LEMONT, Ill. – PGA Tour commissioner Tim Finchem said Wednesday any increases in prize money will be flat over the next decade, and that he didn’t seriously consider reducing purses during the economic downturn.
“Our objective is to do the things that we need to do to continue to grow as we come out of a downturn,” Finchem said. “And it’s not our intention to go backward to get ready to go forward. Our intention is slow growth during this period, and then come back and grow more.”
Most tournaments have incremental increases built into their contracts, some as little as $100,000. At least two tournaments were allowed to keep their prize money the same from 2008 because of special circumstances. The AT&T National, for example, had to pay a higher site fee this year to stay at Congressional with the U.S. Open coming to Bethesda, Md., in two years.
Seth Waugh, the CEO of Deutsche Bank Americas, said last week that he urged Finchem to keep prize money the same because it sent the wrong message in a tough economy.
“The idea that we would sort of just generally roll back really doesn’t accomplish anything,” Finchem said. “It just sets us back on a basis from which to move forward, and we don’t feel the need to do that.”
Finchem did not agree with the idea that raising purses, even slightly, could be perceived the wrong way. He noted that players do not get a salary, rather they have to compete for prize money each week.
And he didn’t see how a $100,000 reduction would change anything.
“It results in having to change all of our contracts to get it done, and it puts us in a position that’s not positive from a negotiating standpoint,” he said.
He also said the contract extensions with four title sponsors this year include incremental increases in later years.
Even so, Finchem said prize money won’t be growing at the same rate as the previous dozen years in the Tiger Woods era. Total prize money in 1996 – Woods’ last year as an amateur – was nearly $70 million. The first television contract renewal after Woods joined the PGA Tour resulted in total prize money of about $135 million in 1999, and it has gone up steadily to nearly $280 million last year.
“Overall, I’d say over the next five or 10 years, you won’t see the kind of increases we had the last 10 years, even in an up economy,” Finchem said. “They’ll be more modest. But that’s our intention, to continue to grow.”
Meanwhile, the Sports Business Journal reported that the Tour’s financial reserves lost more than 25 percent of their value in 2008 because of the slide in the stock market.
“Operating reserves are invested, and investments are off,” Finchem said. “They’re not off that much, but they’re off the last couple of years. Now, they’ve come back some this year, but we’re still trying to grow the reserve, and when the dollars that are invested are getting hit, you have to grow more. So we’ve had that impact. We’ve just had to work harder. We’ve had to find new sources of revenue and we’ve had to cut costs, and thus far, we’ve been able to do that.”