Comcast's Golf Channel has struggled since its inception 12 years ago, even with it being co-founded by Arnold Palmer.
In response, they made a deal for 15 years, in hopes that it'll make the channel a household name. Included in the partnership is for the channel to be able to offer coverage of every regular PGA Tour event in the early rounds, while also being able to offer every round of the 13 PGA Tour tournaments.
A big downside to the deal is that the Golf Channel won't be able to broadcast the best money-making and important golf events - the Masters, the U.S. and British opens, the PGA Championship and the Ryder Cup - because they are not run or owned by the PGA Tour. The networks will be carrying these weekend events while cable networks TNT, ESPN (DIS) and the USA Network will carry early round coverage. With 31 weekend tournaments, NBC (GE) and CBS (CBS) will provide the coverage.
This is probably in response to Walt Disney owned ABC and ESPN choosing not to renew their contract saying that the advertising revenue that was generated from the broadcasts weren't enough to pay for the broadcast fees; the reason it is being spread across several networks.
What's good for Comcast (CMCSA) is that they do have a long-term outlook, which will be good for the company and its investors. The thought is that it will probably take years of losses before the company starts to turn it into a genuine profitable channel.
Their goal is to build up the ratings to the place they can command premium prices from advertisers ... something which will take some time to do.
Another good way that Comcast is looking at the deal is the dual value of the partnership. Not only is it a revenue generator they are looking to build, but also the growth of the brand, which over the long haul has a much higher value to the deal than anything else.
Dave Manougian, president of the Golf Channel said, "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."
He added that the deal with the PGA Tour has already increased ad revenues into the double digit range. He estimates that it will take around 7 to 8 years before the channel sees enough ad revenue to pay for the rights fees.
A strategy they're using to increase the chances of being picked up by more cable systems, is to charge providers 21 cents per subscriber per month, far below the fee charged by ESPN of $2.60. Executives of the Golf Channel said that there are no immediate plans to increase the fees in the near future.
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