The dissatisfied members of the PGA Tour, led by Jack Nicklaus and Arnold Palmer, who petitioned their tour policy board for more financial information last week, began getting their answers yesterday.
The tour's first annual report to the membership--with graphs, charts, audited financial statements and explanations of the most basic tour business practices and multimillion dollar strategies--was given to golfers arriving at the Westchester (N.Y.) Classic.
The report, long in the planning, was distributed just one week after 14 prominent players, including Tom Watson and Tom Kite, signed a letter authored by Nicklaus and Palmer that questioned the future direction of the tour and sought more information from Deane Beman, the PGA's commissioner, and the tour's policy board.
A special players meeting has been called after the first round of the Westchester Classic Thursday night to discuss the issues raised in the letter.
The 32-page document being issued to the players, a copy of which was obtained by The Washington Post, offered something to almost everyone:
* Assurances are given that aggressive marketing of PGA Tour Inc., in a manner parallel to that of the vastly wealthy NFL Properties, will not substantially harm the marketing prospects of individual players. "An organization's name and logo has rarely, if ever, been a substitute in the marketplace for an individual star's active endorsement," argues the report.
* Further assurances, admittedly tepid, are made that the tour, by its building of several new tournament players clubs, has no intention of "crowding out" individual players who want to "get into the golf course design or real estate development business." The report admits that there could be a conflict between a new tour course and a development in the same geographic market that might be allied with a Nicklaus or Palmer; "these situations, however, obviously will be limited in number."
* The report also tries to placate famous players (like Nicklaus and Palmer) who are involved in course design, emphasizing that all the clubs will not look like the TPC at Sawgrass, nor will one architect (Pete Dye) design all of them.
* A lengthy explanation is given of the kind of complex business deal that allows the tour to acquire new tournament players clubs, like those at Eagle's Trace and Plum Creek, with, according to the report, no investment risk by the tour and no substantial out-of-pocket expense to the tour.
The tour, the report states, hopes to tie in with a developer who was going to build the course, anyway, as a "real estate amenity, probably expecting to lose money." By "giving the course to the tour, the developer increases the prestige and value of surrounding real estate." So, the tour gets a free golf course with no land or start-up costs, while the developer increases his profit margin on the real estate development because he has the tour's name, plus an annual tournament, on the property.
The report emphasizes that new players clubs would be built only if the deal with the developer is in the true sweetheart category and a new course would "significantly upgrade the current tournament site "
* A look at the Tournament Players Club in Jacksonville, which cost $7.2 million and has produced "a total cash flow back to the tour of $3 million through 1982." The report says that the club returns about $2 million a year in positive cash flow to the tour, even though accounting statements have shown the club operating at a loss until this year. The report says that the on-paper losses, which have alarmed some players, are the result of dividing cash flow between the club and tax-exempt PGA Tour.
* The report explains how and why the Tournament Players Championship could, and should, work out a separate TV package, akin to the sort negotiated by the Masters, producing $700,000 for the TPC.
According to player sources, Nicklaus has expressed his displeasure that his tournament, the Memorial, gets only $220,000 out of the tour's collective TV fund, while Commissioner Beman's brainchild, the TPC, has a separate arrangement that brings in $700,000.
"If there is a strong feeling that the TPC should be treated the same as other tournaments, the board would give this serious consideration," says the report.
A message from the chairman of the tour policy board, E.M. deWindt, reminds tour golfers of their sport's plummeting TV ratings previously "down for four consecutive years and off 12 percent in 1979 alone," and their inability to "compete effectively for the general sports fan's interest."
DeWindt reminds the pros that it was against this stark business background that the board "made a fundamental commitment to its current strategy" of augmenting TV revenues with money from two new outside sources: marketing and the acquisition of tournament players clubs. The report documents how these new projects provide 32.7 percent of the tour's gross revenues--more than $6.6 million in 1983.
DeWindt paints a picture of a radically transformed and revived tour, pointing toward increased TV ratings, imminent new multiyear network contracts at higher rights fees and dramatically increased tour purses that have jumped from $10.3 million in 1978 to $22.6 million in 1983.
The comparison of before-and-after Beman shows that purses have grown from $8.2 million to nearly $24 million, charity contributions from $2 million to $7.2 million, tour revenues from $4 million to $20.3 million, tour assets from less than $1 million to $15 million.
The report reviews last week's news that agreements just reached by the tour with CBS and NBC will produce around $60 million over the next five years. The new arrangements amount to about a 30 percent increase over current levels and cover the years 1984-88 for CBS and 1984-86 with NBC.
In its conclusion, the report states that the tour's broad purpose is to help pro golfers make more money by a sort of flow-through process; the richer the tour, as an entity, gets, the more wealth shows up in purses, pension plan and expanded playing opportunities (like the Seniors Tour and new Tournament Players Series that is now golf's minor league).
"Current players do not, as a technical, legal matter, own the tour or its assets. The tour is really . . . akin to a trust, which the 'trustees' (policy board) run for the benefit of current and future players . . . " said the report. "Nonetheless, the board properly considers the current members of the PGA Tour as its most important constituency or 'shareholders.' "