For nearly four years, the world’s two most prominent professional golf tours battled over players, the moral high ground and outright survival. Now, the feud appears to be ending.
Earlier this week, Bloomberg News reported that Saudi Arabia’s Public Investment Fund (PIF), owner of the upstart LIV Golf, is nearing a deal to acquire a about 6 percent stake in the Professional Golfers’ Association’s (PGA) commercial arm, PGA Tour Enterprises.
Many fans would find it difficult to accept the two organizations coming together because it would require lovers of the sport to move on from a clash that was often about Saudi Arabia’s abysmal human rights record, not golf.
As the country continues to face accusations that it uses sports as a public relations ploy to distract from its troubling reputation, there is another uncomfortable truth to acknowledge: Without the presence of Saudi Arabia, professional top golfers would have continued to be undervalued by the PGA Tour.
The PGA Tour as it is known today was established in 1968 and has grown into a commercial juggernaut. For example, last year it reported US$1.82 billion in revenue, much of which was derived from multibillion dollar media rights deals.
The money enriches golfers, especially the top ones. That year, Rory McIlroy earned US$24.9 million in PGA-related compensation. It makes for a great payday, but McIlroy should not be completely happy with it, either.
Unlike an NBA player, he is not a salaried employee. Instead, he and other PGA Tour athletes are independent contractors who are only compensated if they make the cut at a tournament (finish in the top 65 golfers). Even then, their pay is determined by how high they finish. A top slot is typically worth millions; a bottom finish can be worth the price of a used car.
It is an absurd system that — unlike other leagues — does not compensate athletes for the value they bring to the sport and its broadcasts.
Sticking with the basketball comparison, look at Golden State Warriors superstar Steph Curry. He is to earn US$53 million in guaranteed money this season. The hefty payout shows that the NBA recognizes his performance and the value he brings to the league every time he is on the court (regardless of whether he has a bad game).
Contrast Curry’s US$53 million with the US$0 that Tiger Woods earned for missing the cut at this year’s US Open. He might not be the old Tiger, but he still draws a lot of viewers to televised golf, and he is objectively worth more.
Getting it has been the hard part. (In fairness, Tiger has not publicly asked). One main reason is that the PGA Tour has never faced meaningful competition or pressure from its athletes to do better. Then came the PIF, with nearly US$1 trillion in assets, announcing LIV Golf in 2021.
The first season cost US$784 million. The second season was reportedly slated to cost US$1 billion.
Much of that treasure has been spent on revolutionizing how much — and how — pro golfers are paid.
In LIV’s first year, every tournament paid a purse of US$25 million, and even the last-place golfer was guaranteed to take home US$120,000. Meanwhile, the 2022 PGA Championship had a comparatively paltry purse of US$15 million.
It is worth noting that LIV also includes fewer players than the PGA, allowing for each to earn more.
Yet LIV’s biggest innovation was to tilt away from prize money and bring in multiyear, guaranteed deals. Most notably, Jon Rahm received a multiyear contract reportedly worth US$300 million, and even lesser players on the back ends of their careers received eight-figure deals.
The move pulled athletes away from the PGA Tour. To survive, it had to pay up. So far, it has. In 2021, it paid just less than US$400 million in prize money; last year, it paid out US$560 million. That year, it also set up a US$100 million pool to reward players who “generate the most positive interest in the tour.” Tiger Woods received US$12 million last year.
The most critical development has been to recognize that the PGA Tour cannot survive if its only tactic is to try to top the guaranteed cash and prizes offered by the deep-pocketed LIV. Instead, it needs to offer something that other professional leagues typically do not: player equity in the league itself.
Before LIV, the idea might have been dismissed out of hand by the conservative golf establishment that the PGA Tour represents. Similar to other professional leagues, it likely views player ownership as a threat to its authority and survival, but PIF’s money has changed the risk calculus.
So, the tour created PGA Tour Enterprises in January to manage the league’s commercial activities. A group of investors led by John Henry’s Fenway Sports Group funded it with US$1.5 billion. Player equity grants worth about US$930 million in total would be distributed to players based on their tenure in the tour and their records in its championships. The grants would vest over the years, providing an incentive to stay, win and promote the tour.
It is such an attractive idea, so full of growth potential, that PIF is investing its own money into it and settling its grudge. If the tour’s commercial prospects appreciate, as they surely will, PIF can always sell at a profit.
Of course, there are still details to work out and regulatory approvals to receive. However, even at this stage, the grants stand as a critical means of ensuring that athlete earnings properly reflect the value that they bring to their league and sport.
That value is not nearly as important as ensuring human rights in and around sports, but players looking to thank someone for the advance might want to give a friendly nod to LIV, PIF and the Kingdom of Saudi Arabia.
Adam Minter is a Bloomberg Opinion columnist covering the business of sports. He is the author, most recently, of Secondhand: Travels in the New Global Garage Sale. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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