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PHILADELPHIA — Comcast Corp. is making a big bet on golf, hoping to transform its little-watched Golf Channel network into a household name.
The Golf Channel is exclusively carrying every round of the first three PGA Tour events of 2007. So for the first time in four decades, this week’s Bob Hope Chrysler Classic will not be shown on network television.
The coverage is part of the Golf Channel’s unprecedented 15-year partnership with the Tour that kicked off this month. The deal gives the channel early-round coverage of every regular PGA Tour event, and every round at 13 PGA tournaments. NBC and CBS pick up the weekend coverage for 31 tournaments.
The contract substantially boosts the channel’s golf programming and for the first time gives considerable heft to a network co-founded by Arnold Palmer 12 years ago. But it’s also likely to generate big losses in the early years for parent company Comcast, the nation’s largest cable operator.
Last year, Walt Disney Co.’s ABC and ESPN walked away from negotiations with the tour, saying they can’t generate enough advertising revenue to offset the broadcast rights fees. In addition, the Golf Channel is shut out of the five most lucrative events in golf — the Masters, the U.S. and British opens, the PGA Championship and the Ryder Cup — that are not owned or run by the PGA Tour. Those have separate broadcast deals for the weekend with the networks and for early-round coverage with USA Network, ESPN and TNT.
Comcast — whose CEO Brian Roberts is an avid golfer — is taking a longer view. With more than $22 billion in overall annual revenue, distribution into 24 million homes and deals with other cable and satellite TV operators to carry the Golf Channel, Comcast is gambling that it can build ratings for the network that will allow it to charge advertisers ever-higher rates.
“If we don’t generate enough ad revenue but it helps us grow our brand and grow our distribution … (we hope the result will be similar to) what football did for Fox,” said Dave Manougian, president of the Golf Channel.
News Corp.’s Fox television network’s successful $1.6 billion bid in 1993 to broadcast the National Football Conference pitched the network for the first time into the same echelon as the three major networks. What helped was the financial backing of Rupert Murdoch’s empire.
Comcast first invested in the Golf Channel in 1994, along with five other cable operators. It began increasing its stake and in 2003, acquired the final 8.6 percent stake for $100 million.
With the PGA Tour deal, ad revenues are “up, well in double digits,” Manougian said. He added that the channel should generate enough ad revenue to offset rights fees midway through the contract.
Gil Kerr, PGA Tour’s senior vp of broadcasting, programming and productions, said the tour has had a relationship with the Golf Channel since its inception. The channel is the exclusive carrier of the Champions Tour and Nationwide Tour.
“They weren’t in enough homes at the time to do a deal with them on their own,” Kerr said. But “their distribution has grown a lot in the last six years. We knew going into the TV negotiations that they wanted to be aggressive in acquiring the PGA Tour.”
The Golf Channel is available in 75 million homes compared with 92 million homes for ESPN. Manougian said the channel currently is in at least 85 percent of basic video tiers. The Golf Channel is part of the digital package of Cox Communications and Cablevision.
In 2012, when the Tour’s contracts with NBC and CBS lapse, Manougian believes the Golf Channel will be able to pick up more weekend coverage.
Kerr won’t say what the Golf Channel deal is worth, only noting that the total value of all current contracts has increased. He also won’t comment on whether there’s any revenue sharing. Comcast and Golf Channel executives also declined to discuss contract terms.
Asked whether the contract has an exit clause, Manougian would only say that “any contract has disaster clauses, whether it’s a one-year deal or a 20-year deal. There’s nothing out of ordinary about this contract.”
It helps that Comcast isn’t only counting on ad revenue to offset the Tour’s rights fees. It charges cable and satellite providers 21 cents per subscriber per month, a fraction of ESPN’s average monthly fee of $2.60. And Golf Channel officials say they aren’t planning an immediate increase to offset the costs of the PGA Tour contract — another bet that in doing so, they will be able to get picked up on more cable systems.
In 2005, 63% of the Golf Channel’s $267.5 million in revenue came from license fees, according to Kagan Research in Monterey, Calif. Cash flow was $116.7 million. For 2006, Kagan is projecting a 13% increase in revenues to $302.5 million and cash flow of $139 million.
For now, viewership of the final rounds for the first two PGA championships on the Golf Channel has come in far lower than last year, when they were on ESPN.
Still, boosting viewership takes time, said Neal Pilson, former president of CBS Sports and now a TV consultant in Chappaqua, N.Y. “Even down the road, I don’t know if viewing levels on the Golf Channel will equal the levels that golf was achieving on ESPN.”
“But I think what they will have is a very strong golf audience that is saleable (to advertisers) and it will be a permanent home for PGA Tour, which they have not had in the past,” he said.
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