Tiger Woods' recent marital woes are a media spectacle and the subject of much debate among many regular folk. Some, like the Washington Post's Kathleen Parker, believe the sports world's first billionaire should be able to keep his private life private. Others, including most media experts, suggest that the better course of action would be to come clean about everything that's happened as a way to reassure his fans and sponsors that he's taking care of these issues, however sordid they may be.

Frankly, I too believe we all deserve privacy in times of difficulty. However, when the subject in question is the world's highest-paid athlete and celebrity endorser for no less than six publicly traded companies, investors deserve to know the possible risks that come with such an association. It's doubtful we will hear anything more from sponsors other than the obligatory "We support Tiger." With this in mind, I thought it might be interesting to lay out to investors the potential damage should this unravel any further.

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A Street Paved In Gold
Tiger's road to a billion dollars began in 1996 with a $40 million, five-year deal with Nike (NYSE: NKE). He signed another five-year deal in 2001 for $100 million, and he's now operating from a third signed contract in 2006. Given he was paid $20 million a year until 2006, I'd guess that his annual remuneration on the latest deal from the swoosh empire is around $35 million. Tiger's estimated annual haul from all 10 endorsement deals is approximately $105 million, which means his contracts with Accenture (NYSE: ACN), AT&T (NYSE: T), Gatorade - part of Pepsico (NYSE: PEP), Gillette - part of Procter & Gamble (NYSE: PG), EA Sports - part of Electronic Arts (Nasdaq: ERTS) and four other companies are worth another $70 million annually. According to Forbes, Tiger entered 2009 with $895 million in career earnings from endorsements, prize money, appearance fees, etc. When you consider that Tiger likely put much of this toward income-producing investments, his net worth is well over $1 billion. He won't be hurt financially from this. But what about his sponsors? Business As Usual
When you have a brand like Tiger Woods, you want to hang on to it for as long as you possibly can. It's not surprising, then, that most of the statements in the press from his sponsors have been extremely supportive. Most mention his family. The one that caught my attention, however, was from Gillette, which indicated they had no plans to change their marketing programs involving Tiger. This at least suggests they're thinking about the ramifications. Score one for Procter & Gamble investors.


So what is Tiger really worth to sponsors? Estimates vary between $2.50 and $4 for every dollar spent on endorsements. This would mean in Tiger's case that all 10 companies could expect a combined $420 million in annual revenues from their association with the golfing great. For most, including Nike, it's a drop in the bucket.

Where The Dam Could Break
Nike Golf revenues in fiscal 2009 were $648.3 million. The year before that they were $729.0 million, and in 2007 they were $646.3 million. Essentially, they've been fairly flat for the last three years. Meanwhile, two of Nike's acquisitions, Converse and Hurley, have seen their revenues increase 62% and 35% over the same three-year period. Converse's sales in 2009 were $915.3 million, $267 million higher than those at Nike Golf. At the end of the day, Tiger's side of the business generates less than 4 percent of Nike's total revenue. It would appear there is no major threat to Nike's business, no matter the fallout. Appearances can be deceiving.

I believe the real value in Nike having the world's best golfer under contract at many millions per year isn't because of the golf business (although it once was the only reason), but because of the cachet he brings to Nike as a whole. I don't have a figure - Nike surely does - but I would guess that Tiger's influence on footwear and apparel revenue generation is huge, maybe in the billions. After all, if one of the best athletes in the world uses the product, so too will weekend warriors in any sport, not just golf. (Find out what the rich have in common; check out What The Rich And Powerful Have In Common.)

Bottom Line
Of all the companies and products Tiger Woods endorses, Nike has the most to lose from any consumer backlash. Will this occur? I doubt it. That doesn't mean investors shouldn't be aware of the possible goodwill impairment that comes with a business whose revenues deteriorate quickly due to unforeseen circumstances. When and if they drop, it won't matter how it happened. It'll just hurt.

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