As the new PGA TOUR season gets underway at The Sentry in Hawaii this weekend, our thoughts turn to the state of professional golf sponsorship in 2025. But first, some recent history.

The world of professional golf was roiled in late 2021 with the announcement that LIV Golf, an upstart tour, would commence play the following spring. LIV is financed by the PIF, the sovereign wealth fund of Saudi Arabia and established to provide an alternative to the PGA TOUR and the DP World Tour.

Almost immediately, the PGA TOUR responded to the nascent threat. TOUR commissioner Jay Monahan informed players that 55% of the organization’s revenue would be paid out in prize money. It was estimated that only 26% had been paid out previously. The following June, Monahan announced that eight TOUR stops would be “Designated Events” (now “Signature Events”), and seven of the eight tournaments would have $20M purses (the 8^th would offer $15M in prize money). In some of these cases, the purses would be more than double what had previously been offered. 

In June 2023, Monahan declared that the PGA TOUR, the DP World Tour (the European professional tour) and the PIF would form an alliance. As of this writing, what that alliance will look like remains a mystery. Regardless of the announcement, and what the partnership ultimately entails, the TOUR has created an environment in which its players will have the ability to earn much more in prize money than they could in a pre-LIV world. And that prize money must come from somewhere.

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Investigating the Business Model

To understand that, we need to look at the TOUR’s main sources of revenue. The TOUR is a $1.9B business, according to its 2022 tax filings.⁽¹⁾ That represented a nearly 20% increase from the prior year, thanks in large part to their new media rights deal.

The PGA TOUR renewed its current media rights deal with ABC/ESPN, NBC and CBS with a nine-year deal starting in 2022 which pays the body $700M per year through 2030. In addition, it sold its international broadcast rights to what is now Warner Brothers Discover for $1.2B. The TOUR also lists “tournament income,” which was $425M in 2023.⁽²⁾ Finally, the TOUR sells sponsorships to brands such as Coca-Cola, FedEx, MasterCard and about five dozen other corporate partners.⁽³⁾

Historically, title sponsors of TOUR events paid roughly one and a half times the purse in sponsorship fees. Title sponsors get the lion’s share of event sponsorship benefits, not the least of which is having their brand used every time the event is mentioned or referenced in the media. In addition, they get significant business building assets in the form of tickets and hospitality, pro-am spots, space to create experiential activations and other benefits that can be used to engage fans, customers, executives and employees, among others. Let’s look at one recent example and the ramifications of an event being elevated to “Signature Event” status. 

Wells Fargo was the title sponsor of the TOUR’s Charlotte stop from 2011 through the most recent event this past May. When its deal came up for renewal, tournament organizers sought to increase the rights fee from an estimated $15M per year to $25M per year to cover the increase in prize money from $9M to $20M.⁽⁴⁾ According to reports, Wells Fargo was willing to invest up to $20M/year, but the TOUR rejected the offer and ultimately signed Truist Bank, a Wells Fargo competitor, to a $25M/year sponsorship deal.

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What’s the ROI?

While sponsorship choices are driven by a variety of factors (i.e. public policy, hospitality), brand building with internal and external stakeholders is a key objective, hence sponsorships are marketing expenditures. And like any other marketing expenditure, the company needs to be able to demonstrate that it’s receiving a return on investment sufficient to justify the expense. Most marketers have developed sophisticated and, often, proprietary measurement tools to determine if the investment has paid off. Metrics related to brand exposure, brand health, business influence, or new business secured, and consumer engagement are some of the many KPIs used to determine the success of a sponsorship.

Let’s take a quick look at measuring ROI. At its core, it’s a simple ratio. In the numerator, we have the monetary value of the sponsorship (the return), in the denominator we have the investment. In our example, the denominator has increased by about 66% (assuming the rights fee increased from $15M to $25M and any other expenditures remained the same). Let’s further assume that a sponsor seeks a minimum ROI of 1.5:1. (This is purely for illustrative purposes; sponsors might set a benchmark higher or lower.) That means that Wells Fargo would have to go from generating a return of $22.5M to one of at least $37.5M. And this needs to be accomplished ostensibly without any, or at best, few additional assets and benefits.

This has real world implications. A company is being asked to increase its investment significantly in a title sponsorship without having a commensurate increase in assets and benefits required to meet its objectives for ROI. The increased rights fees will almost certainly eliminate a number of potential sponsors who can no longer justify the expenditure. 

For those brands still willing to invest at a higher level, the path to an acceptable ROI is somewhat counterintuitive. If the numerator needs to keep pace with the denominator, the marketer needs to invest more in activation. This incremental investment above and beyond rights fees will be additive to the money already spent on leveraging the sponsorship. It could come in various forms, such as more social and digital content, investing in player endorsements, increasing hospitality and customer hosting programs or increased advertising.

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Watchouts and recommendations

As the demands on sponsorship investment grow, so does the need for a sophisticated, data-driven approach to ensure that brands not only meet their ROI goals but thrive in a more competitive environment. At Taylor, we have consulted leading brands like Mercedes Benz, Gillette, AIG, Panini and Travelers on how to navigate the complexities of golf sponsorship and unlock the full potential of their investments.

For example, for AIG we evolved their sponsorship strategy with the Blueprint of Progress. By aligning AIG’s core values with progress in gender equity and demonstrating the company's leadership on a global stage, we successfully elevated the partnership far beyond traditional brand exposure. 

While the stakes have changed, the principles of smart sponsorship remain the same and Taylor is uniquely positioned to help brands capitalize on opportunities - ensuring that every sports investment is a powerful catalyst for growth.