Case | HBS Case Collection | December 2013

The PGA Tour (A)

by Ramon Casadesus-Masanell and Cole Magrath

Abstract

In 1994, the PGA Tour (the "Tour"), the dominant incumbent professional golf circuit, had created tremendous value for its players. In the 1974 season, players competed for $8 million in prize money; by the 1994 season, the total prize purse had increased to $56 million. This case series will explore the Tour's business model through the lens of business strategy. In addition to allowing students to apply the tools of strategy analysis to a novel situation, study of the Tour allows the application of business strategy concepts to a non-traditional setting given the non-profit structure of the Tour. The (A) case, the main case, allows students to parse the factors that allowed the PGA Tour to succeed in increasing the value creation for players seven-fold over a twenty-year period. Enabling this value creation was a careful aligning of the interests of TV networks, corporate sponsors, charitable beneficiaries, volunteers, and most importantly, the players.

Having identified the crucial aspects of the Tour's business model, the case series presents numerous challenges the Tour's business model has faced. In 1994, at the end of the (A) case, the Tour was at a crossroads when professional golfer Greg Norman began publicly discussing the potential creation of a World Tour, a professional golf tour in which the best players would compete for very large purses at venues around the world. Norman's World Tour concept threatened to upend the Tour's system, siphoning away the top players. Could the PGA Tour and Norman's World Tour coexist? How serious a threat was the World Tour? What could the PGA Tour do to prevent the World Tour from gaining traction? At the same time, the Tour faced a governmental anti-trust challenge that could limit its control over players. How could the Tour respond to this challenge? How damaging would successful anti-trust action be to the Tour's model? The (B) case resolves the anti-trust and World Tour challenges. The (C) case allows an examination of the resilience of the Tour's business model in a severe financial crisis and recession in 2007/2008. After resolving this challenge in the (D) case, the (E) case examines the impact of a scandal involving Tiger Woods, one of the Tour's most prominent players. The (F) case resolves this scandal, and invites a forward-thinking analysis of future opportunities and challenges.

Keywords: PGA Tour; Tim Finchem; Deane Beman; golf; professional golf; Sports Industry;

Citation:

Casadesus-Masanell, Ramon, and Cole Magrath. "The PGA Tour (A)." Harvard Business School Case 714-442, December 2013.