“Golf is a good walk spoiled,” growled Mark Twain, and in recent years, more and more Americans have been agreeing with him. The industry hopes that the U.S. Open, played June 9 through 15 at Torrey Pines, will create enough excitement to put a roadblock in front of that slow but steady erosion. Over four days, there will be 30 hours of live television coverage, and the Saturday and Sunday telecasts will appear on prime time in the Eastern markets. (They will run from 4:00 to 10:00 p.m. EDT on Saturday and 3:00 to 9:00 p.m. EDT on Sunday.) Verily, that is a lot of TV golf.
Of course, much will depend on whether the sport’s icon, Tiger Woods, is in contention. He is recovering from knee surgery. He says he will compete in the U.S. Open, but if he does, he will not have played in a tournament in two months. “If Tiger is in the running, there will be a significant jump in ratings,” says San Diego stock analyst Bud Leedom of California Equity Research. “If not, I would be surprised if there are good ratings.”
“It’s called the ‘Tiger Factor,’ ” says Ron Bain, a San Diegan who was formerly president of CBS TV Sports and vice president of NBC TV Sports. “When it is just another event on the tour, when he is not playing, ratings can go down 10 to 15 percent. When he is playing, they can go up 10 to 15 percent. In a major event like the U.S. Open, the ratings have gone up as much as 50 percent when he is leading or in contention.” The best possible scenario for TV and the golf industry “would be Tiger leading and [San Diegan] Phil Mickelson chasing him.” For Mickelson, Torrey Pines is like a home course, but “Tiger has won more times than Phil” there.
However, explains Bain, advertisers on televised golf tournaments are less ratings-obsessed than other advertisers. They are reaching an upscale, largely male audience, and there are few other avenues for targeting that group on TV. The ratings for even a major golf tournament are below the ratings for an average pro football game. Who cares? It’s not how many. It’s who.
But even a U.S. Open that draws a record-breaking TV audience, including oodles of the well-heeled, probably won’t help golf that much this year. Leedom, who publishes the California Stock Report, isn’t recommending golf stocks, because the industry is deeper in the doldrums now with the economy in recession. Golf participation and equipment sales could be down as much as 5 percent in this year’s economic anemia, he says. In the late 1990s, drivers made with space-age metals would sell for $500. “A $500 club is extreme now. You don’t see those prices as much. Something at $300 is the sweet spot,” says Leedom.
That’s not good news for San Diego County. Carlsbad and environs constitute the center of golf equipment manufacturing. Callaway Golf sells the most irons and putters. TaylorMade, a unit of adidas, seized the leadership in drivers in 2005, but Callaway gives it a tough fight. Cobra, a unit of Fortune Brands, has a solid position in drivers and other clubs. Publicly held Aldila, a maker of graphite shafts, has seen its stock drop from $35.60 two years ago to below $8, as its earnings slipped severely. Stock of Ashworth, a maker of golf clothing, has plunged to a little above $3 as the company wallows in red ink.
In the last seven years, stocks in the BusinessWeek/Golf Digest stock index have declined an average 15.5 percent, while the overall market has risen around 10 percent.
In a report on Callaway, Casey Alexander of New York’s Gilford Securities says the domestic golf equipment business right now is “a lousy market” because of weak consumer spending. The result? Whiff. “Most of the time, investing in the golf industry is akin to sinking your feet in cement shoes,” Alexander told BusinessWeek.
But just how far has the total golf industry sunk? Some are overstating the woes. In February, the New York Times, citing data from the National Golf Foundation of Jupiter, Florida, stated that between 2000 and 2006, the number of golfers had fallen from 30 million to 28 million. “It’s all wet. They imply the numbers are ours. They are not,” says Joe Beditz, chief executive of the foundation. He says the number of golfers actually rose slightly in that period. The number of rounds played between 2000 and 2006 declined from 518 million to 500 million, says the foundation — a modest drop. Beditz concedes that the number of core golfers (those who play eight or more rounds a year) fell from 17.7 million to 15 million in the period.
But the statistics quoted in the Times had legs. In March, the Motley Fool, an online stock-assessment service, picked up the Times numbers and gave a double-bogey report on golf stocks. Jim Cramer, who leaps up and down, shouting, on his Mad Money TV show, is sober when discussing golf. He said recently, “There’s a secular slowdown in golf…as much as we think there’s a lot of business done in golf, it is a declining industry, so I am not going to recommend [Callaway].”
Says Leedom, an expert in the golf industry, “It has been in a gentle decline.” It could go up or down 3 percent a year over a long period, with occasional steeper dips or rises such as this year, but the trendline slants only a bit to the downside. He doesn’t believe there have been double-digit declines.
Golf got overexuberant in the late 1990s. As Tiger Woods roared on the scene, the industry began salivating about baby boomers who would be retiring in a few years. After 2001, about 1180 golf facilities opened, but 560 closed, according to the National Golf Foundation. In recent years, a few more people have dropped the game than started it. Golf requires patience, brains, and a long attention span. Such qualities are declining in today’s society. It takes four or five hours to play 18 holes on a standard course. That’s too much time these days.
There is still a split among San Diegans. It was the establishment that pushed to have the U.S. Open at Torrey Pines. With politicians in their pockets, they mowed down opponents. Preparing the course for the tournament is depriving many people, locals and tourists alike, from playing the beautiful layout. “Torrey Pines North has been closed to 18-hole play since early February,” says Paul Spiegelman, who has battled on behalf of local golfers. “There has been some 9-hole play. But it closed to 9-hole play on May 18 [and will stay closed until] July 1 and will not return to 18-hole play until probably September 1 because of all the damage done by the U.S. Open using the North Course for corporate and merchandising tents and an operations staging area.” Revenue will fall. The City of San Diego will actually lose money on the tournament, says Spiegelman.
Of course, if the Open is exciting and generates such a huge audience that the golf industry shows signs of bottoming out, San Diego could feel an upswing. But a continued mild downswing is more likely.