⛳️ A Business Tradition Unlike Any Other

The business model behind the world’s most iconic golf tournament.

That’s a wrap, folks. After another beautiful weekend sneezing all over the azaleas, scarfing down $1.50 pimento cheese sandwiches, and imagining for 4 straight days how nice it would be to take a nap on those luscious greens, a champion was crowned in Augusta, GA. The #1 golfer in the world and now 2x-Masters winner, Scottie Scheffler (shoutout DTX!), dominated the field and was able to get fitted for his 2nd green jacket in 3 years. But no one clicked on this amazing newsletter to hear a recap of the tournament results. That would be ridiculous! Let’s take some time to review the tournament from a business perspective. As the most popular tournament in all of golf, what does the business model look like? What makes the tournament so special? And in what ways does the Masters leave money on the table? Let’s get after it…

What’s the background of the Masters?

• The first tournament was held in 1934, and beginning in 1940, the Masters was scheduled each year during the first full week in April at Augusta National Golf Club.

• The tournament was first called the Augusta National Invitation Tournament. Co-founder, Clifford Roberts, suggested it be called the Masters, a reference to the “masters of golf” who played in it — the name was then changed in 1939.

• In 1937, Augusta National members began wearing green sport coats so that they could be recognized if fans (aka patrons) had questions about the tournament. The tradition was expanded to winners being presented with green jackets in 1949.

  • Now, winners are able to take it home for a year, then must return it to the clubhouse, where it can only be worn on property 🤔.

• In 1952, the Champions Dinner was started. By tradition, the previous year’s winner picks the menu and all former Masters winners are invited to enjoy the feast. Augusta National provides the chef and service crew, however the prior winner has to pay for the meal 😂.

• Everything at Augusta National is done on purpose and with extreme precision. One example, their membership list is not public and it’s been rumored they only have ~300 members.

  • Reportedly some members are: NFL commissioner Roger Goodell, Peyton Manning, Warren Buffett, Bill Gates, Condoleezza Rice, and Jack Nicklaus.

  • More examples: 

    • The food is intentionally wrapped in green packaging, so it can blend in with the ground.

    • Grass on the teeing grounds are 5/16 of an inch and the fairways are cut to 3/8”. The greens are never longer than 1/8”, and the grounds crew is so quick and precise they replace entire pieces of sod within 15 minutes.

    • Instead of selling tickets based on supply and demand or to the highest bidder, Augusta initiates a lottery system — where patrons go online to apply for tickets. It’s estimated that the odds of winning tickets are at 0.55% each year.

    • Broadcasters aren’t even allowed to mention the total $20M purse for all winning golfers. Nor are they allowed to mention golfers’ sponsors, shoe deals, brands of golf clubs they’re using, etc. because that’s free advertisement Augusta doesn’t want 😉.

• If you thought that wasn’t convincing enough, attending the Masters in person might feel like jumping into a time machine. Since the opening of the club, there has been a zero-tolerance no cell phone policy on the grounds (no, you can’t TikTok dance your way down Magnolia Lane). And if anyone is seen with a cell phone, they are kicked out immediately.

What does the business model look like?

• When it comes to the Masters, it’s important to understand the need for the tournament to drive the narrative. They pride themselves on being different, prestigious, and quirky all at the same time. Let’s review…

• In 2022, the Masters generated ~$142M of total revenue (see Table 1). And to be honest, the tournament lacks revenue maximization. Let’s break it down even further…

  • Merchandise: $69M (49% of total revenue)

    • It might seem out of the ordinary that merch sales are the leading revenue generator for the tournament. The reason for that is because it’s the only place you can purchase Masters gear!

    • There are no online stores, which means you must attend the tournament — exclusivity at it’s finest.

  • Badges (i.e. ticket sales): $40M (28%)

    • Augusta sells practice round badges for $75, single-day competitive round badges for $115 and four-day badges for $375 — (yep, that’s under $100 per day of competition).

    • But resellers really rake it in…four-day passes have been going for ~$7,000 😱.

