Marriage can be expensive. Wedding costs generally include renting a hall, catering, alcohol, a band, invitations, flowers and, for the wealthy, legal fees for negotiating pre-nuptial agreements. Cynics point out that divorce is often yet more expensive, even if you’ve limited your post-marital obligations through a legally binding contract. Now we have a third category marital infidelity not necessarily resulting in divorce -- that could be the most expensive of all, and may eventually cost one perpetrator hundreds of millions of dollars.
Since bursting onto the professional golf tour as a teenager in the mid 90s, Tiger Woods has been perhaps the most dominant athlete in any sport. He has set an unprecedented number of records, earning more career wins than any active golfer. He is the youngest player to achieve the career Grand Slam, and the youngest and fastest to win 50 tournaments on tour. Woods has won 16 World Golf Championships, has held the number one position for the most consecutive weeks and for the greatest total number of weeks, was awarded Player of the Year (for golf rather than female conquests) a record ten times and, in December 2009, he was named “Athlete of the Decade” by the Associated Press. He is also the sports world’s first billionaire ever, having collected over $900 million in endorsements over a fifteen-year career.
In December 2009, Tiger set another record. It is a record that he definitely did not seek and one he desperately tried to avoid. For 20 straight days in late 2009, stories relating to his marital infidelity graced the front cover of the New York Post. This broke the previous record of 19 consecutive days in September 2001, when the front cover of the Post addressed stories about the tragedy of 9/11.
Tiger’s announcement that he is taking a break from golf will undoubtedly affect the sport as a whole. Yet most people have focused on the personal economic consequences of losing his inestimable endorsement earnings. Let’s appreciate how much that means. In 2008, Tiger Woods earned $117.3 million. However, “only” $7.7 million (or 6.5%) came from winnings on the golf course. The other $109.6 million were from appearances, sponsorships and endorsement fees away from the golf course.
Not what the sponsors had in mind
Immediately following the scandal, the world watched to see how his major sponsors would react. Gatorade, the beverage company, immediately announced changes in their use of Tiger Woods. The "Tiger Focus" line of drinks, with the now ironic slogan "Is it in you?" has been discontinued but Gatorade has not announced that they are ending their relationship with the golfer entirely.
Accenture, the global consulting company (once part of Anderson, and the only corporate survivor of the accounting firm’s bankruptcy in 2002) was the first sponsor to jettison Tiger completely, even though they had built their entire marketing campaign around the golfer. Accenture employees have been ordered to remove all Woods branded merchandise from the firm’s offices worldwide.
This week, AT &T switched from Tiger, dumping him as the face of their advertising campaigns. While he still can keep his i-Phone, the tunes are becoming less melodious. Gillette has not officially cut Tiger Woods but he is not currently appearing in any ads on their behalf. Curiously, Nike, which famously encourages its customers to “Just Do it” and has built its entire golf business around Tiger Woods, is, for the time being, staying with him.
Given the incessant attention, one investment bank, Credit Suisse, published a special research report exclusively on "Tiger Woods Fallout: Another Nail in the Coffin of the Expensive Endorsement Era." The report highlights how “investing vast sums of money in one individual can be fraught with risk... and companies are now realizing that they have been systematically overpaying for athlete and team sponsorships.”
Race barriers broken
There is a cultural dimension to this scandal as well. Americans have always been captivated by their sports heroes. However, black athletes were long excluded from the major leagues and, even when allowed to play, were slow to attract “color-blind” appeal. This was particularly true with endorsement contracts, as corporate sponsors didn’t think black athletes were “worth” as much as their white teammates off the field. Moreover, sometimes the black stars themselves wound up feeding the conventional, unfortunate, stereotypes.
For example, almost all Americans over 30 still remember where they were on November 7, 1991 when Magic Johnson announced that he had the HIV virus. It was assumed that his promiscuity caught up with him. That same year, Wilt Chamberlain published an autobiography bragging about having slept with over 20,000 women. Males across the country became instant math wizards, calculating averages (about 1.5 women a day, every day, assuming uninterrupted activity since the age of 16).
Michael Jordan shattered that prejudice, but he did it as a basketball player, a sport long dominated by African Americans. And, while he remained beloved by all, he was especially emulated in the black community. Tiger Woods performed in a sport played by very few, and by hardly any African Americans. Golf is extremely expensive. Decent equipment costs thousands of dollars and initiation fees at some private clubs are over $1 million if they’ll even let you become a member. Tiger redefined a sport where most matches take place on courses that, because of his skin color, would not let him play let alone join -- up until about 20 years ago. Even one-day green fees at many public courses are over $100. Golf makes skiing look like a bargain.
But business executives, accountants, lawyers, doctors and the super-rich are addicted to golf. Multiple mega-deals have been agreed to on a handshake among golfing partners. As a result, the sponsorship dollars were always disproportionately high. With Tiger, they more than doubled. Now analysts predict that the sport will suffer advertising revenue losses of nearly $200 million in 2010 if Tiger’s off the tour. Television audience numbers are about 50% lower when he isn’t playing.
According to these same analysts, the scandal could personally cost him over $200 million in lost endorsement revenue. Add to that the “hush money” he’s allegedly paid his various mistresses along with his wife’s rumored astronomical financial demands to stay with him (or what she would demand in a divorce) and Tiger’s sexual habit may prove to be the most expensive in history. Moreover, beyond the money, his sterling personal reputation is forever sullied.
Thus far, 14 different women have claimed to have had affairs with the golfer; comics speculate there will be at least 18. This underlines one more record unwillingly broken by Tiger -- the tremendous number of jokes generated by his indiscretions. He has served as a goldmine for late night comedians and on-line chat rooms and the sordid creativity never seems to end.
Shoot for the green, not the greenback
Here’s my advice to Tiger: You have essentially had two parallel careers. After the scandal broke, you chose to quit one of them. That was wise. But you chose the wrong one. Get back to what you do best. Play golf. Many corporations have paid you a lot of money to use your image as a wholesome family man with exceptional athletic ability -- to sell their products. At least the first part of that image seems to have been disingenuous. Unless you choose other products, your income from endorsements will continue to decline precipitously even if you prefer to remain active.
So be proactive. Jettison all sponsorship agreements at your initiative, regardless of the legal stipulations in the various endorsement contracts. You had the greatest commercial career in history. Quit. Quit now. Quit completely. If you want to make an endorsement “comeback” in a few years, perhaps the market will be receptive, in all likelihood for a new set of sponsors. Some obvious candidates come to mind.
However, you also got a lot of money to hit a golf ball. That’s something you do better than anyone on the planet. And that hasn’t changed. Moreover, your multiple off-piste exploits did not seem to be overly distracting to your game. You shouldn’t quit golf. Instead, get your personal life in order as quickly as possible and get back on the course. Just do it, Tiger, it’s in you!
Lyon (Lenny) Roth is a senior executive at an international wealth management firm and a member of Ben Gurion University's Board of Governors.
Published by Globes [online], Israel business news - www.globes-online.com - on January 7, 2010
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