Nobody played the business of golf better than Ely Callaway. He bought a fledgling four-person start-up in 1982 and turned it into the most successful purveyor of golf clubs in the sport's 300-year history. Callaway's innovation was to design clubs with oversize heads (remember your first Big Bertha?), which made a difficult, frustrating game immediately more satisfying to the weekend duffer.
Callaway Golf's success spawned a fiercely competitive $4 billion industry that has lately been showcased by a pro named Tiger and the marketing magic of a company called Nike. Yet if anything troubled Ely Callaway in his final days (he succumbed to cancer on July 5 at 82) it was that despite a decade of entrepreneurial zest, his beloved game had landed in the rough. For all its apparent popularity, golf is not attracting new players, and those who do play are not playing as much. The wave of aging baby boomers the industry counted on to hit the links never materialized, and the economic downturn has further stalled any rush to the thousands of underused courses built in recent years.
The result is that golf-course owners and equipment makers are spending millions of dollars battling each other for the same 26.7 million customers. Small, independent start-ups that seemed so promising just three years ago have folded or been folded into a few big companies like TaylorMade (owned by Adidas-Salomon), Fortune Brands and Nike. Earnings at Callaway (2000 sales: $837.6 million) failed to meet expectations, and the stock is down 40% from its 52-week high. "The industry is flat, and rounds played declined for the 10th straight month in a row," bemoans Callaway spokesman Larry Dornan. "This is unprecedented."
Ely Callaway revolutionized golf with the simple idea that if he made a demonstrably better club, people would pay big bucks for it. Over the past decade, Callaway's formula became the conventional wisdom for growing almost any game: combine new technology, savvy marketing and a stable of mediagenic, talented pros, and then watch new equipment fly out of shops everywhere.
It worked in tennis. Participation in the sport plunged in the mid-1980s, only to bounce back with the advent of lighter, more powerful, wide-body racquets made of composite materials. According to the Sporting Goods Manufacturers Association, tennis players' numbers are increasing, and equipment sales are expected to rise 4% annually. "If you want the consumer's dollars, you have to bring real innovation to the game," says Johann Eliasch, CEO of Head--who exited golf because he didn't think his company could do so there. Tennis was another matter; last summer Head launched the Intelligence line, which uses piezoelectric fibers in the frame. The fibers convert the energy produced when the ball strikes the strings to electrical impulses and then redistribute that energy optimally to maximize power. (Goran Ivanisevic used one to win Wimbledon.)