  • International TV Rights: $25M (18%)

  • Concessions: $8M (5%)

    • Concessions at Augusta are also extremely cheap, patrons can buy any beer for just $5 (try getting that price at a baseball game). Sandwiches go between $1.50 to $3, soft drinks ($2), and various snacks (all $1.50).

They must make a killing with the TV media rights deal, right?

• On the contrary…the Masters generates no domestic TV revenue because its agreements with CBS and ESPN allow Augusta complete control of the broadcast in exchange for no money (if Augusta wants its viewers to watch sparkly unicorns prancing around the 13th hole, well by god CBS and ESPN have to show those exquisite creatures!).

• The Masters are very purposeful and exclusive when it comes to the revenue they generate for the weekend.

  • Augusta has only six sponsors — AT&T, Delta, IBM, Mercedes-Benz, Rolex, and UPS — all of which split a measly 4 minutes of commercial time per hour of event coverage.

    • Besides televised soccer, there is no sporting event with less commercial interruptions than the Masters.

    • As a result, ad revenue is essentially an afterthought; For example, three sponsors (IBM, AT&T, and Mercedes-Benz) last year paid an estimated ~$24M to air their spots during the final two rounds.

  • And most of the sponsorship money goes directly to CBS and ESPN to cover the cost of production.

  • To give you an idea, the U.S. Open generates ~$15M/year in sponsorship revenue (and yes, the Master’s have much higher viewership than the U.S. Open).

• So if CBS and ESPN are barely generating any TV revenue, why continue being media partners for the Masters?

  • It’s all about exclusivity. The Masters are one of the most desirable sports properties and neither network is dumb enough to give that up.

    • But there are also monetary benefits too…for example, CBS’ popular program, 60 Minutes, after last year’s Masters saw its target demo increase 77% vs. the previous week’s total, as ~1.5M adults tuned in.

So what makes this golf tournament so enticing compared to others?

• Exclusivity. Ultimately exclusivity drives demand, whether that’s with licensing, merchandise sales, sponsorships, etc. The Masters values exclusivity in on-premise experiences and it strategically prioritizes maximum exposure in TV viewership. It’s exactly why every year it is considered one of the top spectacles to attend in sports.

• Taking pride in their craft. Sometimes it might come across as a little anal, but there’s something special when an organization cares so much about perfection and tradition. The Masters prides itself in excellence in every aspect of golf and tournament organization, from course maintenance, volunteers, staff to the fan experience. Fans want to be treated with class and respect all while having a great time. It would be hard to make the case that this tournament doesn’t check all those boxes.

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Quick Hitters

• 🏀 The NBA was back at it again breaking more records as the regular season came to a close on Sunday evening. They drew ~300,000 more fans into its arenas this season than last (~22.5M total) and averaged 18,324 per game. There were also 873 sellouts across the league, which was 82 more than last season. It’s the second straight year the NBA set new records in those categories. It’s looking like these records can be attributed to the new NBA In-Season Tournament, which debuted this season in November. Plus the evolution of the Play-In Tournament, which is coming into its 5th season — where it inevitably adds more drama to the end of the regular season leading up to the playoffs (what a great set of numbers to flaunt to media companies looking to bid for the NBA’s new media rights deal!).

• 📈 Keep on growing women’s basketball! WNBA commissioner Cathy Engelbert confirmed last night that the league intends to expand to 16 teams by 2028. The league announced earlier this year that the Bay Area would receive an expansion team for a 13th league franchise, which is expected to start playing in the 2025 season. The WNBA is looking at the 2026 season for its 14th team as Engelbert named Philadelphia, Toronto, Portland, Denver, Nashville, and South Florida as places the league is exploring as options. Charlotte is also in consideration according to a report from The Athletic.

• 🎾 During the coverage of the WNBA draft last night, tennis legend Serena Williams was interviewed by CNN where she mentioned she is open to the possibility of owning a WNBA team in the near future. Serena retired from tennis with $450M in career earnings and already has quite the sports ownership portfolio, including with Angel City FC of the NWSL and the Los Angeles Golf Club in the Tiger Woods/Rory McIlroy-backed TGL. Her husband Alexis Ohanian — Reddit founder also has a little cash in the bank as well 😉.