said.

The 2010 PGA Tour season begins on January 7 in Hawaii. Cohen’s estimate suggests ad losses may be at least $192 million if Woods is out all year. That, plus the potential damage to Nike, would put the effect at more than $220 million.

Weekend television audiences sank by 47 per cent to an average of 2.4 million viewers when Woods was out with a knee injury in 2008 and early 2009, according to data from Nielsen, the New York-based researcher. Excluding major tournaments, ad prices were 30 per cent higher when he was present than when he wasn’t, according to TNS.

“There will be an audience for the sport after Tiger Woods,” Cohen said. “They’ll just be much smaller because he attracts a casual fan who otherwise may not tune in.”

The ad crunch will initially hurt broadcasters, then potentially affect the tour later when networks seek to renew television rights at lower prices, said Cohen.

Woods, ranked No 1 for the past 4 1/2 years in the Official World Golf Ranking, has dominated golf since turning pro in 1996, earning a record $100.2 million in career prize money. His 14 major tournament wins are second to Jack Nicklaus, who had 18 as a professional.

The golfer built an endorsement franchise that helped propel his total earnings past $1 billion, according to Forbes, teaming with Beaverton, Oregon-based sporting goods manufacturer Nike, Procter & Gamble Co’s Gillette razors, Swiss watch maker Tag Heuer, consulting company Accenture Plc and others.

Woods attracted sponsorships that helped lift prize money and feed the growth of professional golf. The industry pumped about $76 billion into the US economy in 2005, a 22 per cent increase from 2000, according to the most recent study commissioned by the US PGA Tour, the PGA of America and US Golf Association.

Operating golf facilities made up the biggest portion of the total, $28.1 billion. Endorsements, tournaments and associations accounted for $1.68 billion of activity. Golf supplies totaled $6.15 billion.