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Why The Masters Leaves $200 Million On The Table

April 04, 2022

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Hey Friends,

Ninety of the world’s best golfers will travel to Augusta, Georgia, this week to compete in the 86th annual Masters golf tournament.

It’s the smallest field for a major championship in golf, and over four days and 72 holes, the world’s best players will compete for a chance to capture the iconic green jacket and a place in Masters history.

There are still plenty of questions to be answered — will Tiger Woods play his first professional tournament just 14 months after a near-death car accident? Can Hideki Matsuyama deal with the pressure and defend his 2021 championship? Will another rookie like Will Zalatoris show up and shock the world by being in contention on Sunday? Brooks Koepka is healthy; can he contend? How about Dustin Johnson?

I don’t have the answer to these questions. I don’t think anyone does really. So rather than spend our time speculating on the unknown, we’re going to do something a little bit different today — I’m going to break down some of the most fascinating (financial) details of the tournament, from the iconic $1.50 Pimento Cheese sandwiches to the $200 million in revenue that Augusta National is leaving behind.

Let’s get right to it.

Augusta National is one of the most secretive organizations in sports. So it’s no surprise that the revenue and profitability generated by the annual Masters Tournament are relatively unknown.

I mean, we have a few clues. But unlike most private clubs, which operate as non-profits, Augusta National is a for-profit corporation, and it does not disclose its income, holdings, membership list, or ticket sales.

The most recent publicly available figure comes from Golf Digest in 2015, which reported the Masters Tournament took home $115 million in revenue that year.

Here’s a breakdown (% of total):

  • Merchandise: $47.5M (41%)

  • Tickets: $34.75M (30%)

  • TV Rights: $25M (22%)

  • Concessions: $7.75M (7%)

There are expenses, of course. The merchandise sells at a 65% mark-up. They pay out roughly $10 million in prize money. They have to pay taxes, and security, staff, maintenance, year-round operations, player hospitality, and food and beverage all cost money too. Still, the tournament brings in about $30 million in profit (~25% margins).

But here’s the interesting part — revenue has increased five-fold over the last two decades, from $22 million in 1997 to $115 million in 2015, which means we can somewhat accurately estimate a ~10% compounded annual growth rate (CAGR).

If you extrapolate that 10% CAGR to 2022, this year’s tournament could bring in nearly $200 million in revenue, and with the same 25% profit margins, about $50 million in profit.

Now that’s wild…but is it?

The Masters sells $50 million in merchandise each week, or $850,000 per hour. They sell nearly 200,000 tickets to practice & tournament rounds, totaling about $35 million in revenue. And despite keeping concession prices historically low — a breakfast sandwich and a large coffee will only run you $3 — the tournament brings in more than $8 million in food & beverage sales each year also.

But still, the Masters is leaving a lot of money on the table.

Take the U.S. Open, for example. It’s one of golf’s four major championships, along with The Masters, The Open Championship, and the PGA Championship. They currently generate about $165 million in annual revenue and account for roughly 75% of the USGA’s total revenue each year.

But $93 million of that $165 million in revenue, or 56%, comes solely from their TV deal with NBC, which spans a decade and guarantees them about $1 billion.

The Masters, on the other hand, make $0 in profit from domestic TV rights.

Here’s how Golf Digest explains the mystery deal:

Nowhere is Augusta National showing more restraint than with its domestic TV rights.

This is the 60th consecutive year CBS has broadcast the Masters on a one-year contract, an arrangement that began in 1956. ESPN has had the weekday cable rights since 2008 on the same basis. "The way the Masters TV deal is constructed is still shrouded in mystery," says a source in the broadcasting business. "The deal changed a little bit when Billy came in as chairman, bringing in a small rights fee, but neither CBS nor Augusta National makes money on the deal."

Another source, also in the broadcast business, explains it this way:

"After the Masters, CBS sends an invoice to Augusta National, and they check it out and get the money from their corporate partners to cover production costs," says the source.

That means that IBM, AT&T and Mercedes-Benz pay about $6 million to $8 million each in exchange for four minutes of advertising time per hour—about one-third of the commercial interruptions of other sporting events. Rolex and UPS are the corporate partners for the international broadcast.

"If they ever opened up the [domestic TV] bidding, it would absolutely be worth more than the U.S. Open, but that's never going to happen," said the source, referring to the $93-million-a-year, 12-year deal the USGA signed with Fox Sports in 2013.

"There was talk back when the Masters went without sponsors during the Martha Burk controversy [2003-'04] that it might go to pay-per-view," the source said. "If they did, they could get $100 for the weekend and get two million to three million buys. Do the math on that. But they're never going to leave CBS."

This isn’t an apples-to-apples comparison, of course. The Masters and the US Open are two different tournaments during two different times of the year. Still, The Masters is roughly 2-3x more popular based on TV viewership alone and would undoubtedly command a multiple of the $93 million that the US Open receives annually.

2021 Final Round Viewership

  • U.S. Open: 5.67 million

  • The Masters: 9.5 million

And if Tiger Woods is in contention on Sunday, that number will be over 10 million.

So the question becomes — is leaving $200 million on the table worth it for Augusta?

It’s complicated, but the answer is yes. That is the price they are willing to pay to maintain complete control over the tournament. As Golf Digest put it, “the Masters makes a lot of money, leaves perhaps even more on the table, spends a lot of money to make its tournament better, and gives away a lot to help grow the game.” I think that’s a fair way to look at it.

I hope everyone has a great day, and we’ll talk tomorrow.

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