Golf Convergence May, 2015 Opinion/Editorial:
The Other Side of the Coin – Has Another Side
Executive Summary: There is one subject regardless of whether we post a blog, write an article or cover the matter extensively in our “Business of Golf” book series that always draws incredible attention: “Third-Party Tee Time Companies.” The emotions surrounding this subject run high and the facts presented on which the many positions taken are low. Summarized below are major points to consider:

GolfNow Chooses to End Integration Contract with Club Prophet – or is it the other way around? Depends on who you interview but it really doesn’t matter.
GolfNow’s customer is not the golf course which supplies tee times – it is the golfer. Golf course owners and management team have consistently failed to understand this fundamental point regarding GolfNow’s business model.  A golf course to GolfNow is as a tire supplier is providing parts to an automobile manufacturer whose clients are the consumers.
Golf course owners and managers, in large part, are apathetic and while they will ferociously complain citing others for their woes, yet they are too indifferent to do what is in their best interests, especially if capital investment is required. No one is required to use GolfNow. Every golf course that is utilizing that service did so of their own free will.
Golf Channel, I believe, feels that any effort to grow the game through Allied Industry efforts will be unproductive and that they represent the best hope to invigorate the business of golf for the benefit of the entire industry.
Jawboning by Golf Associations will have no impact on the business practices of GolfNow. The inflated ego’s of Associations delude them into thinking they have an influence on Golf Channel where in fact they have little.
Because the accounting practices of the vast majority of golf courses that utilize GolfNow are so rudimentary, it is near impossible to measure or too dispute any statistics provided by GolfNow regarding the net benefit they provide to golf courses.
If GolfNow offered a “cash price” for their services like EZ Links does, this entire debate about the negative impact of barter would immediately dissipate.   Unfortunately, GolfNow won’t change their exclusive barter policy because the liquidated value of trade times in some markets, we have been informed, exceeds $100,000, i.e., Phoenix/Scottsdale.   The fair market value for the services they provide is perhaps valued at $30,000 per year which still creates a $150 million revenue stream on the installed base.
The decision to end the Club Prophet/GolfNow interface will provide a representative sample of golf courses that will be able to state within the next couple of months whether they received any value from the services received by GolfNow as a third-party distribution channel.   Early indications from interviews conducted with golf courses who have left other third-party firms indicated terminating the relationship has minimal impact on rounds and that the yield per round and the total revenue increases slightly.
There is a growing sentiment that GolfNow merely cannibalizes existing rounds by booking golfers who would have otherwise used a different distribution channel to play the same course. This argument has merit in that in the 10 years GolfNow has existed, total rounds played, as reported by the National Golf Foundation, has decreased by 5 million annually now reaching a stabilized based of 25 million rounds per year.  GolfNow would likely counter that based on NGF research, 33% of  GolfNow customers are playing 14 rounds more per year.   The question that can’t be answered in what is the yield on those players?
While other firms jockey for space in this arena, only an acquisition or licensing by the PGA Tour of EZ Links (which we have heard rumblings that discussions are now occurring) and an affiliation with Club Prophet will seriously dent the growth of GolfNow.com. The PGA Tour has the television coverage to introduce the masses to an alternative form of tee time booking. All other firms in the third-party arena are, in my opinion, merely clowns in the circus waiting for intermission to end.

Ethical Questions Addressed in This Article

Beyond the “he said, she said” nature of this editorial in trying to sort the many conflicting claims, there are some significant issues of substance regarding the ethical practices involved by the vendors in perhaps comprising the interests of their golf course clients. These issues are summarized below:

Should a golf management software vendor hold their clients hostage and selectively determine which interfaces they will create?
What is a fair fee that a golf management software firm should charge to create and maintain an interface?
It is appropriate for a third-party tee time vendor to contact a golf course directly and induce that facility to switch to their own point of sale solution if an interface agreement exists with a golf management software provider?

Background

On May 1, 2015, the software integration agreement between Club Prophet Systems and GolfNow.com ended. An estimated 236 golf courses (Club Prophet’s club base is estimated to exceed 1,000 golf courses) were impacted based on the booking engine use to process tee times and which firm hosted the golf course’s website.

While there are many permutations regarding the impact, simply stated, the booking engine was either provided by Club Prophet or GolfNow.  The website might have been hosted by a third-party or GolfNow. To the extent that the booking engine or website host was provided by GolfNow, a golf course is impacted.

