The case of Tiger Woods is still too fresh to permit authoritative judgment of
its financial impact, though the latter is likely to be sizable. In 2009, Woods
was a superstar at the very apex of his sport, boasting a smart, blemish-free,
family-centred image. His multiracial ancestry made him an appealing exam-
ple, especially in a sport where minorities account for a small fraction of top
players or fans. Woods had accumulated endorsement deals valued at more
than $90 million annually, and he was the first athlete to surpass $1 billion
in earnings.
The scandal that engulfed Woods began with a suspicious car accident at his
home in Florida in the early hours of 27 November 2009. During the next few
weeks, intense media scrutiny revealed that the superstar had engaged in nu-
merous extra-marital affairs. As details became public, major sponsors such
as Accenture, AT&T, Gatorade, General Motors, and Procter & Gamble end-
ed their relationships or ceased featuring Woods in advertisements, though
several other sponsors, including Nike, TAG Heuer, and EA Sports, did not.
Nevertheless, the scandal directly affected the market valuations of his spon-
sors, at least in the short term. An event study of the stock movements of
eight sponsors found that they had lost an average of 2.3 per cent or their
market valuations (representing about $12 billion) in the ten-day period fol-
lowing disclosure of the scandal.
In July 2010 sales of EA Sports’ third-best
selling game, Tiger Woods PGA Tour 11, were off by 68 per cent compared to
those of the top competing golf game.
As for the PGA Tour, TV ratings for the
tournaments not featuring Woods declined by as much as 50 per cent; overall
advertising revenue during the first three months of 2010 fell more than $8
million below the total for the same period in 2009.
Woods himself is estimated to have lost approximately $25 million in an-
nual endorsement earnings from the scandal.
Projecting the value of this
sum forward a dozen years based on growth rates of comparable superstars
(Michael Jordan), Woods lost potential earnings of $885 million or 61 per
cent of his pre-scandal earnings potential. Under a scenario in which Woods
recovers earning power at the same rate as Kobe Bryant, the estimated
value lost drops to $432 million, or 33 per cent of his pre-scandal earnings
potential (see Figure 4.3).
GUARDING THE GAME Preserving the Integrity of Sport
1...,33,34,35,36,37,38,39,40,41,42 44,45,46,47,48,49,50,51,52,53,...124