Tiger's golf exit has sponsors scrambling
Tiger Woods, the world's top golfer with a $1 billion net worth, is taking an indefinite leave from golf. And this is causing some of his sponsors -- who pay him about $100 million a year -- to take action. While a few stay mum or say they are still deciding, some are quietly distancing themselves from Tiger. Only one is voicing full-fledged support.
How should sponsors react to this situation? It depends on how the sponsors' executives feel about explaining their Tiger strategy to clients and other constituents. Reuters reports that a recent survey of marketing professionals found that 75% of them would curtail endorsements with Tiger if they had them.
Here's how I think his sponsors will decide. If the executives are comfortable with the way Tiger is handling family matters and that he will emerge as a good representative of their brand, they'll support him. If they are still trying to decide, they'll say nothing or announce that they're trying to decide. And if they think his image and value to their brand hurts more than it will help, they will split from him.
Sponsors Begin Making Choices
So far, those in the support camp are pretty small. The New York Times reports that Nike (NKE) is the only sponsor coming out in full-throated support of Tiger. The Times quotes Nike as saying, "Tiger has been part of Nike for more than a decade. He is the best golfer in the world and one of the greatest athletes of his era. We look forward to his return to golf. He and his family have Nike's full support."
Two sponsors seem to be distancing themselves. The Times reports that Accenture (ACN) -- the former consulting arm of the now defunct accounting firm, Arthur Andersen -- removed Tiger's image from its homepage on Friday. Accenture has used Woods in its marketing since 2003. And Tag Heuer is pulling posters of Tiger from its stores in Australia, according to Reuters.
Some sponsors have not taken any action yet and have kept their mouths clamped shut on this topic. These include Pepsico (PEP), Gatorade and Procter & Gamble's (PG) Gillette. Perhaps they are in the process of deciding what to do or have chosen to say nothing as they wait to see how much worse things get. Some have contract clauses that let them cancel their deals if Tiger cheats, according to the New York Daily News.
And at least two sponsors have publicly decided not to decide. AT&T (T) told Reuters: "We support Tiger's decision and our thoughts will be with him and his family. We are presently evaluating our ongoing relationship with him." And Electronic Arts (ERTS) told Reuters, "We respect that this is a very difficult, and private, situation for Tiger and his family. At this time, the strategy for our Tiger Woods PGA TOUR business remains unchanged."
Golf Will Likely Take a Huge Hit
Meanwhile, Tiger's absence from golf could cause a huge drop in tournament TV ratings. Last time he left the game -- for eight months while recovering from reconstructive knee surgery -- golf tournament ratings fell by 50%, according to the Associated Press. But this situation is far different. There is the potential that more mistresses -- beyond the current baker's dozen -- could come forward to tell their story. This would not help Tiger's case among sponsors in the short term.
So what will happen next? The New York Daily News reports that Tiger and his family may move to an island near Stockholm, Sweden to begin piecing things back together.
If Woods returns to the golf course in 2010 or 2011 with his golf game and marriage in good shape, those tournament producers and sponsors will be back. In the meantime, while Tiger's sponsors will survive without him, it could be a long time before golf recovers.
Peter Cohan is a management consultant, Babson professor and author of nine books, including Capital Rising (due in June 2010). Follow him on Twitter. He has no financial interest in the securities mentioned.