#AskAlan: PGA Tour Enterprises Edition!
Answering all the thorny questions surrounding the reshaped Tour and what it means for the game…and LIV Golf
Is anyone aware of how much they have hilariously overvalued the sport of professional golf? @KPNYJ
Rory is! Following his presser on Tuesday afternoon at the Crosby Clambake, McIlroy scrummed with a half-dozen scribes for about 20 minutes. It was the most relaxed and unburdened I’ve seen him since LIV made the scene. Among the things he said: “Guys want to be paid like an NFL quarterback, but we don’t create the same value. The ratings for the final round of the Sentry was one million and for the AFC Championship game it was 50 million. If that’s not a wakeup call, I don’t know what is.”
Golf has always been a niche sport. Peak Tiger tricked a lot of folks into believing that the game had gone mainstream, but he was a once-in-a-century attraction. Ever since Woods ran over the fire hydrant, professional golf has slowly, inexorably been returning to its traditional place on the fringe of the sports world. That LIV was willing to massively overpay for players does not change the natural order of things. Which leads us to:
Billion dollar question: What does the Strategic Sports Group get out of this? How do they get a return on the investment? @Joecattle101
I appreciated the analysis of Max Homa and others who keep pointing out that the new investors are not doing this out of benevolence but because they want a profit; thus the Tour is going to have to innovate to create a better product to generate more fan interest and more value. One problem with this thinking: golf is not a normal investment. There are a lot easier ways to make money than pouring it into a nebulous new Tour that has lost many of its biggest stars and potentially faces a competitor with a much bigger war chest. The fact is, really rich guys like shiny things, and many are jock-sniffers. They try to buy their way into every sport because they dream of Jim Nantz addressing them as “Mr.” live on national TV. Add in the fact that many/most private equity bros love golf and it’s easy to see that it is their heats, not their heads, that is driving this investment with the Tour. I mean, look at how many very successful people threw money at the TGL and it’s been a turkey from day one. These guys will do anything to get Tiger to say hi to them on the range at Medalist.
All that said, the new investors will have a big voice on the board of the new PGA Tour Enterprises and they will want to shake things up, just to justify their existence. The first order of business in the PE world is usually layoffs, so I expect the army of VPs in Ponte Vedra Beach are quite nervous these days. A lot of money and manpower goes into running the Senior Tour and very few fans pay attention—it could be vulnerable to downsizing, if not an outright shuttering. The Tour schedule is so bloated it makes a ton of sense to lop off a dozen or so of the worst-performing events. But cutting costs isn’t enough. How to generate more revenue? The real bonanza is in media rights but the Tour’s deals are locked in until 2030. Squeezing disaffected fans for a few more bucks to subscribe to streaming services would be a horrible idea. On the day that everything changed—June 6, 2023—Monahan tipped his hand on Squawk Box: sports betting.” Golf is an ideal sport for gambling because it runs four days a week, dawn til dusk, with 150 or so players doing all kinds of things simultaneously, all of it creating copious amounts of data. I think the new Tour is going to go all-in on gambling—are you ready for the DraftKings Open at Riviera? The FanDuel Pro-Am at Pebble Beach? The Tour has always kept gaming at arm’s length but in this brave new world it’s all about the money and this is by far the biggest and easiest revenue stream the Tour can tap into.
What’s the likelihood of PIF investing in this, and what incentive would there be for them doing so? @KOnocomment
The incentive is the same as when the PIF pledged $500 million to the Premier Golf League, as when the PIF tried to partner with the European Tour and when the PIF sought to invest in the PGA Tour in 2021: for the Saudis, golf is the ultimate vehicle for acceptance in the Western world and access to the global ruling class. And for a golf-nut like Yasir Al-Rumayyan, it also means he gets to play in every pro-am and party with DJ on the yacht—LIV is a glorified fantasy camp for His Excellency. He’d love to be embraced in the same way by the PGA Tour firmament. You can call it sportswashing, networking or disrupting but the goal is the same: to present a different narrative of Saudi Arabia, to bring big-time sporting events to the Kingdom, to forge relationships with the decision makers at multinational corporations. Spending a few billion dollars more on golf is not a big deal to the PIF if it can secure investment and partnership from blue-chip corporations as Saudi Arabia remakes its economy and society. Two of the pillars of MBS’s Vision 2030 are sport and tourism and golf can fuel both. So the PIF’s investment in golf has never been about a traditional ROI.
