Tiger Woods - the Financial Fallout of the Tiger Woods Sex Scandal

Two US professors have estimated the loss to shareholders from the Tiger Woods sex scandal at up to $US12 billion ($A13.65 billion). The University of California, Davis, researchers told the media that the new study questions whether celebrity sponsorship has an impact on a firm's bottom line.

"Our analysis makes clear that while having a celebrity of Tiger Woods' stature as an endorser has undeniable upside, the downside risk is substantial, too," said Victor Stango, professor of economics.

Stango and fellow economics professor Christopher Knittel reportedly studied the stock market for 13 days after Woods crashed his car outside his Florida home on 27 November 2009. The study focused on nine sponsors: Accenture, American Express, AT&T, Tiger Woods PGA Tour Golf (Electronic Arts), Gillette, Nike, Gatorade, TLC Laser Eye Centers and Golf Digest. Shareholder value fell 2.3 per cent - or about $US12 billion ($A13.65 billion). The researchers reported in their study that this pattern of losses is unlikely to have emanated from ordinary variation of stock prices. They further stated that investors in three sports-related companies - Tiger Woods PGA Tour Golf, Gatorade and Nike - fared the worst, experiencing a 4.3 per cent loss, or about $US6 billion ($A6.82 billion).

So are the shareholders the biggest losers? Individually, no. The biggest individual loser is Tiger Woods.

Tiger Woods is really the biggest overall loser

Tiger Woods wins the award for "the biggest individual loser" - and he brought it all on himself. Just for starters, there is loss of sponsorship earnings which far exceeds what he would have made from tournament fees. Then there are his various business interests that seem to have fallen by the wayside since the scandal broke on 27 November 2009. Not to be forgotten are possible mounting legal bills and supposed mistress silence payouts. It is impossible to estimate just how much Tiger has lost and will lose in the future from this mega-scandal.

It is not surprising that Elin Nordegren has decided to proceed with divorce from Tiger Woods, the husband who betrayed her with mistresses running into double figures. Reportedly she will be in receipt of a US$300M divorce settlement, but this is just one of the financial implications of the Tiger Woods sex scandal.

Another loss with a financial undertone is the loss of respect and credibility that Tiger Woods has brought on himself by his actions. It is certain he will ever be viewed as the "squeaky clean sportsman" ever again. If he stays away from golf for an extended period of time, he risks never getting a chance to take a crack at the Jack Nicklaus record on winning 14 majors. Sources are even saying that Tiger Woods should not be allowed to contest this record in light of his disgraceful off-course behavior. In the days when Nicklaus was king of the course, golf was viewed as a "gentleman's game" - and probably still is to many.

Charity and commercial losers

Tiger's charity and commercial interests have taken a bit hit and landed in the rough. Executives at the Tiger Woods Foundation - a charity for underprivileged kids-fear big problems attracting sponsors for 2010. One major Woods backer, telecoms giant AT & T, has already pulled the plug.

PGA Golf loses

With Tiger Woods being a major draw-card, it is hard to estimate exactly how much the world of golf will lose post scandal. The financial implications of a PGA tour without Tiger Woods could be massive.

Tiger's staff could lose big-time

Reports from an insider close to Tiger indicate that the 12 month golf lay-off could extend into 2011 and he might not return to golf until 2012 because of the time it will take to re-build his life. The insider is reported to have told the media - "Tiger's cut himself from many of the people he used to talk to on a daily basis. Many senior aides are worried about their jobs - they fear Tiger will shake up his organization and ditch anyone who may be implicated with helping him in his indiscretions. There was also a big office move on the cards soon, as Tiger planned to set up premises close to his secluded new $30 million dream home on Jupiter Island, on the Florida coast halfway between Kennedy Space Center and Miami. But that's been put on hold, leaving some to speculate that Tiger may sell the property."

Is that a win or a loss?

The winners ...

Elin Nordegren would have to be the biggest winner in financial terms. However, it has been reported that the US$300M divorce settlement is backed up by a pre-nuptial agreement. What was Tiger Woods thinking when he chose to go down the path of infidelity with such a large number of paramours? Did he think he would never be caught out by Elin? Surely he would have known that US$300M is a lot to stake on a life of debauchery?

The lawyers involved in this entire scandal will be rubbing their hands with glee. Tiger will have had to hire a divorce lawyer and probably other specialist legal representatives to handle negotiations with mistresses, sponsors, business entities he was involved with - and the list would go on and on (just like the list of mistresses!).

The mistresses (rumored count now 18 and rising) have been cashing in on their notoriety from the get-go. It is impossible to document each and every commercial venture or purported payout, or to put a dollar value on this, but with so much media attention on "the mistresses", it is fair to say there will be a few new millionaires in the US this financial year.

The Victorian Government in Australia

How lucky can you be with timing? Tiger Woods landed in Melbourne, Australia on November 8 to play in the Australian Masters, part of the 2009 Australasian PGA Tour. Crowds went wild and the tournament was a sell-out. It has been estimated that the Victorian economy was boosted by AU$34M because of Tiger Woods's appearance at this event. That is just 19 days before the scandal erupted. Victorian Premier John Brumby could not have timed it better!

Vanity Fair magazine

Nobody at Vanity Fair could have suspected that an Annie Leibovitz photo shoot with Tiger Woods about 2 years ago would be a financial windfall of mega proportions. What's a bet that the magazine rushed to get the photos in their February 2010 issue to cash in on market interest in the sex scandal. If these photos had been published pre-scandal, the Buzz Bissinger article would have been more tuned to Tiger, Elin and the kids. Instead, Bissinger has been able to capitalize on the scandal and presented a truthful and fair account of Tiger Woods as he is today.

The Tiger Woods sex scandal is "headline heaven" for Vanity Fair and it remains to be seen just how successful this issue will be in terms of magazine sales.

The moral of this story

Why risk so much? Did Tiger Woods think he was invincible - or is he just a spoiled brat who thinks he can have everything and do anything he wants just because he can?

The moral of this on-going scandal (story) is - "be sure your sins will always find you out."

Tiger Woods has traded love, respect and adoration for sexual kicks, disgrace, embarrassment and loss of credibility as a human being. He might have been a one-time winner, but now he is just "the biggest loser".

Sources:

http://www.news.com.au/couriermail/story/0,23739,26550270-952,00.html

http://www.news.com.au/couriermail/story/0,23739,26552395-5012980,00.html

http://www.brisbanetimes.com.au/business/world-business/study-shows-cost-of-tiger-woods-problems-us12-billion-20091229-lhjh.html

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