The business behind the Masters – leaving $300 million on the table
The Masters provides a counterintuitive approach to staging a global sporting event, prioritizing control and quality over revenue maximization
The premier sporting event in the world
From Thursday on the 88 best golfers in the world compete for the most prestigious accolade in golf, the Green Jacket. Augusta National Golf Club, the most renowned course in the world, is hosting the first major of the year, the Masters, in its 88th edition. This legendary tournament distinguishes itself from the rest as the lone major to be hosted on the same course every year, as well as having the smallest field of players out of any major.
The Masters is steeped in tradition, but does not follow the traditional rules of doing business in the sports world, creating one of the most exclusive events in sports. While basically any other sporting event aims to maximize its revenues, the Masters takes a different approach, placing paramount importance on the quality of the product above everything else. This unwavering commitment to a perfect customer experience leaves potential revenues of ~$300 million on the table.
This devotion to provide the best possible experience is reflected in how everyone who has attended the Masters has universally proclaimed it as the greatest live sporting event one can attend. Just look at the two images below, one of Tiger Woods teeing off at the Masters and one of Lebron James scoring to become the all-time points leader in the NBA, and focus on the crowds. Augusta National is very focused on tradition and does not allow patrons (the name given to spectators at the Masters) to bring cell phones of any kind onto the course. All the attention is on the on-course product, which is unique in today’s sports landscape, and, in my opinion, absolutely amazing. No need to worry though, patrons have complimentary pay phones on course they can use in case they need to contact the outside world.
The Masters is a one-of-a-kind event, and amongst my absolute favorite on the sporting calendar. Let’s uncover everything that makes the business behind the Masters so special and gives the tournament its unique allure.
At the Masters, money is not everything
Unlike most other golf clubs that operate as a non-profit (for tax exemption status purposes), Augusta National is a private for-profit corporation. This status allows them the privilege of not needing to disclose any information on their club’s income, assets, members or anything else. Consequently, their revenues on estimates.
For 2022 Masters, estimates suggest total revenues of around $151 million for the tournament week, although the potential for higher earnings remains considerable should they opt to maximize their income streams. The revenues are split as follows:
TV rights: $25 million (17%)
Sponsoring: $10 million (7%)
Merchandising: $69 million (45%)
Ticket Sales: $39 million (26%)
Concessions: $8 million (5%)
Media rights
Let’s commence with the big-ticket item when it comes to sports revenues, TV rights, particularly the domestic ones. While most other events cash in on TV rights as their main revenue driver, the Masters diverges significantly from the industry norm. Remarkably, the Masters generates a grand total of no domestic TV revenue, offering them for free to ESPN (weekday coverage on Thursday & Friday, since 2008) and to CBS (weekend coverage on Saturday & Sunday, since 1956). In exchange, they get full control of the broadcast on both networks.
This unconventional approach may seem completely insane, especially juxtaposed with the $93 million annual fee NBC pays to the USGA to broadcast the U.S. Open domestically, an event with around half the viewership of the Masters (6.2 million vs. 12.1 million viewers in 2023). One could make a very compelling case that the Masters could easily generate $200+ million for their domestic TV rights on the open market, given its prestige, viewership interest and the fact the U.S. Open deal was signed back in 2015. The Masters does however generate $25 million from its international TV rights, which is at least something.
Let’s remind ourselves what was mentioned at the outset. The Masters central priority is on generating the best possible experience for the patrons and viewers, even at the expense of potential revenues. By maintaining full control over the broadcast, they limit advertising slots to a mere four minutes per hour, significantly below the PGA Tour's average of 18 to 20 minutes. Furthermore, there is no on course signage sponsorship, again, all in service of exclusivity and brand appearance. For Augusta National, control supersedes financial gain.
Not going to lie, it is quite badass to be able to forfeit $200+ million purely on the attitude of “we are benchmark others aspire to”. It also offers a contrarian blueprint for other sport events to consider in their approach towards TV deals albeit perhaps not to such an extreme degree. In a world of dwindling attention spans, it may not be the dumbest idea to leave some money on the table to ensure long-term viability of the product and engage the next generation.
