Will The Tour Miss Tiger? Analyzing Increase In PGA Tour Purses

Will The Tour Miss Tiger? Analyzing Increase In PGA Tour Purses

That loud gasp you heard was the golf industry learning that Tiger Woods is quitting golf (at least for the time being). The Tour, television and the media, manufacturers and other industry fixtures are worried because of a collective belief that Tiger Woods IS golf. Indeed, it’s become an article of faith that Tiger Woods has single handedly revived golf’s flagging fortunes, turning it into the multi-billion dollar industry that it is today. But is it true?

An oft-cited statistic is that since Tiger became a professional, tournament purses have risen 300 percent. That’s an impressive number, but alone it tells us nothing.

To determine whether three hundred percent represents a significant increase, I decided to do a comparison for the years 1997 (when Tiger became a professional) to 2007 for golf, and several other sports.

In 1997, the total PGA Tour purse was $70,800,800. In 2007, it was $272,300,000. That’s a percentage increase of 284.60%—not quite the cited 300%, but close enough.

It’s a little less impressive when the 2007 figures are recast in 1997 dollars. When adjusting for the rate of inflation, PGA Tour purses are up “only” 193%.

(I am always amazed when reporters try to compare prices across the decades and forget about a little thing called “inflation.” Often, what looks like an increase is not that at all.)

Purses reflect player income, so the natural starting point is to compare an increase in Tour purses to the increases in player incomes in other sports. However, it’s difficult to compare other sports directly to the PGA Tour.

Players in mainstream sports, such as baseball, football, basketball and hockey earn salaries, not purses. Further, they operate under collective bargaining agreements that serve to control and reduce player income. In a sense, these sports are not particularly good comparisons because in a free market, player incomes likely would be much higher.

My initial thought was to compare salary caps; hockey, however did not have a salary cap in 1997. Further, salary caps vary; some are more strict than others.  Some baseball owners, for example, are notorious for exceeding the “cap.” Caps also are circumvented with signing bonuses and deferred salaries.

A more reasonable approach, I decided, was to compare average player incomes. Tour purses represent what the players take home; so too does the average player salary. As you can see in the chart below, I collected 1997 and 2007 average player salaries for Major League Baseball, the NFL, the NBA, and the NHL.

In addition to the major sports, I also was able to obtain data on total NASCAR prize money for 1997 and 2007. In some ways, NASCAR may be the most direct comparison to PGA Tour. Like the PGA Tour, NASCAR consists of a series of events, each of which offers a sum of money to the winners.

Finally, I decided to include television revenues for NCAA Basketball and the Summer Olympics. These, I thought, would reflect the increasing value of these otherwise unpaid—or underpaid—athletes. At least in the case of NCAA basketball, the television revenues appear as income for the member schools, if not the athletes.

All of the numbers were taken from online sources. When the initial source was not authoritative (such as the New York Times, where I found several of the figures, or the official sites of the respective sports), I tried to get several confirmations. The actual numbers are shown in the figure below:

image

To compensate for the effects of inflation, the 2007 figures were reset to 1997 dollars, using an online inflation calculator.

For each of the sports, I calculated a straight percentage increase based on constant dollars.

The greatest percentage increase between the years 1997 and 2007 was experienced by NASCAR (243%) and NCAA Basketball (203%). Golf followed next, with a 193% increase.

Looking at the other sports, it seems as though golf showed greater growth—at least from a player income perspective. The NBA had a 94% increase; MLB, 73%; the NHL, 48% and the NFL, 45%. The summer Olympics experienced a 49% increase in television revenues.

The results are shown in the figure below:

image

I believe, however, that the numbers for the team sports (MLB, NBA, NFL, NHL) are artifically low, thanks to collective bargaining agreements that restrict free agency and suppress salaries with mechanisms such as a salary cap. I also think that it’s possible those sports hit their great expansion period prior to the 1997 starting year of this examination.

At any rate, given the numbers posted by NASCAR and NCAA Basketball, the increase in golf’s total purses does not seem nearly as impressive.

One way to analyze the growth is to calculate a mean and standard deviation (although with such limited data, a statistician will argue that they are not particularly meaningful.)

