Fifteenth installment of The Primary Cut – weekly insights from the world of golf player management and other golf-related industry and player news.
1. Mickelson taking ex-sponsor to court
In every rotten economy there is collateral damage. In Phil Mickelson’s case, the ill-effects have gone beyond his equity portfolio. The recent bear market has lead not only to the termination of his good friend, Pebble Beach pro-am partner and now-former [consulting firm] Bearing Point CEO, Harry You (whose company’s shares were recently down roughly three-quarters from one year ago after reporting a worse than expected third-quarter loss), but also to a contentious lawsuit (read the actual complaint filed here) against his former sponsor.
People began scratching their heads and asking questions when Mickelson began his first tournament of the year at the Buick Invitational donning a Callaway cap, in lieu of his typical Bearing Point logo. The murky details quickly emerged. It seems that Mickelson’s last contract with BP expired on December 31st, and in the months leading up, the two sides were in the midst of negotiating an extension, during which talks the company allegedly expressed its desire to continue the two sides’ up-to-then rock solid relationship. The new “contract” was never officially signed, however, and when You was fired in early December, Bearing Point immediately terminated all talks, claiming that You never had the authority to negotiate any extension with Mickelson in the first place. Mickelson’s camp, however, claims that because he detrimentally relied on the company’s initial statements that they wanted to re-up with him, he did not attempt to find another sponsor, and as a result missed-out on possible deals with replacement sponsors (although he quickly switched to a Callaway logo on his hat, and presumably got paid extra to do so, thus putting into question the extent of his actual damages). Moreover, as to the authority question, Mickelson’s attorneys can persuasively argue that a corporation can be sued even if a corporate representative does not have the authority to act on behalf of the corporation, if a reasonable belief existed by the injured party that the person had the authority to act on behalf of the corporation. And if I didn’t know any better, I’d say this is straight from a first-year contracts law exam.
The unfortunate situation underscores just how precarious some corporate sponsorships can be. But this turn of events was especially surprising, given exactly how much Bearing Point once had invested in Mickelson (rumors are up to one-half of its entire marketing budget), and also the tight relationship Mickelson had with the company (Mickelson had worn the Bearing Point, formerly KPMG Consulting, logo since 2000 on his visor)—You in particular. Golf Digest reported recently, for example, that Mickelson, 37, and You, 48, “met about three years ago through the golfer’s endorsement deal with BearingPoint and now get together or speak on the phone about a dozen times a year,” and moreover are “far from the only pro golfer and senior executive finding common ground. Formed by mutual business interests and an appreciation for what it takes to get to the top, such friendships often blossom on a golf course and can become quite close.” The pair are so close that You’s 5-year-old son, Robert, often calls Mickelson before big events to chat with him and wish him luck.
Moral of the story? Sponsorships can bloom into more for your client—leading to future friendships and business opportunities. Why else does Tom Brady have a specific clause in his endorsement deals mandating one-on-one time with the CEO whose product he’s endorsing? In Mickelson’s case, You is a business contact, and more importantly a family friend for life. But as an agent, always be mindful that such relationships can fall apart—and that sponsors are often at the whim of fickle economies and tightly audited and revised marketing budgets that could leave you in the dust at any time.
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Speaking of corporate relationships, Tiger’s coziness with the UAE Sheikhs has paid dividends. Even had he not holed that dramatic putt on 18 this past weekend to capture yet another Dubai Desert Classic, the annual weekend foray to the Mideast would have been a lucrative one for Woods. The Dubai tournament started in 1989 and has never been shy at spending big money to attract the game’s elite international stars from across the globe. One mainstay, at least since 2000, has been Tiger, who apparently earned $2 million just to show up. But that’s peanuts compared to what Tiger is reportedly earning through his “Tiger Woods Dubai” course, which will be apart of Dubailand, a theme park twice the size of Florida’s Disney World that includes a collection of 300 man-made islands in the shape of the world (to go with another man-made island configuration in the shape of Palm trees), and the world’s first, soon to be completed, underwater hotel, the Hydropolis (where rooms will be 66 feet below the sea surface surrounded by plexiglass and where visitors will pay thousands per night to be treated to various aquatic scenes). Sports Illustrated reported that Woods’ end of the deal is as much as $45 million, and that in order to secure him, Sheikh Mohammed bin Rashid al Maktoum, Dubai’s ruler, outbid a group of Chinese investors on behalf of Tatweer, a member of the government-affiliated Dubai Holding, for the honor of building the first Woods course (he also has one in progress in North Carolina) as part of Tiger Woods Design, a golf course design company that will embark upon projects around the world.
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Kevin Streelman signed an exclusive representation agreement with Icon Sports Management Ltd. Streelman, who won three times on the Gateway Tour and once on the Hooters Tour in 2007, tied for 29th at the Buick Invitational in San Diego two weeks ago, and received plenty of airtime and attention when he was paired with Woods in the third round. Woods went on to win the event.
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The Octagon-organized and run LPGA event, the Procter & Gamble Beauty NW Arkansas Championship presented by John Q. Hammons, will be played July 4-6 at Pinnacle Country Club in Rogers, Ark., and will be getting a “makeover” from P&G. Tim Erensen, senior vice president of Octagon, said the change in date provides the tournament an opportunity to secure a network television broadcast. He said there is an available window on CBS for that weekend, and that he expects a deal to be finalized within the next 30 days. Broadcast arrangements for the tournament’s opening rounds have yet to be determined.
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Jhared Hack’s, winner of last summer’s Western Amateur, decided to turn professional midway through his freshman year at Central Florida, and has already signed with Vantage Sports Management. Hack says he hopes to play events on the European Challenge Tour this summer, and earn exemptions into PGA Tour and Nationwide events.
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What recession? Callaway Golf reported record annual sales of $1.125 billion and more than doubled its net income in 2007. So does that mean that demand for premium golf clubs is price inelastic even as the dollar’s value continues to fall?