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AT&T NATIONAL

July 1, 2009

Tim Finchem

BETHESDA, MARYLAND

JOEL SCHUCHMANN: PGA TOUR Commissioner Tim Finchem, thanks for joining us here at the AT&T National. We'll jump into some opening comments and then take some questions, please.
COMMISSIONER FINCHEM: Well, we're delighted to be here, to have a few minutes to chat with you. Let me just make a couple of comments. We're pleased with how the tournament has come on here, the economic impact is estimated over $30 million this week, and of course the support for the Tiger Woods Foundation each week, those are the two things we look at, what's the economic impact and what's the charitable result. This will be a solid week in both counts.
We have a great field, golf course is in perfect condition. We also are pleased with the reopening of TPC Potomac at Avenel Farms. If you haven't been over there, we invite you to do so. It's, I think, a terrific job, and we're delighted that this week it could be use for some of our customers to go over and play and some of the supporters of the tournament to go over and play, and hopefully that will be a good partnership going forward.
We're also looking forward to playing this event with Tiger and AT&T in Philadelphia the next two years. Aronimink I think is going to be a terrific venue for the tournament before coming back here to Washington after the Open, coming back here in '12.
With that said, I'll be happy to try to answer your questions.

Q. Was there a concern when this tournament was going to be looking for another home, and how happy were you to hear that it was going to be going to a major market to a top-100 course?
COMMISSIONER FINCHEM: That it was going to be going where?

Q. To a major market to a top-100 course. Did you have any initial concern when they announced that they would have to go for two years?
COMMISSIONER FINCHEM: Yeah, it made good sense. I think having a tournament sponsored by AT&T and hosted by Tiger Woods, marketing really in competition with a U.S. Open didn't make a lot of sense for either one. I think it would have diminished what the tournament is trying to do for the Tiger Woods Foundation, would have diminished the ability of the U.S. Open to effectively market its tournament, as well.
That said, to be able to go to Philadelphia where we actually haven't played golf in a while, and to go to a golf course that is as good as Aronimink and the venue is really good, and on a golf course where a lot of work has been done in recent years to bring it where it is today I think is very special, and we're all very excited about Philadelphia the next two years.

Q. Let me follow up on that. Philadelphia, top-100 golf courses, Aronimink, it's a big market. What is the problem with the PGA TOUR not having been there much in the last 30 years or so?
COMMISSIONER FINCHEM: Why haven't we been there?

Q. Yeah, it should be a common place I would think.
COMMISSIONER FINCHEM: Well, if you look at our calendar, we're full, and so we don't play PGA TOUR golf in Minneapolis or St. Louis or Kansas City or Portland or Seattle, Philadelphia. Those are markets that we'd like to get to, and we've done some things to get to them different ways.
We played the BMW FedExCup playoff event in St. Louis at Bellerive last year. We're scheduled to play that event in Indianapolis, another market we don't play in on a regular basis, terrific sports market. We just can't play everywhere.
But that combined with the fact that as opportunities presented themselves, it just wasn't the combination of a sponsor that wanted to play in Philadelphia and a golf course that was available. I know there was an opportunity a few years back, may have been when Aronimink went into construction, just didn't work out.
So we have several markets we don't play on a regular basis. We'll try to get PGA TOUR level golf into those markets as best we can going forward.

Q. It's been a year since your drug testing policy has been in effect. I wonder if you could just sort of briefly summarize where that is, what some of the results have been, and how about naming some names?
COMMISSIONER FINCHEM: First of all, if you recall, we went through an eight-month ramp-up to it, intensive work with players to make sure they understood the details of the program, not just on the testing side but more importantly on what the rule is.
PGA TOUR players are used to and grew up with the concept that you play by the rules. It is anathema to a player that you would not play by the rules. And when a player has a question about whether or not he might be on the verge of breaking a rule, he finds help from a fellow competitor or an official to avoid that situation.
In that ramp-up period, we found that the players took this rule just as seriously, except this rule is different. This rule has to do with making sure that things don't get in your body that can violate the rule. You have to accept the fact that those substances can't be in your body and you have to work at making sure that your daily intake of whatever avoids it.
Sometimes it's not that simple. You go into a drugstore, a GNC or buy something over the counter and put those substances in, and if you're not careful you can be in violation.
The players took it very seriously. They got educated. We've had over 1,000 tests in the last year. The testing processes worked extremely well. The players have cooperated. I think the staff that's worked with the outside testing agency has done a good job, the testing agency has been very professional. When you go in -- I think I did the first test. It's like going into a clinic. It's very professionally organized. We haven't had delays. It's worked very smoothly. I think it's been well thought out. We haven't had any problems that have arisen at this point.
I'm not saying we won't. I think when you're dealing with hundreds of athletes and things can get into your body, we may very well have problems. But at this point, not only do the players accept the rule, they put it on the same level as any other rule of golf. They work hard to understand what they need to be doing. They stay updated, and we've avoided problems.
And I think we have had -- earlier this year the International Olympic Committee observed our processes and were very pleased. WADA, we have worked closely with WADA in the development of our program. They are very pleased. But also the IOC people in relationship to our bid for the Olympics have been on-site at a tournament. They've observed the process. They've observed the way we select, the way we notify a player, the whole process, and they've been very pleased.
So to have the anti-doping community positively reacting to our program is a big plus, and we're very proud of it.

