PGA TOUR Is Preparing To Replace Ailing Sponsors

According to the Reuters News Agency, turmoil in the auto and financial services sectors has left the PGA TOUR vulnerable to the loss of marketing and advertising dollars.

"There are a number of companies clearly cutting back on their sports marketing budgets. We anticipate some of those kind of conversations." he said of possible requests to rework or end sponsor deals early. "We've got to assume ... some slippage, so we have to prepare for some replacement there."

The PGA Tour, which operates the main professional U.S. golf tours, is highly dependent on corporate sponsors such as General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) and Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) to support its tournaments. GM has warned it is running short of cash, while Wachovia is being acquired by Wells Fargo & Co. (WFC.N: Quote, Profile, Research, Stock Buzz)

The PGA Tour set a record this year at $123 million for charitable donations raised through its tournaments, which reflects the sport's revenue, Finchem said. Next year could be different, however.

"It's unlikely that we won't suffer," he said of 2009. "What we're seeing now is a pullback on spending by corporations ... and those things come home to roost in ways that can negatively impact us during this kind of downturn."

It certainly does not help that popular golfer Tiger Woods has been out since June recovering from reconstructive knee surgery, causing TV ratings to drop.

Woods, recently rated the most powerful person in the sports business world by BusinessWeek magazine, is expected to resume play some time in 2009.

"You can't take the No. 1 athlete in the world ... and have him out. It's just a variety of negative factors," Finchem said. "He brings so many casual viewers to our telecasts.

"To have him out is a big hole," Finchem added.

Another big hole would be created if the tour lost sponsors from the auto and financial sectors. Eleven title PGA Tour sponsors come from the financial sector, while GM, already cutting golf-related spending, is the title sponsor of two events through 2010.

Last month, GM's Buick brand also ended its endorsement deal worth an estimated $8 million annually with Woods one year early in a move to further cut costs.

According to the Reuters report, Commissioner Finchem called the auto sector "a little murky" now, but pointed to long relations with Honda Motor Co Ltd (7267.T: Quote, Profile, Research, Stock Buzz), Daimler AG's (DAIGn.DE: Quote, Profile, Research, Stock Buzz) Mercedes, Chrysler CBS.UL and BMW AG (BMWG.DE: Quote, Profile, Research, Stock Buzz), in addition to GM, as positives.

While no current sponsors have requested to rework or terminate early any deals, the PGA Tour has already had a wide range of discussions about adding new sponsors or expanding existing deals if necessary, Finchem said.

Japan's Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) could be one candidate for a bigger marketing presence if the sport lost other auto sponsors, while the tour also has reached out to other companies in the financial services sector, he said.

Other new sponsors could come from industries that "have performed relatively well during the downturn," Finchem said. Such sectors include energy, the environment and retail, mentioning Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research, Stock Buzz) as one company that could broaden its role.

The PGA Tour has contracts signed for the title sponsorships of all its tournaments through at least 2010, with about 15 of those through 2012 and another 10 to 12 through 2014 or 2015, he said.

Finchem, who pointed out that PGA Tour has remained fully sponsored during the past two recessions, said ticket and other sales remained "reasonably robust" in 2008, but it would be unlikely it could sidestep a "pullback in spending in the branded area, advertising area."

He acknowledged that advertising and public relations budgets were often the first trimmed by corporations during recessions, although in the past the PGA Tour has come through any cutbacks "reasonably well, quite well."

(Reporting by Ben Klayman and Paul Thomasch, editing by Derek Caney)