Sponsoring
With only 4 minutes of ad space per hour for and an absence of visible logos on the course, the number of sponsors is naturally on the low end. Currently, the Masters has exactly six sponsors: AT&T, Delta, IBM, Mercedes Benz, Rolex, and UPS. Rolex and UPS are corporate partners for the international broadcast, with the other four being partners for the domestic one.
The lion's share of sponsorship revenue flows directly to CBS and ESPN to cover their cost of production for the broadcast, with the remainder used to cover for hospitality event expenses. Estimated at $6-8 million in 2015, the production costs likely approach the $10 million mark presently. An insider familiar with this peculiar process described it as follows:
“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"
In essence, sponsorship revenue operates on a zero-sum basis, balancing against production and hospitality expenditures. Using the comparison to the U.S. Open again, which generates around $15 million from sponsoring, there definitely is an unmonetized potential in sponsoring for the Masters.
Merchandising
If you have been paying attention, it will not shock you at all to hear that the Masters takes a unique approach to merchandising as well. They are the sole large-scale sporting event that limits merchandising to in-person attendees only. There is no online store to order Masters merch, you have to get a ticket and buy everything in on course stores.
This deliberate exclusivity drives demand and Augusta National has perfected the art of on-premise merchandising. They generate an approximate $70 million in merchandising revenues per tournament week. Patrons are on the course for seven days, from Monday's practice rounds through Sunday's final tournament round. Consequently, the merch shop generates a comically high $10 million a day, and if we assume it is open 10 hours a day, that is an easy $1 million per hour (or $16,000 every minute), figures virtually unparalleled in the retail landscape. Estimates suggest that the average purchase value per patron shopping in the merch store is a ludicrous ~$1,000.
Other sporting events would do well to heed this exclusivity strategy for cultivating a premium brand image, potentially amplifying their own merchandising revenues by enhancing product desirability. The Masters is probably sacrificing money in the short-term from restricting merchandising to in-person only, but in the long-run the exclusivity ensures that the annual spend during the tournament week remains and even grows from the current levels. And it all feeds into the general aura of the tournament.
Ticket sales
Obviously, the ticketing system at the Masters is also unique. There are two ways to get official Masters tickets (before having to resort to the resell market), only one of which is realistically attainable. Since 2012, a limited number of single-day tickets for each session (Monday to Sunday) have been made available through a lottery system, priced at $140 for tournament rounds and $100 for practice rounds. The odds here are not great, being around 0.55% (1 in 182), and this is the realistic option of getting tickets.
There are also patron badges, that grant you access for the full 4-day tournament for $450. These badges are akin to season tickets that can be renewed every year. They present exceptional value, arguable the best value in sports. So, how do you get one? Well, if it has not become blindingly obvious so far, the Masters is a one of one type of event, especially in terms of exclusivity. Nobody besides Augusta National knows how many of these badges exist and they are only transferred upon death to a surviving spouse, other family members are not eligible. Should there be no surviving spouse, the badge reenters the waiting list pool, where it is eventually awarded. Sorry to disappoint, but there is no chance of you ever ending up on that list. The patron waiting list is highly exclusive and was introduced in 1972, and swiftly closed by 1978, because it became too long. It was briefly reopened in 2000 again, but immediately closed after being overrun with requests. Suddenly, the 0.55% lottery odds do not seem that bad anymore.
The pricing for the official tickets is significantly under market value, with the cheapest available ticket on the secondary market for a practice day ticket starting at ~$1,400, tournament day tickets starting at ~$2,000 and 4-day passes starting at ~7,000 (we are getting close to Super Bowl ticket prices here).
Ticketing revenues are estimated at $40 million and are evidently beneath what they could fetch on an open market. Even with conservative estimations on ticket prices (less than half of secondary market rates), revenues could easily soar into the range of $160-200 million.
Concessions
You know the drill by now. The Masters could make more money, but opts not to for the sake of the patron/viewership experience. Augusta National is famous for its cheap concession prices, as can be seen below. For fun, many go once through the entire menu, as it is only $66 in total. For comparison, average beer prices in NFL stadiums are around $10, and even nearly $12 for the NBA.