For the period studied, the mean increase was 81.20%, with a standard deviation of 119.19. NASCAR and NCAA Basketball fell outside a single standard deviation. Golf fell inside that line.

That might suggest that while NASCAR and NCAA basketball experienced abnormally high growth, golf did not.

So what of the Tiger Woods effect? The mantra has been that Tiger is responsible for skyrocketing PGA Tour purses. If, as the data suggests, golf has not achieved an extraordinary increase, then perhaps there is no Tiger Woods effect. Even without Tiger, it’s possible that golf would have experienced the same triple digit increases.

Another explanation may be that the Tiger Woods effect has been offset by similar effects in the two other sports that experienced even greater growth.

There may in fact be a parallel in NASCAR, the sport that experienced the greatest growth during the period 1997 – 2007. Call it the “Jeff Gordon” effect: Jeff Gordon was a rookie in 1991, won his first Sprint Series in 1995, and his first Daytona in 1997. It could be argued that Gordon—who certainly opened up the new markets to NASCAR—has had a Tiger Woods effect on his own sport.

NCAA basketball? I have no idea. It’s a case that would seem to dismiss the “great man” theory.

Whatever the explanation, I think that this analysis at the very least corrects the notion that golf has experienced a “300%” increase in the Tiger Woods era. When correcting for inflation, it’s more nearly 200%.

More tenuous is the data that suggests golf’s growth was not particularly strong when compared to other major sports. NASCAR and NCAA Basketball showed much greater growth. And golf may not be statistically ahead of MLB, the NBA, NFL and NBA.

The Tour can expect that negotiations for new deals will be down in the coming year. But the question will remain: How much of that is due to the Tiger Trangressions, and how much would have occurred anyway in the wake of the ongoing financial unpleasantness? It’s entirely possible that companies were already planning on pulling out of—or scaling back on— their golf sponsorships. But now, whenever that happens, Woods will get the blame, rather than general business conditions.

Tiger’s Gatorade deal is a good example. Pepsico already was planning on dropping Tiger Focus. The timing was just incredibly bad.

As for the overall Tiger effect, more study is needed. I have a couple of ideas for a regression analysis that could test that theory.

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7 thoughts on “Will The Tour Miss Tiger? Analyzing Increase In PGA Tour Purses”

  1. Perhaps there is indeed a Tiger Wood effect, but it did not achieve the effect as expected and reported, because we can see from the figure that, the increase of PGA tour purse is somewhat higher than the other team sports except of NBA and NASCAR.

    Reply
  2. The PGA Tour sells the wife and kids running out onto the green at the 18th in celebration of a win.

    When Tiger returns, is the PGA Tour ready for hookers, strippers and cocktail waitress’ to run out from all corners of the green into the waiting arms of their star, if he wins at Pebble Beach?

    How will that sell? I say the Tour advised “Woody” (as my golf/coffee buddies now refer to him) to take some time off while they contemplate their next move.

    Reply
  3. Great blog.  I have told people this for the last five years or so and no one listens.  Tiger’s effect was no more than that of Jack Nicklaus years ago.  All of sports athletes are being paid an insane amount of money these days.

    I remember a couple years ago when the Miami Dolphins drafted Jake Long as the #1 pick of the draft.  Just by being the #1 pick, he was automatically the highest paid lineman in the NFL.  I can’t remember numbers exactly, but he got like $35 million plus guaranteed in his contract.  Insane.

    Another thing to add is that the crowd Tiger supposedly attracted, is not wealthy enough to have that much of an impact anyways.  Seriously, how many blacks do you actually see show up at PGA event?  Still not many at all.

    Reply
  4. Excellent post, some rationality applied to statistics and a challenge to a well accepted Dogma (probably capitalised on by some good marketing).

    One thought you could do is compare it to English premier league football (soccer) or European football. There are no wage caps and players can earn similarly insane amounts. It has had a big boom but I wonder how it compares to US sports and the PGA.

    Perhaps you could also look at the TV viewing figures for PGA tournaments. I hear a 0 increase when Tiger is in the field? True or some more marketing?

    keep up the good work

    Reply

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