Check out this letter from the chairman of the LPGA Tournament Owners Assn.
July 28, 2006
To: Jay A. Coffin, Golfweek
Fr: Jack Benjamin, TOA Chairman of the Board
Re: Article – Rift Between Bivens, TOA Widens
After receiving many requests for information, the TOA’s position in this memo is only to provide clarification on statements in the article posted on Golfweek’s website this week.
From the tournament point of view, all this really boils down to is managing revenue and expense. Tournaments in 2006 provided roughly $50,000,000 in purse to the LPGA. Tournaments spent another $100,000,000+ to stage events on the Tour. The LPGA takes 6.5% of the total purse ($3,250,000) to support LPGA programs and operations. The remaining $46,750,000 goes to the players. In addition, under the new contract requirement, the LPGA will receive $100,000 from each tournament as a fee to host a LPGA event. Given today’s tour of 32 events, that amounts to $3,200,000 annually. In total, the LPGA receives or will receive a minimum of $6,450,000 directly from the tournaments to support programs and operations. The major concern with just these additional costs (there are other cost requirements in the contract such as purse increases and 100% of the IDS electronic scoreboard expense), is that there are no new revenue sources identified by the LPGA or the Tournaments to sustain these increases in the future. The financial risk rests only with the tournaments.
Another issue that makes interesting conversation is the LPGA impression that tournaments make anywhere from 2 to 9 times the profit that the LPGA makes on an annual basis. This statement is a result of not understanding the business models of most tournaments. The charity gift is not profit. Charity dollars are a requirement and often a line item expense in the tournament budget. The charity gift/expense is necessary in order to attract and keep sponsors and volunteers. It provides a major focus for raising money to support a tournament. The added LPGA expense requirement in the proposed contract, without the identification of new revenue streams, will in many cases reduce the charity contribution, which ultimately reduces sponsor satisfaction and volunteer recruitment. Typically, the only funds left over after the charity donation, are funds to provide operational cash flow until the next year’s tournament.
The TOA’s sole purpose as an association is to investigate, disseminate, and provide factual information to its members in order for the tournament businesses to be competitive and sustainable. The TOA has been engaging in business development efforts with the LPGA on a regular basis for over 20 years. We have had many difficult conversations, and many intense negotiations; we have always come to a satisfactory agreement. That is one of the major reasons why the LPGA business opportunity is so well positioned in today’s sports marketplace. The stage has been set over the years by the great skills of the players, coupled with the partnership between the LPGA and all its major stakeholders and investors.
The implication that the TOA or its member tournaments are struggling with “change” is misleading as tournaments change each year in keeping pace with the sports and entertainment environment and industry. Positive, sustainable change is a negotiated direction between partners who share a vision, and then agree on a path to achieve that vision. This principle is the underlying theme of the TOA’s strategic plan. It’s just business management 101. It only gets complicated when the business vision, the roadways to execute the vision, and the measurements of success are absent or just not clear.
Thank you for your time.