Concessions are a bargain at the Masters and revenues could easily be doubled from the current $8 million annually, with an adjustment to the prices. However, the example from the Mercedes Benz arena, home of the NFL team Atlanta Falcons, has shown that a decrease in concession prices actually can lead to an increase in profits (fans splurge more on cheap beer and hot dogs). Considering the longstanding tradition of cheap concession pricing at the Masters, and the potential of higher consumption on lower price levels at sporting events, it does not appear to make too much sense to mess with the formula for a relatively modest potential dollar gain overall.
What can others learn from the Masters?
It is evident that the Masters is not following conventional wisdom in how it operates, prioritizing tradition and product quality over revenue maximization. There is an optimization potential of over $300 million for the Masters, if it truly desired to do so. The beautiful thing about Augusta National, however, is that they do not have to and that they rate tradition and their product above anything else.
This raises a pivotal question: can other sporting events replicate this model, and to what extent? The Masters brand stands out in the sports world, its allure and mystique amplified by deliberate decision-making and unwavering focus on product control.
Several implications emerge from the Masters' model that warrant consideration by other sporting events:
Not everything needs to be behind a paywall. While the Masters values exclusivity in on-premise experiences and merchandising, it strategically prioritizes maximum exposure in TV viewership. Similarly, smaller leagues or events may benefit from offering free access to broaden their fan base.
Exclusivity in licensing and merchandising fuels demand. Teams should explore offering timed-exclusive or venue specific items that resonate with fans, or even something to collect (the Masters Garden Gnome that are unique to every year’s event are a particularly popular collector item).
Be clear in your identity throughout and convey that message in everything you do. The Masters prides itself in excellence in every aspect of golf and tournament organization, from course maintenance, volunteers, staff to the fan experience. Find your identity and let it drive every decision, even if it may not always maximize revenues in the immediate term.
I love the Masters and its embracing of tradition that make it such a unique event on the sporting calendar every year. I hope other sporting events emulate some of the viewership friendly attitude and focus that Augusta National has demonstrated over decades. It would be of great benefit to fans and patrons alike.
Fun facts about the Masters
Any victor of the Masters can return and compete for the rest of their life
Every winner becomes an honorary club member, but Jack Nicklaus (record 6-time winner) is the only players alive today that is a full Augusta National member
The winner receives the Green Jacket and can take it home for 1-year, thereafter it will be returned to his champions locker and can never leave the property again
The reigning champion hosts (and pays for) the Champions Dinner every year ahead of the tournament, where they select a menu of their own that is prepared for all previous champions attending. This year’s menu from Jon Rahm is very much inspired by his home country Spain
Augusta National is one of the most exclusive clubs in the world and invite only (after an extensive vetting process). If you ask to become a member your chances of ever getting in plummet
The course is infamously difficult to play on and many joke that the easiest way to play Augusta National is to become the U.S. President
Renowned for its pristine golf course, Augusta National sets the industry standard with cutting-edge features. The club employs a proprietary SubAir system beneath the greens, controlling their speed and firmness, while also heating the walkways to prevent slipping
Patrons visiting Augusta National are expected to adhere to strict rules, including a no running on the premises, no cell phones at any times and no cameras during tournament days
Patrons often bring chairs to claim their preferred viewing spots, secure in the knowledge that their seats will remain untouched until their return
Dubbed “The Augusta Rule” by the IRS, it enables homeowners in the U.S. to rent out their property for 14-days a year without needing to report it as rental income on their tax return, with many locals benefitting from the rule and renting out their homes during the week at astronomical prices
Amateurism has a long tradition in Augusta National, with co-founder Bobby Jones being the most successful amateur golfer of all time. Augusta extends invites to accomplished amateurs winning the continental amateur championships every year. During the tournament they all stay in the 3rd floor of the clubhouse called the Crow’s Nest, a cozy 30ft x 40ft room. 5 Amateurs will participate in this year’s Masters
Thanks for reading
The Masters is in my top 3 favorite sporting event, I truly love it. It’s unique and undeterred approach towards how it is run from an economic perspective is amazing and commendable. I pray that I may be lucky enough to go one day in person to the Masters…so if you know someone who knows someone, just send them my way.
I hope you enjoyed this breakdown and gained a new-found appreciation for the Masters and how a contrarian approach in sports business can work as well. If you have, please consider sharing it with your friends and subscribing, much appreciated!
Great work mate