Advertising in Golf

Golf manufacturers are now coming up with more and more adverts to help the buyer fully believe in their product and this commonly used necessity in the world of business has a place in the world of golf, and without it many businesses wouldn’t be able to stand. The purpose of advertisement would be to gain notoriety. A famous quote from Oscar Wilde even says that, ‘There is only one thing in life worse than being talked about, and that is not being talked about.’ Common examples which represents advertisement within golf would be a tournament name, for example the Traveler’s Insurance Championship, BMW PGA Championship at Wentworth and the AT&T National in America. Another representation of advertisement would be through the Master’s competition in which CBS purchased the broadcast rights for $15-$20 million, which although it’s not direct advertisement it gains publicity for CBS. Advertisements can also manifest itself in human form e.g. Rory McIlroy. McIlroy is a walking advertisement for Nike and that is why they are paying him $150-$200 million over a 10 year span just for using their equipment. But they expect him to generate additional revenue for Nike in that time. that sum of money doesn’t include bonuses for winning a major championship which can bring bonuses in excess of millions of dollars. The influence of having a major winner using a specific type of club persuades the average golfer to get that club because people want to impersonate successful players. Also golf magazines like Golf Digest and Golf Magazine earned $320 million through advertisement each year. Nevertheless this doesn’t fully explain how some advertisements will be included in magazines like ESPN and Sports Illustrated, so we could propose since golf is a major sport we can assume at least that between 5%-10% of the advertisements were golf related so we can assume that another $80 million was spent there. As for giving a spectrum on the entire world of golf it is estimated that $320 million dollars was given to golfers to endorse their products, and you must bare in mind this only accounts for a select amount of golfers and does not include Tiger in his prime. The effect of advertisement through golf is enormous even though there is no quantitative value it is evident: what brand of golf club does Tiger Woods use? 

Golf clubs and why the degree of a driver isn't the optimum angle

Purchasing clubs, clothes and even golf carts seem to be a fundamental block which helps the world of golf keep spinning, and a fine example will be my own father. My dad believes the most prudent way to react when you haven’t putted well for a while is to buy a new putter; perhaps not the same approach as Rory Mcilroy nevertheless my dad is helping the golf economy. Clothes as well have a huge role because fashion is a trend and will never finish, very much like a cycle that never ends, meaning for golf companies who produce clothing, as long as they’re relevant, they will be successful. The quality of products ranges hugely: a RLX waterproof may cost over £100 while you can purchase one from your local Sports Direct for much less. Fashion will be perpetually evolving and many people want the next big thing, or at least what’s big at that moment, so many shoppers will be going to other shops to buy their clothes meaning monetary expansion for other areas. A handful of clothes brands, including Greg Norman’s own range of clothing, earned $1.6 billion over 75% of the $2.1 billion clothing market in 2011. 

          Perhaps one of the biggest money makers in this area is golf clubs. In 2011 $3.1 billion alone was spent on clubs, and Titleist, which is the leader in golf ball manufacturing, has a company valuation of $1.2 billion; Nike also has a 7% stake in the golf manufacturing market and Taylormade have still got a huge chunk in the market despite having a 20% dip in sales. As for a bit of physics on the golf club. What has been the main source of why people have gained distance is due to the dramatic improvement in material and design. Going from wood to metal meant less energy is absorbed by the club-head, and instead more is provided back to the ball, Newton’s Third Law of Motion. Also the dimples, which contributes to the aerodynamics of the golf ball, are becoming more advanced that allowing the golf ball to gain more lift and distance. Weirdly enough drivers have a normal loft of 12 and below, however the perfect height to gain the most horizontal distance is 16 degrees, this is because normal calculations don’t account for quadratic drag produced by the ball which dramatically influences the carry of the golf ball.   

          Taylormade’s dip is most likely due to how they produce too many new series of clubs too frequently, for example the SLDR Drivers and the new RSI Irons. Consequently, people will wait for the next generation to be released knowing then they can purchase the current series much cheaper. The market is always going to demand for more forgiving clubs which go further, or add more distance, meaning technological advances must be rapid to keep up with the wants of the users. Finally golf carts. These are a sign of extreme wealth, for example the Oakley hovercraft will cost $58,000 and one humble club in America decided to buy five of them. Even though this sector may be exempt for an exclusive group, this part of the golf economy alone produces $625.2 million.

