- About-turn driven by massive investment and prospect of PIF-powered growth
- Litigation also a factor in PGA Tour’s shock decision to merge, some claim
- Business as usual – for now – in terms of broadcasters and rights deals
“A BIG, BEAUTIFUL, AND GLAMOROUS DEAL FOR THE WONDERFUL WORLD OF GOLF.”
For once, former US president Donald Trump’s use of block capitals was justified, whatever the merit of his words, as the sports industry digested the shock news of the PGA Tour’s merger with LIV Golf.
For 18 months, the PGA Tour and LIV Golf, majority owned by Saudi Arabia’s Public Investment Fund (PIF), had been in bitter conflict: commercially, legally, and in the court of public opinion. The acrimony had been fuelled by strong public statements, most notably from Jay Monahan, the PGA Tour commissioner.
Then yesterday the duo, along with the DP World Tour, stunned observers with their announcement to merge commercial operations under common ownership in a tripartite agreement.
Sources are somewhat split on the key driver for the PGA Tour’s about-turn.
Crucially, the merger ends all pending litigation, and some suggested to SportBusiness Media that the PGA Tour was concerned about the possibility of extremely damaging consequences from these lawsuits – financially, reputationally, and operationally.
One executive with close knowledge from the LIV Golf side suggested that the litigation played a “huge role” in the PGA Tour’s decision.
Other industry sources, however, say that the financial contribution from PIF, which will number into the several billions of dollars once the details are ironed out, was simply too high an offer for the PGA Tour to turn down. Experts also said that the PGA Tour believes PIF’s involvement will help drive international growth for the new property and the overall sport, an important factor given the need to widen the commercial potential and extend the geographical boundaries of golf.
It is thought that PIF’s exact financial investment has not yet been determined. Given the previous antipathy, it is, though, “evidently a massive offer,” as one source said. The agreement, which combines PIF’s golf-related commercial businesses and rights with the commercial businesses and rights of the PGA Tour and DP World Tour, is at present a framework.
Sources told SportBusiness Media that the parties were obliged to make the announcement now, as despite the inner circles holding talks over the past several weeks, working out the finer details would have inevitably led to leaks.
What is clear, however, is that, according to the statement, “PIF will hold the exclusive right to further invest in the new entity, including a right of first refusal on any capital that may be invested in the new entity, including into the PGA Tour, LIV Golf and DP World Tour.”
Litigation
Since August, the PGA and LIV Golf have been locked in legal battles, with depositions still ongoing until yesterday’s announcement.
Firstly, a group of players, later joined by LIV Golf, launched an antitrust lawsuit against the PGA Tour. Later, the PGA Tour filed a counterclaim, accusing its Saudi-backed rival of inducing top players to breach their PGA Tour contracts.
In February, a federal magistrate judge ordered that PIF Governor Yasir Al-Rumayyan could be deposed by PGA Tour lawyers and the LIV Golf backers must turn over documents as part of an ongoing legal challenge.
Later in the month, a federal judge ordered the antitrust case to proceed as scheduled, despite a plea from the PGA Tour for a delay.
One source close to LIV Golf claimed that his side were confident that, given “overwhelming evidence” of the PGA Tour infringing on potential rights and sponsorship sales, the outcome of the lawsuits would have ultimately been in LIV Golf’s favour.
The source described comments last week from Ari Emanuel, chief executive of Endeavor, as the “final nail in the coffin.”
Emanuel, speaking in an interview with Freakonomics Radio, said the sports and entertainment group had been willing to invest $1bn (€930m) in LIV Golf before backing away at the behest of Monahan.
Other experts, however, said that the legal conflict was more of a headache than a driver of the PGA Tour’s decision. One said the PGA Tour was “bullish” about ultimately succeeding in court, but that a long, draining, and expensive legal fight on more than one front was not what the established US-based tour needed.
Another view is that LIV Golf has concluded, after 18 months of rancorous competition, that taking on the golf establishment would be too lengthy and bruising a process. The only route to possible success would be continually paying above-market fees to golfers, perhaps for many years to come. In view of this, PIF decided that it made more strategic sense to work with, rather than against, the PGA Tour.
Media rights
In terms of sales for media rights in the short-to-medium-term, the PGA Tour is in a stronger position today than it was before yesterday’s announcement.
Domestically, the PGA Tour is as secure as ever. It holds nine-year domestic media rights deals with CBS, the commercial network, the Comcast-owned NBC Sports Group, and Disney’s ESPN+. These deals run from 2022 to 2030 and bring in around $700m per year.
However, sources say that the PGA Tour believes that its driver for growth over a long-term period will not be its domestic market, but international territories. In this context, the deal with PIF is also about growing and internationalising the game, backed by the power of a sovereign wealth fund.
While it holds many long-term deals, in some key markets, the PGA Tour may have faced adverse conditions when its rights next went to market. For example, in the UK its current deal, worth an average of about $32m per season, is from 2022-23 to 2024-25. The agreement was struck with media conglomerate Warner Bros. Discovery, which acquired international rights to the Tour in a 12-year, $2bn deal from 2019 to 2030.
Prior to yesterday’s announcement, the PGA Tour would not have been able to say to potential UK broadcasters, for certain, that it had the best golfers in the world under its roster from 2025 onwards.
For now, sources say broadcasters have been told it’s “business as usual” until the tripartite framework becomes a more concrete agreement, and decisions are made regarding changes to the global golf format and calendar. The PGA Tour only recently started selling its media rights in-house again, following renegotiations held with WBD amid the shuttering of its GolfTV international streaming service.
LIV Golf, meanwhile, will also continue its 2023 season as it was. LIV recently returned to YouTube in international markets, including pay-per-view streaming in four countries where rights deals are already in place. The move came three months after LIV Golf launched its own streaming platform and app, and was viewed as further evidence of ongoing difficulties in selling the rights internationally on acceptable terms.
In October, LIV Golf embarked on a global ‘roadshow’ of presentations and meetings with broadcasters as it launched its first rights cycle targeting exclusive deals worldwide. However, no deals to date have been agreed in markets such as Italy, Japan, the Nordics and the UK, where the free live YouTube streaming is now offered.
Calendar
The parties will now evaluate a strategy for world golf, going forward. Some sources suggested to SportBusiness Media that in the short-term, perhaps even from 2024, LIV as a brand may be dissolved into the PGA Tour, though there might be more Saudi-branded or hosted golf events.
The three parties said that the unified commercial entity will implement a plan to “grow the combined commercial businesses, drive greater fan engagement and accelerate growth initiatives already underway”. Spurred by LIV, the PGA Tour had already spelled out major competition reform plans, including the introduction of smaller fields and the eradication of cuts.
Many expect that the team concept in golf will continue under the LIV banner. The announcements made references to developing the “team golf concept” – LIV has developed a 12-team competition running alongside the individual discipline.
These decisions will, for now, be made by a PGA Tour-controlled board. The new company will be chaired by Al-Rumayyan, but Monahan will be the chief executive. However, the door to financial control by PIF has been opened, a move that will have seismic consequences for golf in the long-term.