(FORTUNE Magazine) – Golf is supposed to be in its golden era--more people playing than ever before, the PGA loaded with telegenic Tiger Woodses, new courses seeming to pop up everywhere, and so forth. But there are two truly amazing things about golf (not including the fact that this former sport of fat cats has actually become kind of trendy). The first is that during golf's alleged great moment, golf-equipment makers are having a very difficult time making money. Last year sales of golf gear dropped $300 million, to $2.2 billion, leaving many retailers in the previously unthinkable predicament of being stuck with an excess inventory of clubs, and analysts predict lower equipment profits again this year. Several factors are contributing to the decline, including a slower rate of growth in the number of new golfers, and overpricing and a lack of innovation on the part of manufacturers. Apparently there is a limit to consumer demand for designer titanium super-bubble-shaft drivers that cost as much as a very nice TV.

The second amazing fact about golf is that equipment makers' great hope seems to be golf balls--precisely the segment you'd think would be the most commoditized and therefore have the least potential for growth. What's the attraction? This is a $700 million chunk of the golf industry that's actually growing: Ball sales were up 6% last year, compared with a 10% decline for clubs. As long as golfers continue to slice and hook their shots unerringly into water hazards--which is to say, forever--there will be a need for more balls.

The satisfying swack of the golf ball business has attracted several big names into the industry. Legendary club innovator Taylor Made's line of golf balls debuted in April; Cobra is introducing a special ball for women; Callaway has started a whole new golf ball division from scratch and has invested $100 million in a new plant. Even Nike has come out with its own swoosh-festooned model.

--Cora Daniels