REV: MAY 22, 2003
KENNETH S. CORTS
Robb Osinski and Bob Winskowicz had been friends for twelve years and business partners for five. In the middle of 2002, they felt that they were on the verge of a breakthrough in the commercialization of a new technology that their firm, Performance Indicator, LLC, had developed to let golfers know when a used golf ball had suffered performance degradation due to immersion in water hazards like ponds and creeks on golf courses. Specifically, they held patents on technology that would change the color or appearance of balls when they had been submerged in water for an extended period of time. Osinski and Winskowicz originally believed that selling the idea would be easy; after all, it seemed evident that this could at least double the size of a stagnant $1 billion industry. The pitch was simple. Even by the most conservative estimates, golfers lose about 150 million dozen balls in play each year. However, they only buy about 50 million dozen new balls. The other 100 million dozen must be used balls (either found or commercially repackaged and resold), about half of which are recovered from water hazards. If you could take the water-damaged balls out of circulation, golfers would have to buy another 50 million dozen new balls to replace them at around $20 a dozen. That extremely conservative scenario pointed to an increase in industry sales of $1 billion a year. Golf World put the number of lost balls at 220 million dozen (4.5 per round); applying the same logic to that number suggested an increase in industry sales of $1.6 billion. Some manufacturers put the number of lost balls even higher, at 6 per round. In any case, Osinski and Winskowicz figured to capture through licensing agreements a swift and significant share of the hundreds of millions of dollars in increased industry profits this would generate annually. Five years after quitting their jobs to pursue this initiative full time, they had spent three difficult years refining the technology and two frustrating years approaching golf ball manufacturers without securing a contract. In the middle of 2002, however, a number of events seemed to be coming together to take them to the next phase, to commercialization of their technology.
The Market for Golf Balls
National Golf Foundation statistics indicated that a total of 586 million rounds of golf were played in the United States in 2000, a figure that had grown at only a 1.6% CAGR over the previous decade. A total of 49.2 million dozen golf balls were sold in 2000. Total unit sales of golf balls had grown at ____________________________________________________________
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less than a 4% CAGR during the 1990s, and were projected to grow at only 1%-2% over the coming decade. Prices for new golf balls ranged from about $17 a dozen for well-known value-priced brands like Top Flite, to about $35 a dozen for popular premium brands like Titleist, on up to about $50 a dozen for the newest super-premium balls like Titleist’s Pro V1. Golf balls remained the highest-margin item among all the categories of golfing equipment, surpassing...