Q. Can you say point-blank that there have been no suspensions as a result of --
COMMISSIONER FINCHEM: There have been no suspensions because of doping. And again, I'll just say, it's not going to surprise me if we have some issue, but I think what's clear is we do not have a doping problem.
Having an issue or two as we go forward does not mean we're having a problem. It could mean a lot of things. But knock on wood, we're very pleased at this point in time.

Q. Why would it not surprise you?
COMMISSIONER FINCHEM: I just think because of the amount of stuff that's out there and different substances that you can take. You've got to be very, very careful. And also we have some situations where TUEs are granted, but they may be granted at a level, and you have to be careful not to go over a level with certain substances, so there's different things that could happen.
It's just not going to shock me. I think the first thing we were concerned about is getting players educated; the second thing we were looking for was do we have any real issues out there. And I think it's clear now that we don't.
When I say issues, I mean are there numbers of players who are using something to gain a competitive advantage. That clearly is not the case.
Now we've got to make sure that on an individual basis players continue to be educated. Nationwide Tour players are educated. We test on the Nationwide Tour, and make sure we're on top of it because now it's a question of education and staying abreast of the situation.

Q. A couple years ago before this came on board, and I'm not saying you were opposed to it, but (indiscernible).
COMMISSIONER FINCHEM: Sure, I think in some people's minds that's probably the case. If you write what I just said, somebody will read that, and they'll say, well, they're not testing enough. That's just human nature. Some people are so cynical, they can't believe we can have 300 players and somebody is not using something. That's not right; they must not test everybody.
I still think that's an issue. My reluctance on doping was we didn't have a problem I felt. I felt that the players aren't taking advantage, and I thought that there was advantages not being lumped into the other sports that, quote, have issues, and when you test in the minds of some, you're either testing because you have a problem, and if you're not finding a problem, well, you're not testing right.
I'm sure there's some percentage of people that think that.
Although on the other hand, I think it's given us the opportunity to restate and reaffirm and rearticulate to sports fans why golf is different. In other sports somebody is trying to catch you doing something, and you're trying to avoid getting caught on the playing field. If I'm sliding into second base and I get tagged and I'm called safe, I don't jump up and say, Ref, I was really tagged and I felt the tag before I got to the base. That's not the way you play. It's a different culture.
And in some sports, cycling, clearly there are drugs that can help you win. You can gain a real competitive advantage. I don't think that's true in golf, either, but it's not really relevant.
What's relevant is there's a rule, players play by the rules, they believe in that, and in a way it's helped us reaffirm that culture. So maybe that's good.

Q. I just want to confirm, so you're saying there have been no positive tests, either recreational or performance enhancing --
COMMISSIONER FINCHEM: I didn't say that. I said we have had no positive tests with respect to performance enhancing. We may have had some test results that trouble us in other areas that we treat in a different bucket. But we don't publicize those. We treat those as conduct unbecoming.
We may in those instances -- I'm not saying this has happened or not, I'm just saying what the process is. If we get a test like that, we will consider it conduct unbecoming, and what are our choices? We can suspend a player, we can fine a player, we can do both of those and put a player into treatment. We could also add to that regular testing.
As I said last year, we have three kinds of testing. We have random testing, we have selective testing. That means we decide to test you because you haven't been tested for whatever reason. It's not random anymore. We're selecting you. And then we have regular testing. We have reason to believe that a player may be using an illegal substance or may have a substance problem and he's in a program and we want to test him. Or a player is playing under a TUE where he's allowed to have certain levels of a substance and we just test him on a regular basis because we want to make sure we get him the TUE, but you've got to play by the rules. So it takes on different forms.
With respect to conduct unbecoming, we don't announce that. With respect to performance enhancing, we would be announcing that.

