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Tiger Tax Part 1: Assessment

Tiger Woods has pumped a load of money into professional golf. That’s not up for debate, and it’s certainly not a revelation to anybody. However, that reality is rather nebulous and lacks context. Sure, I’ve noticed tournament purses growing like weeds; looked upon the size of recent endorsement deals with wide eyes (see: McIlroy, Rory); and figured numerous, faceless Suits have cashed out-sized checks behind the scenes, but that’s really been the extent of it.

That changes today.

The genesis for this piece occurred last April when I read the following comments from Phil Mickelson to ESPN.com’s Bob Harig:

“I’ve told [Tiger], and I’ve said this before, nobody has benefited more from having Tiger in the game than myself…It’s unbelievable the growth of this game. And Tiger has been the instigator. He’s been the one that’s really propelled and driven the bus because he’s brought increased ratings, increased sponsors, increased interest, we have all benefited, but nobody has benefited more than I have, and we’re all appreciative.”

The last two points Lefty made: 1) Nobody having benefited more than him; and 2) Every member of the Tour being appreciative, struck me flush like one of Big Cat’s wayward drives of late.

Here was the second-best golfer of the last 15 to 20 years, a guy who’s Q-rating is second only to the BigCat over that time, exclaiming his genuine appreciation for the financial windfall Tiger has brought, and doing it on the eve of the Masters to boot. Jesus, I thought, if FIGJAM is this reverential toward Tiger, what’s the sentiment among the other guys on Tour? And more specifically, just how much money has Eldrick made these guys?

The Money

I’m comfortable with the following estimate:

Tiger Woods is responsible for at least an additional $1.2 BILLION (2012 real dollars) deposited into the bank accounts of his competitors.

After that number has sunk in, let me quickly walk you through how I arrive at that astronomical figure.

The Analysis

Before showing my work, here are some working assumptions and general notes about this analysis:

  • As mentioned previously, all dollar amounts are presented in real (2012) dollar terms. If you haven’t been paying attention to national economic news, inflation has been minimal between 2012 and now (to the chagrin of the Fed, actually), so 2012 dollars, for all intents and purposes, are fairly similar to today’s dollars.
  • I’ve chosen to examine the time period of 1990 through 2012 for two reasons, one completely arbitrary and the other only somewhat so. Extracting data from PGATour.com is a tedious, time-consuming process and by the time I got back to 1990, I had the heart to go no further. I use 2012 due to the revision of the PGA’s schedule beginning this year which caused 2013’s total purse amount to be artificially low because of the implementation of the wrap-around schedule. I had not the desire to convert purses to a per-tournament basis across all years, so hence the 2012 cutoff.
  • I’m focusing strictly on golf earnings by way of tournament purses. I don’t touch appearance fees, endorsement deals, or anything else.
  • Tournaments encompass Official and Unofficial PGA Tour events because, hey, money is money. Cream, get the money, dolla dolla bills y’all!
  • Finally, I’m well aware there are a bevy of non-Tiger factors that played a part (to varying degrees) in purse growth on Tour from 1990 to 2012. I’ll leave that technical, rigorous examination to the real economists. My intent was to produce a quick, back-of-the-envelope analysis for much needed context.

Alright, now let’s get going…

Below is a graph illustrating total annual purse amounts on the PGA Tour between 1990 and 2012:

Tiger Tax 1             (Sources: PGATour.com, Bureau of Labor Statistics CPI Index)

Nominal purse growth rose nearly 500% between 1990 and 2012, from $51.2 million to $306.9 million. Adjusted for inflation, it’s a bit less heady, but still spectacular 241% increase, from $89.9 million to the aforementioned $306.9 million.

Here again is real purse growth, this time on an annual gain/loss basis:

Tiger Tax 2

That growth curve gets steeper than Sergio with a 3-iron!!!

And one more graph for you—below illustrates year-over-year real purse growth rates:

Tiger Tax 3

I think there’s a joke about this representing a final heart-beat of the Tour, what with the plunging golf participation numbers, sales figures, etc. but I’ll stop before I get too deep into the golf doom and gloom that’s all too present lately.

When considering all three graphs in tandem, I sub-divided the 1990 to 2012 time frame into three distinct periods:

  1. 1990 to 1996 as the ‘Pre-Tiger’ Era. Tiger turned pro in the latter half of 1996, so by and large the description fits, as purses were already set for ’96 (though companies could see the tempest on the horizon). Total purse amounts in this period grow at an annual compounded rate (CAGR) of 3.7%, going from $89.9 million to $111.8 million in 1996.
  2. 1997 to 2004 is the ‘Peak-Tiger’ Era. This is the holy-shit spike. On the course, Tiger solidified his excellence from the start, boat-racing Augusta National and the Masters field in 1997, and setting his status as a generational talent. Nike signed him to a (then-record) 5 year, $40 million endorsement deal in late 1996, jumping full-bore into the golf market with Tiger at the start of the ’97 season. And judging by a CAGR during this period of nearly 14%, Nike wasn’t alone. Corporate money flooded Tour purses, as they jumped in total from $124.6 million in 1997 to $315.9 million by the end of 2004. Please keep this era in mind as it is the heart of my analysis.
  3. 2005 to 2012 is the ‘Postmodern Tiger’ Era. While Tiger continued to dominate on the course up through the 2008 US Open, purse amounts did not follow suit. To my somewhat amazement, purses experienced a -0.40% CAGR from 2005 through 2012, falling in total from over $315 million to $306.9 million. I’ll note here that the Great Recession undoubtedly played a role in suppressing purses.

