Like almost everyone in America, the PGA Tour had a rough 2008 on the stock market.  It's mutual fund investments - heavily influenced by moves in stocks/equities - lost 35% of its value according to Jon Show at Sports Business Journal. The Tour's investments in stocks plummeted some 38% year over year.  The combined result of these losses and other changes in its balance sheet caused the Tour to shed 27% from the value of its investments as of 2007. 

Regardless, don't feel too poorly for the Tour as the value of their total investments still remain at a healthy $694 million.  And, these are all paper losses.  They do not reflect losses realized through the sale of these investments.

The financial analyst in me wonders why the Tour is so heavily leveraged in stocks and mutual funds, provided the volatility in the market during 2008 and '09.  Since its Schwab's name on the Champions Tour cup and not mine, I will refrain from much criticism in how they invest.  After all, Show reports that the Tour still made $1 million in investment income in 2008.

Rather, let's talk about the impact that this may have on tournament purses, charitable giving, and perception of the sport.

Deutsche Bank CEO Seth Waugh - the man behind the wildly successful TPC Boston-hosted event - came out last week and openly criticized the Tour for moving to increase purses in 2009.  As Randall Mell reports:

"I would not have raised purses last fall, not because they couldn’t, but because it was the wrong message. Every model of every business is under pressure, and you have to create more value for people, either by doing it cheaper, or by creating more value. People want a deal. They want to feel like they are getting more. They have to think their way through that, having people feel good about the experience, as opposed to being dictated as to what it is."

Waugh seems spot on.  After all, golf drew the aire of Congress and Massachusetts Democrat Barney Frank for the supposedly lavish gift bags and parties thrown by Northern Trust at the Riviera event earlier this year.  Despite the organization quickly paying back TARP money essentially forced on it by the Federal Reserve and Treasury, Northen Trust and the PGA Tour's reputation were battered by being labeled as organizations that are overindulgent despite these trying economic times.

After a long public relations campaign, including a bit of a "golf walk on Washington," it appeared that the legislative branch of federal government had come around on the game.

With that seemingly handled, Waugh represents the interests of sponsors that are saying that the Tour's move to maintain incremental hikes in fees and purses (which are essentially fees paid by sponsors) probably sent the wrong message back at sponsors. 

Suggestions had been flung out earlier in the year - around Riviera - that the players themselves should hand 10% of their paychecks this season back to sponsors or charities in the interest of showing compassion for how 99.9% of the country is faring right now.  That never manifested itself beyond a couple of donations and a lot of ink on dead trees.

Today, though, scribes starting pointing the finger at Commissioner Tim Finchem instead of at the players.  They wondered if Finchem had given any consideration to freezing fees as a sign of good faith to sponsors.  Finchem balked at the suggestion.

"The increases have been slight, but we wanted to continue to grow. And our plan is to continue to grow. And that means purses and charity dollars.  [O]ur objective is to do the things that we need to do to continue to grow as we come out of a downturn, and it's not our intention to go backwards to get ready to go forwards. Our intention is to slow our growth during this period and then come back and grow more, and that's what we want to do."

In other words, Commissioner Finchem subscribes to the Abercrombie & Fitch model of handling an economic downturn. In 2002, when the economy tanked following 9/11/01, A&F actually increased prices of its clothing in spite of economic theory that suggests price freezes or cuts are what sustains "luxury item" companies like Abercrombie and, in the same vain, the PGA Tour.

Despite the professed value of golf sponsorship made by PGA Tour partners, particularly in the financial industry, these organizations still perceive that investment as requiring continued value in order to be worth sustaining.  If companies like Deutsche Bank do not perceive that the PGA Tour is both providing value and is a trusted partner, the Tour will face serious hardship in the next 18 months as a chunk of the schedule's sponsors come to the table for negotiating future sponsorships on Tour.