It’s the simple math that makes this story interesting.
Although it’s easy to get lost in the macro-economics of professional sports - in this case golf - this narrative isn’t about how many figures are involved as much as it is a lesson in percentages.
Consider last year’s collective bargaining agreement between the NBA and the players’ union, a deal that kept the players’ share of revenue between 49 and 51 percent, which was largely considered a victory for commissioner Adam Silver and the owners.
The players were willing to maintain the status quo because of the league’s nine-year, $24 billion TV deal with ESPN and Turner Sports, an influx of revenue that assured dramatically increased salaries for players and plenty of continued revenue for owners.
Now consider the USGA’s reported 12-year, $1.1 billion deal with Fox Sports that began in 2015. Two weeks ago, the association announced a purse increase to $12 million for this year’s U.S. Open, making it the game’s most lucrative event.
Even with that bump, however, the men’s cut of the Fox Sports deal is about 13 percent annually. Remember, there were many who weren’t pleased that the players’ portion of the new NBA deal remained at roughly 50 percent but accepted it because of the massive increase in TV rights.
With this backdrop, the topic was brought up at the PGA Tour’s first player meeting of 2017 last month at the Farmers Insurance Open. According to numerous players who attended the meeting, the idea of purse equity was simply a talking point, not some sort of line in the sand or action item, and the focus wasn’t just on the USGA. The association’s recent deal with Fox simply made for an easy starting point considering that under the USGA’s old TV deal with NBC (parent company of Golf Channel) and ESPN – which was reportedly around $37 million annually – about 24 percent of that income went to the U.S. Open purse. This doesn’t include revenue from the foreign TV rights.
But this isn’t about a $24 million purse, because that’s not going to happen anytime soon. The concern among some Tour types is simply on the percentages, which saw the player’s take nearly cut in half from 24 to 12 percent under the new deal.
According to one player involved in the meeting, a $25 million purse for the U.S. Open would skew the Tour landscape. The jump to $12 million this year already surpassed The Players and PGA Championship and threatened an escalating purse war that neither the Tour nor the players want.
Instead, the players at the meeting focused on how the additional revenue could possibly be used, from additional funding for Web.com Tour purses, to rookie stipends or even a caddie retirement plan, which is currently a hot-button topic because of an ongoing lawsuit between the circuit and a group of caddies.
According to the USGA’s financial statement for 2016 about half (49 percent) of its revenues ($98.7 million) came from broadcast rights fees, while about half (46 percent or $91.5 million) of its operating expenses were related to its “open championships.”
Included in that group would be the U.S. Open, U.S. Women’s Open and U.S. Senior Open, which had purses of $10 million, $4.5 million and $3.75 million, respectively, in 2016. That would make the combined purses for its three national championships ($18.25 million) about 20 percent of the total “open” operating costs, never mind the association’s total revenue.
In 2017, the total purse for all three of the association’s “open” championships will increase to $20.75 million, or about 22 percent of the association’s annual deal with Fox Sports (reported to be $93 million annually). A spokesperson with the USGA pointed out that the broadcast revenue remains flat over the life of the contract, which will make for varying percentages as the purses increase.
“Each year the USGA determines the most appropriate prize money allocation for its three U.S. Open championships, with the goal to provide a purse that is consistent with the premium stature of the championships,” Sarah Hirshland, the USGA’s senior managing director of business affairs, said in a statement provided to GolfChannel.com.
The remainder of the USGA’s ’16 operating expenses included $34 million in golfer engagements – which included programs like the handicap platform (GHIN), community outreach and the museum – and more than $10 million to conduct the association’s 11 amateur championships and six international team competitions.
While those investments go to the core of the USGA’s mission statement to “promote and conserve the true spirit of the game,” to Tour players, who provide the labor for the association’s most lucrative property, it paints an inequitable picture.
By comparison, according to a Tour spokesperson, the Tour doles out 100 percent of its “net" revenues to member benefits, which includes purses on all of its tours and other player-related income (like FedEx Cup bonuses and the circuit’s retirement program). As far as specific percentages of TV revenues and anything discussed at the Torrey Pines player meeting, the Tour spokesperson declined to comment.
Where the conversation goes from here is uncertain. One player who spoke at the meeting and requested anonymity because of the potential for future negotiations said the concern goes deeper than simply a fair share of the TV rights, and that players want a say in future venues and how the championship is run, pointing out last year’s rules snafus at both the U.S. Open and Women’s Open.
It’s unclear how far the players would be willing to take a potential negotiation with the USGA or any of the game’s other ruling bodies.
“Let’s be honest, we’re not going to boycott a major,” one player said.
Perhaps, but as players proved following the 2014 Ryder Cup there is an implied leverage enjoyed by competitors, as evidenced by the U.S. task force that has now transitioned into a six-person committee which includes three players and dictates future captains and the U.S. side’s selection criteria.
As TV rights deals continue to balloon in golf like in other sports, the concept of revenue equity is sure to gain traction even among Tour players, who don’t belong to a union and often struggle to speak with a single voice. It won’t be the size of the pot that players focus on, it will be the percentages.