Sometimes the golf at a PGA Tour event is far less interesting than what happened behind the scenes to make the tournament happen in the first place.
Such is the case with this week's Traveler's Championship in Hartford.
As Hartford Courant writer Bruce Berlet recalls in the current SI Golf Plus, the last two years of
the Travelers’ history have been quite stormy. At the beginning of 2006, when the Tour announced its initial 2007 FedEx Cup schedule, the tournament, previously a summertime fixture, had been demoted to a late-season spot in the so-called Fall Series. Its place had been given over to the three-year-old 84 Lumber Classic.
Then, three months later, in April 2006, Hartford was suddenly reinstalled in more or less its traditional summer spot, and 84 Lumber had completely disappeared from the schedule.
Berlet credits the Hartford event organizers for the reversal, concluding that the reinstatement “prove[d] that hard work and determination can sometimes prevail over [the Tour’s] disloyalty and greed.”
No argument here about the organizers' resiliency, nor the Tour's fixation on the bottom line (even if Berlet's being overly dramatic about it-- the Tour is supposed to rip people's hearts out for the financial benefit of its players). But based on conversations I had last year with 84 Lumber officials during September's final edition of their tournament, the dealings between Hartford, the Tour, and 84 Lumber were a lot more complicated than Berlet says. Moreover, they indicate that Hartford’s reinstatement wasn’t a case of the little guy triumphing over the big bad Tour, but the Tour playing two little guys against each other to get what it wanted all along—the most lu
crative possible event for the greatest possible number of years.
On a superficial level, the Tour loved the 84 Lumber Classic, Joe and Maggie Hardy’s vanity tournament up in Western Pennsylvania at Nemacolin Woodlands Resort, their version of Neverland Ranch. (Maggie is formally known by her married name, Maggie Hardy Magerko, but around the company campus, she's still called Maggie Hardy.) 84's initial spot on the 2007 schedule was a promotion: it had previously been a fall event. They got it because the Hardys’ relationships with players like John Daly and Vijay Singh (not to mention Michelle Wie!) promised a marketable field, despite the tournament's being staged directly after the U.S. Open.
Hartford was initially relegated to the 2007 Fall Series because as of January 2006 it had no title sponsor. Ailing GM was about to take its Buick brand name off the tournament. Tournament organizers were said in early 2006 to be close to a new title sponsor agreement, but nothing had yet been finalized.
Funny thing was that although the Tour had placed 84 Lumber on its 2007 schedule, there was no ink on that contract either. According to one 84 executive, negotiations hit a snag early in 2006 because the Tour was insisting on a long, six-year deal (with an option for a seventh at the Tour’s discretion).
The six-year ask was at the same time unremarkable and unusual.
Many of the Tour’s title sponsor deals expired at the end of 2006. As it negotiated renewals, the Tour proposed the same six-year term to most every tournament, according to tournament directors I spoke with this week. 84 Lumber was put in no different a position, say, than Chrysler or Bank of America.
What was unusual was that in 2002, during its last big round of title sponsor negotiations, the Tour pursued four-year deals with most of its title sponsors. The difference in term, to a company of the size of 84 Lumber, was colossal. Look at it this way. If you approach a business partner demanding a 50% increase in term, you are essentially asking them to commit 50% more money-- in fact more than that, because each year usually reflects an incremental increase in fees or costs.
How much, then, was the Tour really asking for? Currently, the going rate for a Tour title sponsorship (for a garden-variety summertime event) is about $5 million. On top of that, title sponsors are required to make what’s known as a TV buy—they’re obliged to purchase a certain amount of advertising during television broadcasts. (Sometimes secondary sponsors get involved in this outlay, helping title sponsors make the guarantee.) Depending on the event, the TV buy can run as high as $2 or 3 million. Add in a contractual clause demanding that a sponsor help sweeten the purse every year, and its commitment (again, for an average, garden-variety summer tournament) can threaten or even surpass $8 million.
That figure, however, is for the 2007 edition of a given tournament. When you come to 2012—the final year of a proposed six-year contract beginning in ’07—the price would climb still higher. As one tournament director put it, the $10 million that gets you a FedEx Cup playoff event in 2007 probably only gets you a regular Tour event in 2012.
