December 17, 2009
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<The costs of infidelity>
Bloomberg has an excellent report on the cost of Tiger Woods’s indefinite leave from Golf.
“The 2010 PGA Tour season begins on Jan. 7 in Hawaii. Cohen’s estimate suggests ad losses may be at least $192 million if Woods is out all year. That, plus the potential damage to Nike, would put the effect at more than $220 million.”So you should have no doubts why Tiger is a $1 billion man (according to Forbes).
Readers should be careful when reading the report, since it consists of many numbers and could be very confusing. The financial flows affected are not so easy to understand i.e. when Tiger Woods sits out, what is the financial impact to the industry.
If you switch the angle a bit, and think in terms of the “business” flow, it is easier to understand. Basically, if Tiger Woods sits out :— Less people will watch the PGA tours directly. Less hostel, Food & Beverage and travel activities. Pretty straight forward.— (Broader terms) Less audience will watch the PGA tours via TV and other indirect channels. There will be less advertisement and other marketing campaigns. (Similarly, less marketing campaign by PGA – if it has)
— (Broader terms) Tiger Woods has been the icon of Golf for Nike. So less people will buy Nike and to a less extent, Golf-related sports item. They might switch to the items for other brands (e.g. Adidas) or sports (e.g. basketball), but there should be some net loss in purchase of Gold-related merchandise.
— (Even broader terms). In the longer term, golf could lose its favor to audience and potentially golf players (which somewhat creates viscous cycle). Depending on the impact (which I suspect could be immense), golf course operator will invest less, less merchandise of golf will be sold, and the whole sports could be less popular.
See an extract from the report on the economic impact of the golf sports here (by some golf related assocations). It has a quite good framework (page 4)