Q. You can't confirm for us then that there has been any positive testing?
COMMISSIONER FINCHEM: I wouldn't say yes or no to that, no. I'll say this: We don't have a problem in that area.

Q. You've been dealing with some loss of sponsorships because of troubles in certain sectors of the economy, and I'm curious, are you at all concerned about the loss of two founding sponsors here, and more broadly, I mean, how is the TOUR trudging through this recession?
COMMISSIONER FINCHEM: Well, there's turnover in hospitality sponsorships and local sponsorships all over the country. We have turnover. As I've said before, and it's too early to say, but the best barometer of how our tournament is doing is our net charitable contributions, which were at an all-time high last year of $124 million. That number will be off this year. We don't know how much. We don't think it's precipitous. It's hurtful, and we have to grow it back as soon as we can, which is one of the reasons we announced at THE PLAYERS Championship a redirection and a recommitment to do some things to rebuild our charitable platform.
But it's hard work right now. I know there's a lot of discussion about optics and entertainment and things of that nature, but it's largely the economy, it's largely a reduction of budgets, it's companies saving dollars, and one of the two things that hurt us is if you're going to save dollars, two areas that you can save dollars without firing anybody is you can reduce entertainment and customer communication activity, and you can reduce advertising. And both of those things hurt us. The advertising budgets are way off around the country, therefore the networks have a harder time selling inventory.
So our big two struggles right now are at the tournament level selling hospitality because of shrinking budgets, and then our television product, like every other sport selling.
But comparatively, this is very hard, but comparatively, I think we're performing well. We are better off than we thought we would be by a good margin, and if you compare us on the charity side to other charitable endeavors around the country that are challenged our other sports activity, I think our galleries are good. And we've had some weeks where we're actually up in revenue.
You know, we were up in New Orleans of all places. I understand Greensboro is basically sold out. So it varies from market to market. In general, though, it's soft and we're off a little bit.

Q. You took some hits from people on Capitol Hill about golf sponsorships and the value of golf and the economy.
COMMISSIONER FINCHEM: I'm not doing it this week, but I have done it for a couple months. We met with a good number of members, but the comments that you're talking about came from two or three members. It is not the prevailing view on Capitol Hill. It's a view that got a lot of media attention.
Those comments have gone away now. We don't hear them anymore. I think we did a better job of communicating the economic impact and the charitable impact of the TOUR, but also and more importantly, why it's good business and why good business is good for the United States in today's economy. I think sometimes we lose sight of that. When AT&T brings their customers into Washington, it generates economic impact. It's very positive.
The hotel and hospitality sectors lost over 400,000 jobs in the last two years. We need people to travel, we need companies to invite customers to do business and to spend money, and that's good right now.
So I think that message has come true. I think that generally in golf, we have to do a better job of communicating what the overall economic impact of golf is, what the charitable impact is. In the United States it's $31/2 billion of charity dollars raised through golf. And also that we have to just recognize it's good business.
We're also delighted that President Obama agreed to be the honorary chair of the Presidents Cup and recognize in doing so the charitable commitment of the players through The Presidents Cup, so we're looking forward to that opportunity in October.

Q. I'm trying to explain this to a foreign audience. Could you in layman's terms explain the grooves controversy that was ruled on or the rule change that's going to happen in January?
COMMISSIONER FINCHEM: In layman's terms? It's actually not that complicated. Up until 1987, all grooves were V-grooves. Along about 1988, '90, there was a new groove created called a U-groove. It had more space in it. If it has more space in it, especially in rough conditions when your ball is sitting in the rough, you can spin it easier. You can generate more spin rate.
The PGA TOUR opposed that at that time. There were lawsuits. One thing led to another, they were settled, but U-grooves were allowed.
In the intervening years, the correlation between hitting the ball in the fairway and performing well on the PGA TOUR went like that. So our position has always been that we wanted to return to -- it doesn't need to be a V-groove but a groove that doesn't generate that kind of spin out of the rough so we can reestablish the importance of hitting the ball in the fairway.
During those same years, if you look at putting or greens in regulation, those factors were consistent. So it was hitting the ball in the fairway that fell off.
What that does is it muddies the water in terms of the better player who has a better all-around game being able to succeed against all the rest of the players. So traditionally top players have been very supportive of the idea of returning to a groove with less spin.
That's what the USGA and the R & A approved in the summer of 2008. That's what's going to go into effect in January of 2010. All we did yesterday was react to a request to delay it a year, and we said, eventually, no. We looked at the pluses and minuses, and there were some reasons why we took very seriously the request to delay, because it's always better if you have more time. It's easier to adjust. But for a variety of reasons we chose not to.
Now, the other side of the coin, just to lay it all out, is that it's complicated because this rule applies to professionals starting in 2010. It does not apply to amateurs yet. It starts to apply to what we call elite amateur competitions, state amateurs, U.S. Amateur, things like that, in 2014. So those type players have four years to change out their equipment.
The average player, the player who's not playing in those type of amateur competitions, has until 2024. Now, why is that? It's because the rule-makers, and we supported this, did not feel it was right to tell you if you want to play by the rules of golf, you've got to cash in your clubs in 2010 and buy a new set. 95 percent of the United States, 95 percent of amateur players, buy a new set of clubs within 15 years. So if that average holds, it doesn't imposition very many people. It's just a phase-in. Once the phase-in is complete, everybody is back to the same rules of golf. Is that a fair statement?

