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By John Hopkins
Here is a question. Does the European Tour have any money? An answer is: It depends what you mean by money. We don’t mean the sort of money that Augusta National is said to have, nor the PGA Tour, which has been building a war chest for years. We mean the sort of money that a sports organisation that has been operating successfully for 50 years and forging commercial partnerships year by year might reasonably expect to have salted away against a rainy day.
In its early years a few hundred thousand pounds might have been a stretch but more recently, with the emergence of Europe as a worthy rival to the US in the Ryder Cup and the attendant rise in popularity and subsequent revenue in TV rights, as well as the presence in Europe of world-class players such as Rory McIlroy, Jon Rahm and Tommy Fleetwood, a reserve of well into double figures of millions of pounds might be expected. Perhaps £20m or £30m ($25m or $38m)? There have been stories circulating in golf for some time now that when George O’Grady retired as chief executive in 2014, the tour had a pot of more than £20m ($25m).
The answer might be a surprise. The European Tour had far less than that before the arrival of COVID-19. It recorded an operating loss in each of the non-Ryder Cup years between 2011 and 2018. The losses included £7.1m ($8.9m) in 2015 and £9.5m ($11.9m) in 2017, before making a profit of £10.2m ($12.8m) in 2018. In fact it has returned a profit only in the years of a home Ryder Cup.
Cash reserves had fallen from £16.8m to £9.6m ($21m to $12m) and working capital from £15m ($18.8m) in 2015 to £424,000 ($530,000), according to an article in The Times of London in late 2018.
If the tour is only occasionally returning a profit annually it should be clear why it has less money than you might have thought. This in turn helps clear up why the revenue from a Ryder Cup plays such an important part in deciding whether or not to play this year’s event at all, or behind closed doors. It is true that the idea of a Ryder Cup without spectators would be odd but when the financial implications are considered as well it becomes less so.
“Financially the ET needs tournaments to be played, specially the Ryder Cup, even if it means playing behind closed doors,” said Bernard Gallacher, Europe’s captain at the Ryder Cup in 1991, 1993 and 1995. “Otherwise many of the staff at the tour will lose their jobs (as many as 60 have already been furloughed). And many of the players on the main tour, senior tour and challenge tour will be lost to the game.”
Last week Pádraig Harrington, Europe’s captain for this year’s match, said: “There is a lot at stake for a lot of people. The bigger picture is it would be sensible to stay locked down and have no contact and that’s it, but we know other things have to happen for the sake of the economy. It would be wrong not to consider the financial side.
“Everyone wants fans to be there but the question is: Does sport need the Ryder Cup and should the Ryder Cup take one for the team? Would it be for the greater good of sport? It wouldn’t be in the Ryder Cup’s best interests but it could be in the best interests of enough people who want to see a big sporting occasion on TV.”
The PGA Tour is going to restart events on 11 June with four tournaments scheduled to take place behind closed doors. Harrington said the PGA of America, the body organising the Ryder Cup at Whistling Straits in September, would be watching these events closely. “If those PGA Tour events go well behind closed doors then we are far more likely to see a Ryder Cup as normal,” Harrington said. “It massively increases the odds of being with fans because by September we may have moved on.”
Crucial to this is the knock-on effect of postponing this year’s event until 2021, which would mean the Rome event, currently scheduled for 2022, would move to 2023 and this would mean the European Tour going for another year before receiving the financial windfall of a home Ryder Cup.
Putting the Ryder Cup issue to one side for a moment, the question remains: Why does the European Tour not have more money?
Since his arrival from Canada in 2015 Keith Pelley has enlarged the tour staff considerably. He admits to making a mistake in launching a new website, which cost the tour £1m ($1.25m), and he has had to make redundancy payments to former members of staff. But he has shown imagination by introducing tournaments such as GolfSixes. In all, the number of tournaments the tour operates has risen in Pelley’s time from five to 15 and are, he believes, a source of revenue.
“The big discussion point has always been: Are we completely reliant on the Ryder Cup? And the answer would be that we have been in the past. But in order for us to be a company that’s flourishing we can no longer rely on the Ryder Cup ... ”
keith pelley
In 2016 he announced the Rolex Series, receiving an alleged £50m ($62.5m) annually from the watchmaker in sponsorship. He has built an award-winning social media team. Its Access All Areas series was named the best social media campaign at the 2018 BT Sport Industry Awards.
In November 2019 Pelley was bursting with enthusiasm, saying the tour’s revenue increased from £153m ($191m) in 2015 to £210m ($262.6m) in 2017 to £337m ($421.4m) in 2018. In an article at sportbusiness.com, he claimed that the changes he had implemented since his arrival in 2015 would “ … help to even out revenues over the next four years. The big discussion point has always been: Are we completely reliant on the Ryder Cup? And the answer would be that we have been in the past. But in order for us to be a company that’s flourishing we can no longer rely on the Ryder Cup, and this cycle (2019-2022) we will not.”
Pelley told sportbusiness.com that taking control of European Tour Productions, which previously had been a joint venture with IMG, “ … has been an incredibly strong deal financially for us. The ETP restructure will generate just under £50m ($62.5m) over the next cycle for us in net free cash flow.”
The European Tour has joined with the PGA of America to share sponsorship rights for the Ryder Cup, rather than those rights being sold by the European Tour when it hosts the event and by the PGA of America when it hosts the event. “ … We recognised the problems – that if we were going to come together globally and work closer together, we had to be aligned from a commercial perspective and now we are,” Pelley told sportbusiness.com. This has resulted in the car manufacturer BMW joining the scheme for the 2020 and 2022 matches and Aon, a global professional services firm, also becoming a partner.
Then came COVID-19. Since several European countries reported falls of between 4.5 percent and 6 percent in their economies in the first three months of this year, it is fair to assume that the European Tour’s finances have been hit too. It appeared to have gained a real momentum up to January 2020. Now that has stopped and the tour's task is to regain it. To do that it is working to consolidate its position with the PGA Tour.
But do not be surprised, meanwhile, if financial suitors appear and try to court the European Tour. Two have already, and have been rejected.
Furthermore, the sporting landscape in Britain seems to present attractive business opportunities to overseas investors. In 2003, Chelsea Football Club was bought by Roman Abramovich, a Russian billionaire. Fenway Sports Group, a Boston-based conglomerate, now owns Liverpool Football Club and just last week Newcastle United Football Club was bought by one of the wealthiest sovereign funds in the world, that of Saudi Arabia.
Who is to say in this frantic financial time that others are not eyeing up the European Tour, licking their chops at the prospect of getting into golf? A closer collaboration between the PGA Tour and the European Tour would seem to be a good way to warn off future predators.