Can a deal be negotiated between the PGA Tour, DP World Tour and the Saudi PIF? What can happen next… | Golf news

What is happening with the finalization of the Framework Agreement between the PGA Tour, DP World Tour and the Saudi Arabian Public Investment Fund that finances LIV Golf? Former Ryder Cup captain Paul McGinley takes a closer look at the state of the professional game and what could happen next

The author: Paul McGinley, Golf Columnist


12:20 UK Wednesday 17 January 2024

With confusion surrounding the role and goals of Saudi Arabia in golf, people often ask me about my current views on the professional golf environment and the likely outcome of the proposed deal with the Saudi Arabian Public Investment Fund.

Here's a summary based on what I know:

On historically established tours, golf has always been played by players who are individuals who independently compete for prizes in kind and are not contractually bound.

Saudi Arabia launched a competitive tour two years ago where some big-name players were not only paid incredible amounts up front, but were also hired to play for prize money that exceeded what the main tours offered.

Sky Sports' Jamie Weir looks at the legacy former DP World Tour chief executive of golf Keith Pelley will leave after stepping down from his role.

The established tours responded by increasing funds and guarantees to levels that severely strained their business models. Lines have been drawn with established and traditional tours on one side and Saudi Arabia on the other.

Golf has worked ever since and neither side has succeeded. In early June last year, a truce was declared where the lawsuits were dropped and both sides agreed to try to find common ground. The talks have not yet led to an agreement. A tentative date was set for the end of the negotiations in April.

Without an agreement in place and the necessary financial investment from Saudi Arabia, professional tours may have to fend for themselves, but may struggle to be sustainable.

Without a deal in place, the LIV league will be looking to increase its credibility. They will seek to generate public interest and will seek to raise their commercial profile outside of Saudi funding.

With disruption comes winners and losers. In short, the biggest winners were the players and the biggest losers were the public.



A picture:
Phil Mickelson was one of the first players to sign up for LIV Golf

The public is missing, so is it possible to find common ground?

With the emergence of LIV, a competitor with huge financial resources, all players benefited immensely. When it all started, Phil Mickelson said that for the first time in the history of professional golf, players have leverage. He was proven right and how they used it to their financial advantage

The biggest losers were the public as the game lost its talent. With the best players now only playing together in major tournaments, no one sees the strongest players 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 can satisfy both sides and reunify the game.

I believe they will get there eventually. Solving the situation is difficult, but it is important to start. Things can evolve if a path and some agreement is identified.

When the framework agreement went into effect in June 2023, it essentially set a course that split the business of golf in two.

Butch Harmon believes Jon Rahm's departure to LIV could increase PGA Tour's urgency to create master plan

The first part was the golf product and how to schedule a game into the golf calendar. The second part was the intention to create a new joint ownership company (newco) that would hold the assets of Tours together with a significant Saudi financial investment.

This fund would invest in products within the current golf ecosystem and the returns here could support a golf product that does not appear to be self-sustaining.

The deal can be as simple as this: we currently have one premiere event per month from April to July. The starting point could be to determine the next event in the month where players from both tournaments could qualify for the game.

The PGA Tour, DP World Tour and LIV could continue their tours during the off weeks. That would be the start of trying to mend the fracture and reunify the game.

“The deal is full of challenges”

There are many ways a deal could be made, but both sides have a lot to consider. For all their wealth, the Saudis, along with the tour's private equity partners, will have to see a way to return on their investment.

Masters champion Jon Rahm explains why he joined LIV Golf in deal worth up to £450m

Along with the challenge of generating significant revenue, the deal, where profitability is key, is fraught with challenges because of the high costs now associated with player compensation.

The main source of income for any future combo tour is television revenue. While there is exciting talk of the game becoming more global and less US-centric, with top events being brought to Europe, South Africa, the Middle East, Asia and Australia, there are huge financial and logistical challenges.

Time differences, for example, dictate that live golf often cannot be made available to America's huge and financially lucrative television audience.

American television stations currently pay significant sums for live broadcasts, but television companies in the rest of the world seem reluctant to do the same for what they consider a relatively minor sport. An alternative could of course be the Netflix model and direct-to-consumer tours. However, the challenges and costs of setting up are again enormous.

Sponsors will want big viewership numbers to justify the huge financial outlays they have to make. Golf does not produce large viewership numbers like football, Formula 1 or the NFL.



A picture:
Golf does not generate the same viewership numbers as sports like football and American football

A list of the most-watched televised sporting events in the US last year showed that the final day of the Masters tournament was the most-watched golf event, but only ranked 130th when compared to other sporting events. As a result, when the financial outlay is huge in terms of player contracts, as well as huge funds for event rewards, it is difficult to see how golf can produce the necessary revenue to be a sustainable business.

People think that Saudi Arabia will continue to distribute huge sums indefinitely, but I don't see it. Now they pay big bucks to make it big in golf. However, they are not a charity and their sovereign wealth fund is about creating wealth, not giving it away.

For golf to become a profitable sport worldwide, it will take careful thought and sound financial management. If the golf product (part 1) came close to being financially viable, it could be considered a win for NEWCO.



A picture:
Rory McIlroy is a three-time FedExCup winner on the PGA Tour

Is LIV a breakthrough? Only time will tell

This new LIV league shows a huge financial leap in Saudi Arabia's faith in a product that so far appears to have minimal public or commercial interest. Media interest is nominal and YouTube viewership figures are small.

LIV still has a long way to go to be financially viable outside of Saudi funding. The Saudis have shown a huge commitment to buying players, seemingly at any cost, to try and break into golf successfully. Their foray into golf is still unproven.

If the top players got more involved along with supporting the established tours, Liv could become more successful. However, it is a diverted product from what we know of golf. Time will tell if the Saudis have made a breakthrough that will win the support of the public and the commercial world.



A picture:
Will fans ever fully embrace the LIV Golf format?

Golf needs some agreement and common ground. It's a diluted product these days, no one is winning at the rate necessary for golf to thrive. There are great challenges ahead in the management of the game and many issues need to be resolved to make golf a smooth business such as

  • Membership organizations: can a game function as a business when owned and operated by players?
  • Independent trader status: can players still be able to determine which events they choose to play in?
  • Charitable status: can the PGA Tour continue to be run as a non-profit corporation with all the benefits that status accrues, while potentially being funded by Saudi Arabia and private equity?
  • Betting: has played a large role in the growth and success of other sports. Is it time for golf to embrace this medium of public engagement in the game?

The last two years have seen golf focus too much on the players and winnings and how much they can make, and not enough on how to improve the product for commercial partners and fans.

The success of any new “golf product” will not be determined by Saudi Arabia or the tours. The public will decide. If the fans get involved, the revenue will follow. The way to do that is through their hearts.

Making a product that evokes emotion is connected to the history and past of the players and is a great place, creates excitement and provides a sense of association and involvement with the game.

Watch the PGA Tour, DP World Tour, all the majors, women's golf and much more on Sky Sports this year. Stream golf and more sports with NOW.

This is a limited version of the story, so unfortunately this content is not available.

Open the full version

Ferdinand Medina

"Internet evangelist. Twitter fanatic. Hardcore entrepreneur. Incurable analyst. Extreme food junkie. Unapologetic tv maven. Reader."