Internet Distribution Monopoly
|By Brian Cunningham, February, 2007
I attended the 2008 PGA show held in Orlando January 17th – 19th. This show is big by anyone’s standards with over 1250 exhibitors, 42 of which are technology vendors. The majority of the technology vendors offer golf course and tournament management solutions. There is also a sprinkling of interesting GPS range finder and instructional aids. I was at the conference shopping for a system on behalf of a client, as well as just keeping up with the latest and greatest.
I had a particular interest in Internet Distribution and Revenue Management Solutions. While making inquires in this area, I was shocked to learn that technology vendors in this space currently seem to be the proverbial deer in the headlights of a patent recently issued to GolfSwitch and infringement litigation initiated by them against Cypress Golf and TeeConnect.com.
GolfSwitch is an Arizona-based distributor of tee time inventory to golf resellers, they filed for a patent in 1999 to protect their proprietary GolfSwitch Network system. The patent was granted in March 2006, at which point the company sued Cypress Golf Solutions and TeeConnect, LLC, claiming infringement. At this time, there is increasing use of the Internet as a vehicle for distributing reservation inventory. Whether or not the GolfSwitch claim has merit, the resolution of this lawsuit will have far-reaching effects on golf course owners, partners, and customers.
In their patent, GolfSwitch claims to have invented the process of connecting course tee sheets (local scheduling systems) with a central reservation system, thereby making aggregate inventory available to third-party resellers. Such resellers, ranging from regional golf portals to global websites such as Travelocity, communicate with courses in real time through the GolfSwitch Network.
As a result of the lawsuit, many technology initiatives for hotel chains and third-party distributors have been frozen. Both TeeConnect and Cypress have lost business or had it delayed. Even though these companies do not use real-time communications to distribute inventory, GolfSwitch claims that any system which connects multiple courses with multiple distributors is in violation of their patent.
The GolfSwitch action is remarkable in that it attempts to monopolize the online distribution of golf rounds. This would effectively separate golf inventory from other forms of electronic distribution, such as those employed by the airline and hotel industries. Markets for seats and rooms are highly competitive, with dozens of web-based vendors providing a variety of systems and services. If GolfSwitch is successful, tee time distribution will evolve in a completely different way.
There are two main views of the GolfSwitch position within the golf industry:
Pro: The market for golf distribution technology is highly fragmented. Focus on a common system will increase adoption due to a single standard, in the same way that Microsoft’s near-monopoly has enforced compliance across business systems.Often overlooked in this tug-of-war is the position of resorts, and their need for dynamic booking solutions for guest activities. The GolfSwitch decision could effectively split golf from an otherwise integrated activities suite, making cumbersome (and legally risky) interfaces necessary. If golf cannot be included in the guest itinerary, resorts are less likely to invest in online distribution of spa, tennis, dining, and similar reservations.
Major players in the golf and resort industries are closely watching the GolfSwitch lawsuit. The outcome will determine the future of a number of technology ventures, and will affect the way golf courses and resorts use the Internet for years to come. Such an important issue benefits from thorough examination, and deserves increased public attention and awareness. One source of information is the GolfSwitch home page where they proudly display the formal filings from their lawsuits. I contacted individuals involved in the legal wrangling but none would comment publicly. Privately I heard that the legal bills have run into the $100s of thousands and also that the momentum has recently turned in favor of the defendants.
For what it is worth, I personally see a decision in favor of GolfSwitch
as being bad for may own consulting practice. Resort and Golf course managers
will not need my helping finding the best Golf IDS solutions, at the best
price if there is only one system to choose from.
Brian Cunningham is a principal in ActivityTec, a Technology, Revenue Management and Distribution Best Practices Consultancy to Resort Centric Activity Providers
|Also See:||Celebrate HTNG and It’s On-going Successes, the Story Could Have Played Out Quite Differently / Brian Cunningham / January 2007|