So how did Cat stack over a bill in people’s bank accounts? It really comes down to imagining a world in which Tiger never picked up a golf club. (Please note, in my preferred parallel universe Tiger is a Navy Seal conducting #KillHouse training exercises in regular intervals).

Tiger Tax 8

Any such ‘G.I. Eldrick’ parallel universe could differ from reality in an infinite number of ways (at least that’s what I gathered from Austin Kutcher’s Butterfly Effect), and therefore the possibilities for PGA Tour purse growth are also infinite. In the face of such vagary and overwhelming possibility, I kept things simple and distilled all possible Tiger-less worlds into five separate parallel universes:

(Note: The Pre-Tiger period of 1990 to 1996 is left unchanged from reality in all parallel universes (growth rates and totals). Similarly, the ‘Postmodern’ Tiger purse growth rates of 2005 to 2012 remain unchanged from reality. This leaves the ‘Peak-Tiger’ period of 1997 to 2004 as the crux of my analysis. I set it up this way to ease the complexity of analysis (seeing a trend?). This also, in my opinion, produces an understated (i.e. conservative) final dataset, with which I’m most comfortable).

  • Parallel Universe 1: Tiger Who?: In this hypothetical, purses behave exactly as they did in reality, growing at the same rates and to the same levels they did with Woods around. As the name implies, this means Tiger really didn’t have a damn thing to do with purse growth between 1990 and 2012, and specifically from 1997 to 2004. I don’t for a second believe this scenario to be plausible, but it serves as the ‘best-case’ scenario bookend on the spectrum.
  • Parallel Universe 2: Quarter-Cat: This hypothetical veers from the actual Peak Tiger period by discounting year-over-year purse growth rates by 25% of the difference between reality and simply inflation. It implies, therefore, that in reality Tiger drove ‘only’ 25% of purse growth between ’97 and ’04.
  • Parallel Universe 3: Half-Cat: In this universe, actual Peak Tiger purse growth is discounted by 50% the spread between reality and inflation, implying that in reality Tiger was responsible for half of growth between ’97 and ’04.
  • Parallel Universe 4: Three-Quarters Cat: As you can guess, this parallel universe differs from reality by discounting Peak Tiger purse growth by 75% the difference between reality and inflation, thus implying Tiger drove three-quarters of actual growth between ’97 and ’04.
  • Parallel Universe 5: Just Inflation: This universe is ‘worst-case’ book-end on the spectrum. In it purses between ’97 and ’04 grow by the rate of inflation only. This is sort of the apocalyptic dreamscape of parallel universes. Like #1, I don’t for a second believe this is plausible either.

 Now in possession of five hypothetical Tiger-less worlds, I modeled each one, sat back, and let the magic happen. Here’s what came out:

graph

 

hypo growth

 

These graphs are the same as the ones I already showed you, with the ‘Tiger Who?’ hypothetical world corresponding exactly to reality. As you can see, each of the four other parallel universes are layered within each respective graph, represented by the different colors.

The final piece of the puzzle, the quite literal billion dollar question, involves picking which alternate universe to go with and seeing specifically how it compares to reality.

If I were to hazard a guess for Mr. Mickelson, in reference to his quote at the beginning of the piece, I’d say he would likely admit Tiger’s impact, and specifically his opinion of a Tiger-less Tour, would most resemble the ‘Three-Quarter Cat’ hypothetical (i.e. Tiger drove 75% of actual purse growth) as the most plausible alternative. But because on my public accounting background, I’ll err a bit on the conservative side and pick the ‘Half Cat’ parallel universe as the one most likely to have unfolded if Tiger never touched a club.

So let’s see how the ‘Half Cat’ world compares to reality:

purse

 

PGA Tour purses in a ‘Half Cat’ alternate reality would be about $1.33 billion LESS than they were in reality. In other words, if you’re comfortable with the assertion that Tiger Woods was singularly responsible for half of purse growth between 1997 and 2004, then he is therefore singularly responsible for creating an additional $1.33 billion in tournament purse available on Tour. Backing out Tiger’s earned portion of this additional purse available ($134.7 million in real terms), I thus arrive at my original, conservative estimate:

Tiger Woods, and the Tiger Woods phenomenon, produced at least an additional $1.2 BILLION for the bank accounts of fellow playing pros between 1997 and 2012. $1.2 billion! That’s about the 2013 GDP of Antigua and Barbuda, which is what I call relative context.

Tiger Dollar Bill

 

Now What?

In Part 2 of the Tiger Tax series, totals become personal. I break down, on a player-by-player basis, just how much certain guys have reaped due to Tiger. I plan on naming names. Before you know it, Steiny’s people will be auditing accounts (yes, Vijay, even the off-shore stuff), garnishing earnings (better call your financial advisor, Stu Appleby!), and calling in the wiseguys if need-be. It’s time to pay the Tiger Tax!

Tiger Tax 9

Coming soon: Tiger Woods & Mark Steinberg star in Repo Men 2.

Follow @NoLayingUp on twitter. 

About the Author

Perma-case of the yips inside 5 feet. Completely lose my swing at least once a year. No concept of what a good leave is. Harbor delusions of golf grandeur.

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  • William Edwards

    Pretty crazy stuff. If the “Just Inflation” path was true the PLAYERS Championship purse would be somewhere in the ballpark of 3.5 M, the same as the 2014 Puerto Rico Open presented by seepuertorico.com. Also you could probably guarantee your card by earning 200k, compared to the 700k + needed now.

  • JK

    Jesus One Mulligan a Side Christ. Hope you get paid for this. Great analysis – looking forward to Part Deux.

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