As for the likelihood of the PIF coming in, it hinges on a familiar question: what does Yasir want? The PIF doesn’t like to play second fiddle on its deals; it wants a dominant position. This would argue for the PIF backing out of the framework agreement, and the buzz around Pebble Beach this week is that a deal between the Tour and the PIF is now on life support. But after all of the fanfare on June 6, failing to buy his way into the Tour would be a political setback for Yasir. Does he want to lose face? A talking point in the wake of the SSG deal has been that PIF investment faces regulatory hurdles and that explains the delays in consummating a deal, but that’s just a smokescreen—all the American money that has now poured into PGA Tour Enterprises makes it easier for the Saudis to come in as just another minority investor, since their influence and equity has been diluted. There’s the rub: Yasir does not want to have to defer to the John Henrys of the world. I think he walks. Which leads us to:
How would another pissing contest with the PIF ever be a good decision?@RedHarrington44
Keeping the PIF in this deal is the key to some sort of reunification of the sport. It certainly is in the best interests of the Tour, as it could suck up more billions of dollars in investment and turn LIV from a competitor into an awkward partner. But by signing on with SSG, the Tour has forced Yasir’s hand. If/when the deal falls apart, he’s going to be pissed…and he still has the biggest checkbook in sports. If LIV can buy Jon Rahm, every other golfer is in play, too. The pissing contest in the fall of 2024 could be epic. Which brings us to:
Watching the Torrey Pines event this weekend and barley recognizing anyone on the leaderboard, I really don’t see past how the PGA sustains the current model if LIV continues to reward big-name players with huge amounts of cash. Any thoughts? @LaBeets50
Even if the Tour and the PIF can’t get a deal done, Monahan and his loyalists can declare victory: the June 6th armistice ended the brutally expensive lawsuits; the players are making more money than they ever dreamed of and now can trumpet being the first athletes to own a piece of their league; the Signature Events are a massive upgrade to the schedule; and now, with SSG, the Tour has reshaped its outdated business model and is in the strongest financial position in its history. Only one problem: the PGA Tour’s players are dreadfully boring. Lotsa nice guys who are more or less interchangeable. LIV has taken all the rascals, antiheroes, muckrakers, shit-talkers, pot-stirrers and oversized personalities. McIlroy and Jordan Spieth are the only Tour guys who move the needle and they haven’t won a major in a decade and have only two wins over the last six and a half years, respectively.
There is a very easy solution: the Tour needs to let LIV golfers play in its events. Allow them seven sponsor’s exemptions per season as nonmembers. The LIV’ers would not be eligible for equity, the FedEx Cup or the retirement plan money. But their presence would be a massive boost to Tour events and the corresponding TV coverage. For the LIV golfers, they would have access to valuable World Ranking points and maybe new endorsement deals. Win-win.
How long before Jay leaves? @NDHickman
I’d put the over/under on this autumn. The LIV epoch has been so an acrimonious and chaotic for the PGA Tour it simply wasn’t feasible to even consider finding a new commissioner while things were moving so fast. And Monahan had the support of the two most powerful members of the Tour board, Jimmy Dunne and Ed Herlihy, so he was on firm footing despite all the external criticism of his job performance. Monahan is feisty and prideful—he will want to see this through to the bitter end, and much remains unsettled in regards to the PIF. But that will be done and dusted by the end of this season, making it a natural time for the reconstituted Tour to move forward with new leadership. How much longer does Monahan want to remain in his foxhole? He went from Covid to fending off the PGL and now the endless war with LIV, a relentless four years of strife. He’s already had one major health scare. Presumably he’s been socking away much of his $15 million salary. If I was Monahan, I’d take a nice retirement package, get fitted for my green jacket—hey Fred Ridely, I’m a 40L—and let someone else deal with Patrick Cantlay.
What will the equity splits be like? Rory 10% and 150th guy 0.001%? That’d probably be ‘fair’ in terms of equity value generated but I imagine it wouldn’t make too many Tour players happy? @Blulinski
The details remain hazy, by design. The Tour wants everyone to pretend to be happy and postpone the bitching for as long as possible. No doubt the equity payouts will be modeled after the PIP distribution: shadowy algorithms and mysterious metrics but ultimately Monahan and his cabal will slice up the pie in whatever way keeps Tiger, Rory and other top players happy.
The big question: what happens to the charitable nonprofit commitment of the Tour? @StephenFDiamond
What an adorable question! So quaint, so old-fashioned. But Stephen, it’s not 1968 and Dean Beman ain’t walking through that door. More like Gordon Gekko.