Money-spinning Ryder Cup set to help European Tour through the rough

Europe faces a tough task to win back the Ryder Cup from a strong US side when golf’s most prestigious team event tees off later this week. But away from the fairways, it is a guaranteed money-spinning victory.

The estimated £80 million the cup generated in revenues the last time it was played in Europe makes it among the most lucrative tournaments in the sport.And when it is hosted in Europe, like this year’s competition which begins on Friday at the Le Golf National course in Paris, the PGA European Tour, the organisation that runs professional golf on the continent, makes enough cash to sustain its finances until the event next returns to its shores.

Yet, the European Tour accepts this dependence on the tournament, played every two years with Europe and the USA alternating as hosts, is a dangerous game. This has lead its executives to look for new ways to expand its business.

"Historically, the Ryder Cup has really been utterly critical for the Tour," said Nathan Homer, the European Tour's chief commercial and marketing officer. "In any company, if you rely on one source of core income, that's risky. We've worked hard over the past few years...to diversify where our income comes from."

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The Ryder Cup is run jointly by the European Tour and the PGA of America, the equivalent body in the US. Though precise figures were not provided, the European Tour keeps the majority of the income when the Ryder Cup is held on the continent and takes a smaller amount when it is played in the US.

In the fallow years between Ryder Cups, the European Tour, which runs scores of golf events worldwide, tends to make an annual loss.In 2014, when the cup was held at Gleneagles in Scotland, the European Tour made annual revenues of £231.4m — a 54 per cent increase on the previous year — and a pre-tax profit of £17.6m. In 2017, it made revenues of £210.9m with a pre-tax loss of £10.4m. The vast majority of the Tour’s income is pumped back into organising events and prize money.

Ryder Cup revenues come from ticket sales and sponsorship. The European Tour estimates that about 270,000 people will visit Le Golf National this week, paying an average ticket price of € 170 a day on the three match days between Friday and Sunday.At the same time, the cup attracts tens of millions of dollars in sponsorship from groups including Rolex, Emirates, BMW and Aberdeen Standard Investments.The European Tour also benefits from being able to sell broadcast rights to the Ryder Cup in a package with all its golf events.

The current six-year deal with Sky and the BBC for broadcast rights in the UK runs out this year.Mr Horner said it was already in talks with Sky over renewing the deal, but that it will "consider" other partners and options, including splitting rights between traditional TV broadcasters and digital streaming services.In June, Discovery, owner of the Eurosport network, agreed a $2bn 12-year deal with the PGA of America to create a streaming service that would screen its tour events in every country outside the US. In the UK, Amazon has increasingly been entering the sports market, acquiring live rights for the US Open tennis championships and some English Premier League football matches.

However, Mark Thompson, managing director of sponsorship management company SponServe, said the Ryder Cup's "full commercial potential remains untapped", because rights to the event are split between the US and Europe."For larger international brand sponsors looking for sustained global exposure and asset ownership, this creates another barrier to entry and means the events are likely being undervalued," he said.

Another issue is the difficulty in competing with the riches of the US PGA Tour, where prizes are typically double those available on the European Tour, leading golf’s biggest stars to choose to play there instead.The structure of the Ryder Cup goes some way to addressing this: to qualify for the European team, players must compete in at least four European Tour tournaments.

Many golfers, such as Northern Ireland’s Rory McIlroy, split their workload to satisfy this requirement. Though there is no prize money for playing in the Ryder Cup, the competition’s prestige — and the enhanced commercial appeal each player gains from being considered part of the sport’s elite — is compensation.

However, the European Tour wants to become less reliant on the Ryder Cup. In 2016, it introduced the Rolex Series, a group of eight tournaments with a top prize of a minimum of $7m, in an effort to attract the best-known players and more spectators.Keith Pelley, the European Tour’s chief executive, has also introduced other “innovations” with younger audiences in mind, such as playing music and letting off fireworks as golfers reach the first tee. There are also some new tournaments that are shorter than the traditional 72-hole competitions, such as the GolfSixes team competition launched last year in St Albans, England.

Sponsorship revenue said Mr Horner has grown 35 per cent in the past two years and ticket sales are up 50 per cent, though he did not provide further details.“We want a broader set of revenue streams that means we’re on more secure footing, more of the time,” he said. “But the Ryder Cup will always provide, and should always provide, significant income that we can then choose to invest as our members would want.”–Copyright The Financial Times Limited 2018.