What is going on to finalise the Framework Agreement between the PGA Tour, DP World Tour and Saudi Arabia's Public Investment Fund, who bankrolls LIV Golf? Former Ryder Cup captain Paul McGinley takes a closer look at the state of the professional game and what could happen next
Wednesday 17 January 2024 12:20, UK
As confusion reigns on the role and aims of Saudi Arabia within golf, people often ask me for my current views on the professional golf environment and what the likely outcome is of the proposed deal with Saudi Arabia's Public Investment Fund.
Here's a summary based on what I know:
On the historic established tours, golf has always been played by players who are individuals competing independently for prize monies and they are not contracted.
Saudi launched a rival tour two years ago where some better known players were not only paid incredible sums up front but were also contracted to play for prize monies that exceeded what the main tours were offering.
The established tours reacted by raising prize funds and guarantees to levels that have seriously pressured their business models. Lines were drawn with the established and traditional tours on one side and Saudi on the other.
Golf has laboured since with neither side thriving. A truce was called early last June where lawsuits were dropped and both sides agreed to try to find common ground. As of now talks have not resulted in a deal. A tentative date in April has been set to conclude negotiations.
Without a deal in place and the necessary financial investment from Saudi Arabia, the professional tours may have to go it alone but could struggle for sustainability.
Without a deal in place the LIV league will struggle to enhance their credibility. They will struggle to generate interest from the public and will struggle to raise their commercial profile outside of Saudi funding.
With disruption comes winners and losers. In a nutshell the biggest winners have been the players and the biggest losers the public.
With the emergence of LIV, a competitor with massive financial resources, all players have hugely benefitted. When all this started, Phil Mickelson was quoted as saying that for the first time in the history of professional golf the players now had leverage. How right he has been proven to be and how they have used it to their financial advantage
The biggest losers have been the public as the game has become diluted in its talent. With the very top players now only playing together in the majors, no one gets to see the very strongest of fields competing regularly.
I believe and hope that common ground will be found in some shape or form. Executives on both sides are working hard behind the scenes to find solutions that could satisfy both parties and reunite the game.
I believe that ultimately, they will get there. To resolve the situation is complex but it is important to get started. Things can evolve should a pathway and some agreement be identified.
When the Framework Agreement was put in place in June 2023, essentially it laid out a pathway that divided the business of golf into two parts.
The first part was the golf product and how to schedule the game into the golfing calendar. The second part was an intention to form a new shared ownership company (newco) that would hold the assets of the Tours together with a significant Saudi financial investment.
This fund would invest in products within the current golf eco system and revenues here could prop up the golf product which looks unlikely to be self-sustaining.
A deal could be as simple as this: at the moment from April to July, we have one premier event a month. A starting point could be to identify another event a month where players from both tours could qualify to play.
The PGA Tour, DP World Tour and LIV could still continue their tours in the off weeks. That would be a start as we try to repair the fracture and reunite the game.
There are many ways that a deal could be finalised but there is a lot to be considered for both sides. For all their wealth, the Saudis along with the tours' private equity partners, will need to see a pathway to a return on their investment.
Alongside the challenge of raising significant revenue, a deal where profitability is key is fraught with challenges on account of the high costs now associated with player remuneration.
The main source of income for any future combined tour is TV revenue. While there is exciting talk of the game becoming more global and less US-centric with top-quality events being brought to Europe, South Africa, the Middle East, Asia and Australia, there are huge financial and logistical challenges.
The time differences, for example, dictate that live golf can often not be available to the huge and financially lucrative TV audiences in America.
At the present time, American TV stations do pay substantial sums for live coverage but TV companies in the rest of the world do not seem to have an appetite to do similar for what they see to be a relatively small sport. An alternative, of course, could be a Netflix model and the tours going direct to consumer. Again, however, the challenges and set up costs are enormous.
Sponsors will want big viewing figures to justify the huge financial outlay they are called upon to make. Golf does not produce the big viewing figures of soccer, Formula 1 or the NFL.
The list of the most watched TV sports events in the US last year showed that the last day of the Masters was the most watched golf event but that it only ranked 130 compared to other sporting events. Consequently, when the financial outlay is huge both in terms of contracting players and in the massive prize funds for events, it is hard to see how golf can produce the necessary revenues to be a sustainable business.
People think that Saudi will continue laying out vast sums indefinitely but I do not see this. They are paying big money now in order to gain a foothold in the game of golf. However, they are not a charity and their sovereign wealth fund is about generating wealth not giving it away.
Careful thought and astute financial management will be needed to make golf a global profit-generating sport. Should the golf product (Part 1) get close to being financially viable that could well be seen as a win for the NEWCO.
This new league LIV shows a huge financial leap of faith by Saudi in a product that, as of yet, seems to have minimal public or commercial interest. There is nominal media interest and viewing figures on YouTube are tiny.
LIV has a long way to go to be anywhere close to financially viable outside of Saudi funding. The Saudis have displayed immense resolve in buying players seemingly at whatever the cost to try to make their way into golf successful. As of yet their foray into golf remains unproven.
Were the very top players to become more involved along with the endorsement of the established tours, Liv could well become more successful. However, it is a deviated product from what we know golf to be. Time will tell whether the Saudi's have made a ground-breaking move that will catch the endorsement of the public and the commercial world.
Golf needs some kind of a deal and to find a common ground. Currently a diluted product, nobody wins to the extent needed for golf to thrive. There are big challenges ahead in the governance of the game and many questions need to be tackled to make golf a slick business, such as?
The last two years have seen golf focus way too much on players and prize funds and how much they can earn and not enough on how to improve the product for the commercial partners and fans.
The success of any new 'golf product' will not be determined by Saudi or the tours. It will be determined by the public. If the fans are engaged, the revenues will follow. The way to do that is through their hearts.
Producing a product that lets emotions run high, is attached to history and players past, and is brilliant venues generates excitement and provides a sense of association and involvement with the game.
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