Must Read Digest Story: The Fox & The Peacock

Ron Sirak has written a lengthy, Michael Lewis-style inside look at the USGA-Fox Sports partnership and my only quibble is that the November Golf Digest story was not long enough. I highly recommend reading it before reading the analysis below.

While the average reader probably doesn't care about the insider moves analyzed here (scrolling is your friend), anyone with an interest in business, golf, common sense and television coverage of our beloved sport will find the revelations both fascinating and sad.

My kneejerk reactions:

  • USGA President Glen Nager will go down as the most obtuse leader in the history of the USGA. We learn he's been obsessing about the Masters drawing a higher rating than the U.S. Open and becoming the premier event in golf. His reaction is to then steer the USGA television contract to a network that has little chance of drawing a higher rating, especially when the price tag paid will require a longer broadcast and more commercial inventory, factors which should drive down the rating.
  • The money people tied to this deal think that driving up the rights fee is a great thing for golf. Yet there is never any suggestion the USGA required an investment in technology to enhance the quality of the broadcast? Or reducing commercial time, which the Masters and The Players have proven as the best way to make for a great viewing experience. The extra money derived from the deal will merely go to some investment account and fans will watch more commercials on a network that has never televised golf. 
  • Fox Sports was in the minds of those handling this much earlier in the process than we realized, with Sirak reporting that the USGA met with Fox representatives for the first time April. 
  • The role of USGA Executive Director is now very much secondary to the 2-year lame duck presidency post. In this case, the lameduck president is someone who not only does not appear to understand some very basic things about a golf telecast, but who also may have fudged the truth in the story (more on that later). Current ED Mike Davis very much works for President Nager, and based on this story, the ED job may even be less influential in the organization than someone like television contract negotiator Sarah Hirschland who steered the USGA to Fox Sports. This is definitely a change for the USGA which used to be a golf organization first, but which comes out of this story sounding like a corporation where golf is just the widget in question.
  • The people who stuck the USGA with this deal for 12 years will be gone by the start of the deal, or within a year or two of Fox Sports taking over. As Sirak portrays them in this story, none are lifers who love golf or care about the hard core fan, but instead are obsessed with some mythical "broader audience" that only Fox Sports knows how to tap. (Meanwhile, brace yourself for yet another year of Fox Sports drawing a record low World Series number unless the Dodgers and Red Sox meet.)

My only real quibble with the story was the lack of connection made between the timing of the announcement and Fox Sports 1's negotiations with cable companies over its subscriber fee. While most of us thought the USGA was announcing the agreement during the PGA Championship to stick it to the PGA of America for not supporting the anchoring ban, subsequent reporting and common sense suggest the rush to announce the deal was all about help Fox Sports 1 landing more money per-subscriber.  Armed with the USGA deal on August 7th, Fox Sports 1 was not able to get past $0.23 per subscriber for its August 10th launch, which is less than the Golf Channel currently gets.

In other words, the rush to sign the deal yielded nothing for Fox Sports and a whole lot of resentment toward the USGA.

Here are some of the highlights of the story, starting with Nager's mesmerizing quote about what drove him to push for a new broadcast partner. (And this for those of you who didn't go to law school).

"I told them that if you went back to the '70s and looked at TV ratings and other indicia of what makes a championship great, the U.S. Open was considered the premier major championship in golf," Nager says. "And that if we looked at indicia today, the Masters is considered the No. 1 major in golf. I said I wanted to work with a media partner that had a proposal to elevate the U.S. Open and the other USGA championships and the USGA as a governance organization." (The weekend rating of the 1973 U.S. Open beat the Masters, 9.0 to 8.4. The next year, the Masters edged ahead and began widening the gap after that.)

The only indicia I see where the U.S. Open competes with the Masters in the rating department is with 4 minutes of commercials an hour and a slightly shorter telecast. That ingenious standard stems from a year-to-year deal like the Lords of Augusta have, something Frank Hannigan explained in his letter on this topic. Glen Nager just tied the USGA up for 12 years with Fox Sports, meaning there is no incentive from competitors to offer such a broadcast.


Sandy Tatum, who negotiated previous USGA deals and is a former USGA President who knows his stuff, touched on the contradiction in Nager's fantasy of a "premier" event clashing with exhorbitant rights fee:

"I would judge this as a transforming event," Tatum says of the FOX deal. "The challenge is very significant. How are they going to be able to justify the money they spent without increasing the commercial clutter of the telecast? That will destroy the telecast."

The story outlines the cultural change within the USGA that led us to this mess. Not surprisingly, Walter Driver's name comes up but so does Jim Hyler, the president immediately preceding Nager. And then there are the folks who steered and spun the current Fox Sports deal:

On Sept. 1, 2011, Joe Goode, a 15-year veteran at Bank of America, was named as managing director of communications and made a member of the senior management team. This was a tipoff of what was to come: The USGA was loading up leadership that did not come from the world of golf but was more experienced in the business world.

A week later, Hirshland left Wasserman Media Group for the USGA. And a month after that, the USGA nominated Nager to take over as president in February 2012, a spot most thought would go to Jay Rains. (Rains, considered close to Fay and NBC, was removed as vice president in 2011.) Nominated to the Executive Committee was Stevenson, who in 2007 sold his sports marketing and TV consulting firm, OnSport, to Wasserman.

The story explains the surprise appearance made by Arnold Palmer during NBC's 30 Rock presentation to the USGA group, which my sources say ended in a standing ovation for The King. There was also this terribly embarrassing moment for the USGA's legal firm considering the overall tone of the story, which suggests Fox was very much in their hearts all along, if not the choice from the outset.

