Is the PGA of America Building a Flywheel?
The PGA of America is forward thinking in its two latest investments.
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Hey Golfers —
I have written about the PGA of America a couple of times in the last few months.
Both of these pieces have made me curious about the PGA of America’s strategy for growth — the how and why of what they are trying to accomplish.
This is an obvious statement — most business organizations aim to grow and drive value to key stakeholders. There isn’t one correct way to grow in the golf industry, but one strategy for growth is becoming more apparent.
For now — I will call it the Callaway Playbook for growth. Invest in high-growth golf entertainment businesses.
The goal? Build a flywheel and let it rip.
In my observation — The PGA of America is building a flywheel.
Before we dive into the PGA of America’s flywheel — let me provide a quick breakdown of what a flywheel is.
The flywheel model originated from Jim Collins’ book Good to Great.
A flywheel works in three significant ways.
Attract
Engage
Delight
The goal is to make your customers your salespeople.
Let’s get to it.
Here is a look at the PGA of America’s revenue from 2015 - 2019 — according to their Form 990.
Why the yearly inconsistencies in revenue? Ryder Cup.
Here is a quick comparison between 2018 and 2019.
2018 Tournament Revenue — $94.6 million
2019 Tournament Revenue — $68.2 million
Let’s look at the 2019 Form 990, considering that they did not recognize Ryder Cup revenue in 2019.
PGA of America's revenue comes from several areas — but three are far and away the most significant.
Tournament Revenue — $68.2 million
Education Revenue — $6.3 million
Membership Revenue — $2.7 million
PGA of America tournament revenue comes from its multiple tournaments every year.
How does the PGA of America increase tournament revenue?
Increase its media contracts
Sell more tickets to events
In both cases — the PGA of America needs to introduce people to its product and the game of golf.
This is where the PGA of America flywheel comes in — they need to attract strangers to the game.
Taking a page out of Callaway’s Playbook — through EP Golf Ventures; The PGA of America recently invested in Dryvebox.
Dryvebox is an indoor golf company with physical locations throughout the United States. In addition to the physical locations, Dryvebox has mobile golf simulators.
Although Dryvebox is a relatively new business — it shares similarities with Five Iron Golf. Callaway invested $30 million in Five Iron Golf about a year ago.
But Dryvebox’s unique value proposition is its mobile simulator units — they can bring golf to you. Dryvebox can travel to corporate parties, schools, and communities.
Bringing golf to schools or communities that may not have easy access to golf is a huge opportunity to introduce the game. And the PGA of America can leverage the synergies with Dryvebox to increase its reach.
Using Topgolf as a baseline — Topgolf reported that 50% of its guests identify as non-golfers. They estimate that 75% of the non-golfers are now interested in playing the game of golf. Topgolf does an excellent job of engaging its audience.
Assuming that other golf entertainment businesses follow similar metrics, this is a fantastic opportunity for Dryvebox to engage with people interested in golf, its product, and the PGA of America.
The goal is for Dryvebox to delight its customers and turn them into promoters.
Then the flywheel starts to spin — and the PGA of America gets unique value due to its partnership and investment.
Step 1 — attract a non-golfer
Step 2 — engage the prospect and turn them into a golfer
Step 3 — golfer is now interested in the game
Step 4 — sell golfer tickets to its events and championships
Step 5 — send the golfer to their local PGA of America pro for lessons
Step 6 — golfer promotes Dryvebox and PGA of America, and local pro
But it gets better for the PGA of America.
The PGA of America has about 28,000 members. Those members pay an annual due of $100. While it isn’t significant revenue for the PGA of America — it is extremely important to add value to its members.
So, the PGA of America invested in Sportsbox AI through EP Golf Ventures.
Sportsbox AI is game-changing technology for coaches. Utilizing AI-powered technology that develops coaching applications through markerless 3D motion capture. Essentially — take a video of your swing on the phone, and the technology allows you to see your swing from six different angles. It’s fascinating technology.
I can only assume that the PGA of America will make Sportsbox AI readily accessible and promote the technology to its members.
The goal is for coaches to engage their students with the technology — this is another tool in the tool belt for PGA of America Professionals.
And the flywheel has the opportunity to repeat itself with Sportsbox AI. Students that have success with the technology will become promoters of their PGA of America Professional.
Some may consider this growth method for the PGA of America unconventional — maybe it is, perhaps it isn’t. But what is apparent is their focus on introducing the game of golf to non-golfers and adding value to its members.
Time will tell — but I think the strategy is incredibly smart.
Have yourself a great Monday. Talk to you next week!
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good breakdown Jared!