In a letters to clients (click here for May 6, 2015 or click here for May 13, 2015), titled “GolfNow Chooses to End Integration Contract with Club Prophet Systems and 2015 GolfNow Terminates CPS Integration Agreement, respectively, Rick and Tom Robshaw present their insights and perspectives regarding what happened painting GolfNow as a bully engaging in aggressive sales practices to monopolize the industry.

GolfNow has correctly not responded.   A large corporation is precluded, due to its size and statute, from engaging in tittle/tattle tales.   It is like the elephant telling the trainer to kill the mosquito on its rump.   Just isn’t going to happen.

What likely happened? 

We know that “CPS informed GolfNow that the integration agreement expiring on May 1, 2015, would not be renewed “as is” (since at the time of the original contract they were not in the POS/Tee Sheet business, we never thought to build in some assurance to protect our interests).”[1] Club Prophet also wrote, “We were shocked by this decision as our integrating “partner” had now become our direct software competitor.”[2] Rick and Tom welcome to the world of capitalism. GolfNow did nothing incorrect as they reached out to those golf course which they were currently serving and provided them an alternative from the disruption of service Club Prophet was invoking.

The claim that an integrating “partner” had now become a direct competitor rings very hollowly. Since the acquisition of GolfNow’s acquisition of Fore Reservations, Club Prophet has proclaimed often and loudly that your firm’s business has soared and you have achieved record revenues from golf courses migrating to Club Prophet from Fore Reservations due to that facility’s disdain for GolfNow.   It is my opinion; you can’t have it both ways.

It is our conjecture that the terms and condition offered by Club Prophet, rumored to include the discussions a “50% revenue split on all client bartered times”[3], were beyond the fair market value deemed appropriate by GolfNow. We are confident that GolfNow did offer a reasonable increase in the license fee.

So who is the bully and who is the pig? If one’s interest were in serving one’s client, the golf course operator, it would seem the only fair fee would be the actual costs involved to establish and maintain the interface.   In a survey conducted by Golf Convergence in 2013, 14% golf course owners and managers stated that software vendors should provide the interface for free. While that position is not realistic neither is the position of requesting a 50% revenue split on client bartered times, especially considering one’s contempt for such a business practice as evidenced in many Club Prophet newsletters.

It is our opinion that it is incumbent on a software vendor first to serve the needs of their client and to decline to provide an interface or to exact such a high price for services rendered is inappropriate.   For example, we understand that IBS clients have requested an interface to the EZ Links tee time reservation platform.   Such interface, we have been told, has never been established by IBS. If that is true, we don’t think the interests of the golf course are effectively served by IBS.

It is Always About Money

In the May 13, 2015, Rick and Tom wrote, “The CPS policy is that we do not interface with companies that have a direct competing product. So when the agreement term ended, we opted to tell GolfNow we would not renew the contract “as is” and cited our primary concerns (1) they were a direct competitor and aggressively pursuing our mutual customers, (2) they are installing their software on CPS servers under false pretense, (3) unless we were properly incented financially we had no interest in continuing to “partner” with a direct “competitor.”[4]

The policy that that do not create interfaces with competitors is falsely represented. Club Prophet, pursuant to clause 3 above, will create interfaces with competitors if properly incentivized.   Their perception of market value is greatly distorted in my opinion.

The compensation package they sought from GolfNow appears to be in initial negotiations $2.5 million or reduced in subsequent negotiations to $500,000 per year[5] (Reference the footnote to the Club Prophet article to review our calculation).

I don’t know about you, but as a spectator in this game, the most important player in this drama has been shuffled off the stage.   Who represents the interests of the golf course owner?

Thus, we make a prediction for a bear market regarding third-party tee times as there are no winners here. That is our opinion. What is yours? Comment below for the world to read.

[1] 2015 – Club Prophet Systems – GolfNow terminates CPS Integration agreement, dated May 6, 2015, Pg 2.

[2] Ibid., Pg 1.

[3] 2015 – Club Prophet Systems – GolfNow terminates CPS Integration agreement, dated May 13, 2015, Pg 5.

[4] 2015 – Club Prophet Systems – GolfNow terminates CPS Integration agreement, dated May 13, 2015, Pg 4.

[5] Ibid, Pg. 5