Palmer gave an impassioned appeal that he believed it was in the best interest of the game to keep the package with NBC/GC. One of the lawyers from Proskauer asked for Palmer's autograph.

Casey Wasserman, head of the Wasserman Media Group that consulted on the deal (and full disclosure, who I have worked for at the Memorial Tournament the last two years), is cited as having been part of the process. His comments to Comcast CEO Brian Roberts at the annual Allen & Company gathering in Sun Valley are in dispute, but either version does not give a good impression of how the USGA/Wasserman side viewed the seemingly strong presentation of the incumbent.

Asked if Casey Wasserman told Roberts the USGA deal was going to go to auction—a move that would have altered NBC/GC's negotiating strategy. Jordan, the Wasserman executive, says: "That is absolutely not true. That sounds like sour grapes to me. I know Casey had a conversation with Brian, and he told him, 'You need to get serious about this, or you'll lose it.' "

Personally, I wouldn't be throwing around the term "sour grapes" in the same sentence as Brian Roberts, one of the most powerful men in media and corporate America. And second of all, the quote Dean Jordan does attribute to his boss Wasserman also doesn't look great when NBC, at least at this point in Sirak's version of events, has made such a huge offer that ESPN has already backed out. ESPN!

Now, here's where it becomes apparent that the USGA's representatives either (A) have no class (B) were set on Fox Sports, (C) were in a hurry to help Fox Sports 1 get a higher subscriber fee, or most likely (D) options A, B, C.

All bids were to be in by 5 p.m. Monday, Aug. 5, and NBC/GC upped its offer to a little more than $80 million and expanded its plan for massive promotion of the U.S. Open.

There was silence for 48 hours.

Then shortly after 5 p.m. on Wednesday, Aug. 7, NBC's Lazarus got a phone call from Nager breaking the bad news. FOX, which had never televised golf in the United States—though Sky Sports, also owned by News Corporation, does golf overseas—had the exclusive rights to the U.S. Open and the rest of the USGA properties for 12 years beginning in 2015. "The board made its decision on Wednesday morning, and our president informed NBC sometime Wednesday," Hirshland confirmed.

"Deals like this don't happen this quickly," says one former USGA staffer.

"Only four or five people knew what our offer was," says an NBC official. "When you're a longtime incumbent, you get some sort of hometown prerogative. Would we have matched? I don't know. They chose not to give us the opportunity. FOX ended at $93 [million a year], NBC just north of $80 [million]."

"With the benefit of hindsight, we're not sure the process was handled in the way that it was presented to us," says NBC spokesman Greg Hughes.

So (A) the USGA gets an extra $13 million a year by going with Fox, yet loses Golf Channel as a promotional partner (we don't need no stinking core audience!) and worse, appears to have had little integrity in the process when the spokesman is suggesting something fishy took place. 

When you are a non-profit rulemaking body integrity is kind of important, no?

Finally, if you come away from the story thinking President Nager had no imagination, think again. Picture the scene he paints as the deal was announced...

Nager was attending a PGA of America dinner in Rochester, N.Y., with many other golf dignitaries, when the news release hit. "Several people came over to congratulate me," Nager says. "One said it was the biggest thing to happen to golf since Tiger won the 1997 Masters."

That anyone in the golf's executive ranks thinks anything they do in the negotiating room equates to something like Tiger Woods winning the 1997 Masters, should probably be under Nurse Ratched's care.

That he expects us to believe people sought him out at a PGA of America dinner, much less congratulated him on a 12-year television deal announced on the eve of that organization's major, speaks to a certain emperor-not-wearing-anything-but-a-blue-blazer situation.

There was also this credibility blow to Nager and press release crafter Joe Goode:

The sentence in the USGA release that annoyed NBC and ESPN was this one: "The game is evolving and requires bold and unique approaches on many levels, and FOX shares our vision to seek fresh thinking and innovative ideas to deliver championship golf." Mike McQuade, who produces golf for ESPN, and NBC's Roy privately bristled at what they perceived as a knock on their ingenuity.

"We were disappointed that the USGA chose to disparage our production and the production of every media company [CBS, ESPN, Turner, Golf Channel, NBC] that covers golf instead of just being candid in choosing money over mission," says NBC's Lazarus.

Barely more than two hours after that press release about bold new directions went out, a former NBC executive now at FOX, David Neal, called Roy to talk about jumping to FOX. A close friend says Roy viewed the wording of the press release as "reprehensible" and told Neal thanks, but no thanks.

That's right, producer Tommy Roy, who couldn't be counted on to bring a bold, unique, fresh or an innovative approach for NBC's future USGA coverage, was offered the producing job by Fox Sports within hours of the deal's announcement.

Thumb's up to Fox Sports for recognizing Roy's quality work. There is hope for them yet.

The USGA? Not so much...

NBC sources say the 70 hours of coverage FOX will give the USGA's big three events is half that of what NBC/GC promised.

"False in every respect," Nager says. "The only one who would know that is us since we are the only ones who have both proposals. In terms of contractual commitments for our Opens—the men's, the women's and the seniors'—FOX proposed more, and for our amateur championships FOX proposed substantially more."

Of course, Nager would never actually show anyone the proposals and the parties involved will not violate confidentiality agreements to prove what they otherwise believe to be the truth. So we'll have to take Nager at his word.

After reading this story and the delusional dream of Nielsen superiority over the Masters, few will believe a word the USGA President says. The indicia suggest even fewer will take him seriously.