Housing

Housing, especially near a golf course, can be expensive thus making it such a factor in the golf economy. This factor is highly pertinent since many homes are adjacent to golf courses and those on them will have acquired a higher selling price. A particular example would be a local golf club, Wentworth. On this grand historic piece of real estate there are many houses, each worth in the price range of £3 million and above; the most expensive rumoured to have cost along the lines of £50 million. Usually when buying a house within close vicinity of a golf course you are not necessarily buying the house itself, but instead what it represents: luxury and vast volumes of wealth. Since Wentworth is dripping in golf history and has long been a sign of success it makes it an exclusive piece of property, meaning prestigious real estate companies like CONSERO London are moving into this area. This company single handily has a £1 billion portfolio and an estimated £300 million worth in construction. Since more expensive houses are being built it will drive local house prices up, even outside Wentworth, because it would mean living next to a notoriously affluent estate. In addition to these there are hordes of houses both in England and abroad, including holiday villas which creates tourism and revenue for local businesses. The presence of tourism means a source of revenue for local independent companies, meaning they could build more, or spend more which helps other companies as well, which consequently then engenders the cycle to start again. The Algarve is well known for it being a golfing hub of Europe and produces €7.381 billion/annum that may have predominantly come from golf related companies or will at least be affiliated with golf. Overall housing from golf has benefitted many communities, including abroad and domestic.

Positive investment in Golf

As for the first positive column of the golf economy lies at the heart of every financial industry, investment, and golf is no exception. Despite it not being the largest from a monetary standpoint, it lies at the centre of it all. For example, in 2011, $515.8 million was spent on building 75 golf courses and it’s ineluctable to oversee the gargantuan and prestigious Trump National golf club in California which cost Donald Trump $264 million to build. 

In addition, multiple acquisitions for golf clubs and companies are made by overseas buyers that are looking for a safe and secure investment outside of their own country, then to be used as an offshore asset. Another aspect that relates to business deals and acquisitions would include how many deals may be done on the course. When you play golf at a fantastic course it may be easier for potential investors to be swayed to take a certain viewpoint as well, and may be a great way to persuade the client to invest with you.   

Furthermore, investment in golf is increasing due to the changed mindset of investors and owners; instead of having a primitive and naïve frame of mind which viewed a golf club as a property for members only, alternatively they now visualise it as a business. Also, by building golf courses it will improve the house prices in that area. What also must be mentioned is how small investments matter too, a tiny local range will be a large source of income for many people due to how it provides employment for management, maintenance and selling merchandise for global companies.  

The pit falls of golf investment

Golf, to many, is a sport of a simple concept: getting a small white dimpled ball into a minuscule hole a few hundred yards away, nevertheless when mentioning names like: Tiger Woods, Severiano Ballesteros, Jack Nicklaus, and Rory McIlroy we are easily able to associate them with the bigger picture of golf. How so? It starts with the golf economy around the world which has an estimated value of $177 billion when all is included. What has happened to make this sport such an eminent part of the world’s economy, society, as well as a part of the local community. Golf courses or golf related companies are able to make, in some cases, millions of dollars, so how do they make their money? What has changed in the investors mindset that has made them so successful? Why is it one of the world’s largest sporting economies?

Golf of course has many upsides, however, I must begin with some of the pit falls. Not all investments work out in the financial world and this is especially true in golf. The reason as for why it is difficult is because the adjustment of investors and CEO’s mindsets were too late. Investments in golf courses are dangerous when looking behind it all; golf courses have high fixed costs meaning that this will be a source of constant substantial instability for many smaller enterprises. Having said that, when clubs price valuations are compared to what they were before the recession, many have gone down, showing the market’s difficulty. Investment in golf is becoming so convoluted that the 3 big players of golf investment: GE Capital, Textron and Capmark, have seen a 75% decrease in their joint portfolio between 2007-2012, starting at $2 billion decreasing to $0.5 billion. If you examine the investing side of the golf economy you deduce that since there has been overbuilding of golf courses, due to the property price’s bubble, lenders are reluctant to provide financial backing due to too much risk. Overall golf course investment has been and will be beneficial due to its implications on employment along with providing monetary help for many people. However, in the words of Larry Hirsh, President of Golf Property Analysts, when you invest in a golf club ‘They’re like new cars, they’re worthless the minute you drive off the lot.’