As 84 Lumber negotiated with the Tour in early 2006, golf was perhaps the least of its concerns. The company, sellers of building materials to the construction trade, had been number two in its industry. But now, because of a merger between competitors, it was being pushed down to number three.
Even in that situation, the 84 exec said, a four-year deal might have kept the company on the PGA Tour schedule. But a six-year deal (actually, a seven-year deal, if the Tour chose to exercise its option) would have been a staggering commitment. “We were looking at maybe $120 million total over seven years,” he said. “Granted, we didn’t have to spend that much. But we like to do things a certain way, and make the players comfortable. Anyway, it was just too much money. We could have done it. We’re a private company. It’s not like Maggie had to get anyone’s permission. But she couldn’t have made that deal in good conscience.”
You've heard of offering someone a deal he can't refuse? Well, in 84 Lumber's eyes, the Tour, looking to put them on the financial hook for seven years, was making them an offer they couldn't accept. If the Tour was guilty of any grand evildoing, it would have to do with the unprecedentedly long terms-- which may indeed have been designed to drive out relatively small companies like 84 Lumber. It wouldn't be suprising if the Tour, during negotiations with 84, became aware that Hartford was lining up Travelers, and refused to compromise on the length of the term precisely to shove the company out and make room for Travelers under its umbrella. (If it appeared to the Hartford organizers that the Tour was committed to 84, so much the better-- that kind of appearance could have served to get Hartford and Travelers to come across with more dough more quickly.)
When I talked with tournament directors this week about that 84 exec's $120 million estimate, each initially said it seemed too high. There was a lot of joking about the priciness of chartering planes to fly players and wives in from the previous week’s event, as the Hardys did in 2005, and bringing in the Black Eyed Peas for an evening's entertainment, as the Hardys did last year.
Yet when the figure was carefully considered, it stopped looking so unrealistic. Because such a deal extended so far into the future, and because the cost of a 2013 tournament might be, say, 20% higher than a 2007 tournament, it indeed looked possible to spend $50 million for the sponsorship alone, and $20 million for the TV buy. Throw in a couple of paper clips, rubber bands and grandstands, and you’re well on your way to $120 million, even without the Black Eyed Peas.
In 84 Lumber’s eyes, what may have been decisive was the way the new deal would have encouraged them to pressure secondary sponsors for more money-- especially since 84 has to deal with those sponsors not just one week a year, but 52. “Those people who are out there in those corporate tents,” the executive told me during last year's tournament, “are Andersen, Boise Cascade, and Masonite. These people are all our clients. We would have had to go back to them and say, well, that tent you had last year for $100,000 is now $250,000. Plus, you have to buy some TV time. That wasn’t going to happen.”
So, looked at from today's perspective, the schedule switch looks simple. 84 Lumber demurred at the cost of the event. Hartford and their new title sponsor, Travelers Insurance, did not. So Hartford got the event.
Except for one thing. Travelers wasn’t made to sign a six-year deal. Published reports had the deal at four years, which left 84 Lumber scratching its head, and encouraged employees to complain, however quietly, about what had happened. Indeed, their fundamental question seemed legitimate: why was Travelers given a four-year deal (with a two-year option, discretionary terms undisclosed) when 84 Lumber (and everyone else) was being asked to sign fo
r six (potentially seven)?
The popular answer at Nemacolin last year was simply this: that the Tour would rather be in bed with a deep-pocketed Fortune 500 company in a big city with a long Tour history than with a relatively small company in rural Pennsylvania with a history as short as Michelle Wie’s last name.
As the 84 source pointed out, it was also advantageous to the Tour to have 84 Lumber in the bullpen, so to speak, instead of in the starting lineup. The company’s fondness for golf made it a good bet to rush in at the last minute, if needed, and bail out a wobbly event, especially since it is a private company, whose principles don’t have to answer to stockholders about quickly-made decisions.
All told, then, Hartford’s organizers may have worked hard, and the Tour might be disloyal and greedy, but it would be wrong to presume that Hartford prevailed over anything, got the better of any kind of fight. They got a better deal than the other guy only because the company standing behind them had a big checkbook. If this were the kind of story in which the little guy won, the Tour would have let 84 Lumber sign a shorter-term deal. But the only real winner here was the Tour. Business as usual.