Q. Tim, the only manufacturing company that has objected publicly to the reinstitution of the V-grooves has been a golf ball company so far. Do you have any research indicating that the adoption of the V-grooves will somehow impact the performance of golf balls and therefore affect golf ball companies?
COMMISSIONER FINCHEM: With respect to companies, I've spent a lot of time talking to manufacturers as you might suspect over the last six weeks. They have different opinions among them on different aspects of the rule and equipment and where it should go and all those things.
You know, all I know is that with this change you're not going to be able to spin the ball as much out of the rough. There's some assumptions that players will as a result, maybe, in some instances, look for a ball that spins more generally. That's not necessarily the case in my view, but it's possible.
With respect to the manufacturer that objected, they were a party that recommended the delay. We looked at the request based on whether or not -- because one of the arguments made was there's not enough time to make the transition, and we primarily were looking at it from that perspective.
We also looked at it from the perspective of the timeline and the fairness issue of delaying after individuals and entities and companies had spent time, energy and resources reacting to the timeline. That was a major concern.
But in terms of how it develops, you know, that's something the players will sort out as they pick up the equipment. They go practice with it and then they make the adjustments that they feel like they need to.

Q. So just real quick, nobody presented you with any research indicating that there would be an impact on a specific golf ball product?
COMMISSIONER FINCHEM: No, no.

Q. One more on grooves. Yesterday you said one of the challenges is the qualifiers and that you may look at possibly different rules for that. USGA and R & A are also looking at that. Are you likely to act in lockstep with them or will you act independently regarding rules on qualifiers? And on a different note, do you see with the new groove being implemented next year that course setups may evolve, possibly pin placements get a little more accessible?
COMMISSIONER FINCHEM: Let me answer the second question first because it's more fun. Yes, we do. We have changed our rough heights this year at a number of golf courses and did some fairly meticulous analysis of what happened when we brought those rough heights down a little bit compared to earlier years, and the reason we did that was to set the stage for now measuring what happens on those same golf courses when we shift grooves.
So this will be a -- you're not going to see us revolutionize our setup the first month next year, but over time we're going to be experimenting with a lot of different ways to set things up because our hope is that this change is going to make the game more interesting to watch from a variety of perspectives, and that would be helpful to us. So we're going to be -- we have more people, more energy, we have this wonderful ShotLink program that tells us everything, so we're going to really, I think, enjoy the process of doing some things differently and playing around with it.
To your earlier question, no, we're not going to act in lockstep. Our qualifier -- everybody has their own qualifier situation. The R & A has already decided that they would not apply the condition to some of the their early qualifying for the British Open. The USGA is considering the notion of not applying the condition to first-stage of the U.S. Open qualifying.
We are considering not applying the condition to our Wednesday qualifiers. A vast majority of the players that play in the Wednesday qualifiers are not PGA TOUR members. But then when you get to the Monday qualifiers, the second qualifier for an open tournament, the vast majority are our members. And the concern here is just one of numbers.
Having a little more time for players who are trying to qualify for PGA TOUR events to make an equipment adjustment is the consideration there, and we'll probably decide this in November when we know a little bit more about when equipment is actually -- it's one thing for the manufacturer to make equipment available to a TOUR player; it's another thing for when a manufacturer will have product distributed at retail when you have hundreds and hundreds of qualifiers out there trying to get clubs. So we've got to make sure that the equipment is available to those people first.
My guess is we'll make some adjustment in 2010 as a transition year, but we'll think more about that and decide in November.
JOEL SCHUCHMANN: Commissioner Tim Finchem, thank you very much.

End of FastScripts

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