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The Tiger Crash

December 11, 2009

I just have one question: What if Tiger Woods stops playing golf?

This is not the forum to recap the media-fueled scandals that have enveloped Woods since Thanksgiving. This is an economics blog. So let’s talk economics.

Much like a Fed-induced credit bubble, the mainstream press has inflated a Tiger bubble. Built mostly on a foundation of tabloid-level reporting, the higher-paid “journalists” and pundits on the food chain perform two basic functions: (1) repeat the tabloid reports, and (2) continually insist this is a major story and that everyone must pay attention. It’s easy to condemn the ethics of, say, ESPN for relying on tabloid reports, but there’s clearly consumer demand for tabloid gossip about well-known celebrities. The economic question here is, Why should ESPN pay expensive writers like Rick Reilly ($2 million per year) and Bill Simmons ($1 million per year) to pontificate about a subject where the cheap tabloid reporters are at least three steps ahead of the actual story? Where’s the value in paying a premium for writers who do little original reporting and contribute primarily to self-sustaining hype?

Reilly, Simmons, and their top-columnist brethren are the $3 gourmet cupcakes of modern media. Sure, they might have fancy resumes and ingredients, but they’re still just cupcakes. In the long run, more consumers will get the same sugar rush from 50-cent cupcakes from the grocery store.

Since the gourmet cupcakes don’t contribute much to actual profits, all they bring to the market is hype. They can relentlessly pound the message about how big this story is – Simmons comically labeled the “Tiger Zoo” as the “sports story of the decade” – but eventually, customers lose interest in mere hype.

This is what happened during the last sports-media-fueled bubble – aka steroids. The top press dogs spent years berating athletes and fans about the importance of hunting down every suspected steroid user. (Reilly famously dared a former Chicago Cubs player to pee for him on-the-spot.) But there was never any interest of widespread consumer interest in the story. Baseball attendance continued to grow while “tell-all” steroid exposes came and went from the bookstore shelves.

And this leads back to my original question: What if Tiger Woods stops playing golf? The current bubble inflation is predicated on the belief that this will be an ongoing story for years, as Woods resumes his career goal of winning more major championships than Jack Nicklaus. (Woods is currently four behind Nicklaus.) But Woods can burst that bubble by simply retiring and spending the rest of his life in comfortable seclusion.

Not only would this collapse demand for the gourmet cupcakes’ “advice” on how Woods must live his life, it would also trigger a contraction of the overall consumer demand for professional golf. The same press that’s now trying to destroy Tiger spent years building him up as an unassailable economic force. Indeed, there’s plenty of empirical data to support the notion that Woods’ mere presence elevates the PGA Tour’s income and television ratings. Overall playing purses are substantially higher now than when Woods became a PGA Tour member.

If consumers are deprived of the world’s best player, ratings and revenue will suffer – and so will the media establishment that drove him away. It has nothing to do with journalistic “ethics.” It has to do with the seemingly quaint notion that lower demand for golf means lower demand for highly-paid media types to cover golf (or in this case, cover Tiger Woods.)

But such long-term thinking is beyond the capabilities of the gourmet cupcakes. After all, they weren’t hired for their special analytical skills or insights; they were hired to regurgitate the work of others and generate self-sustaining hype. Which is a great gig…while it lasts.

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