LIV Golf (Saudi PIF), "Mergers," and More

[ChetlovesMer]

1 hour ago, dsc123 said:

What doesn't make any sense to me is the claim that this merger is driven by the mutual desire to stop the bleeding and fallout from the lawsuits.  

On costs, for example.  Lawsuits are expensive, yes.  But businesses smaller than the PGA Tour are in big lawsuits all the time.  You're telling me the PGA Tour can't afford 2 or 3 lawsuits that have been going on for a year or two?  Not only that, you're telling me they got into these lawsuits and what, were surprised that they'd have to pay their lawyers?  Monahan didn't first ask the lawyers, hey, so what do you think this is going to cost us?  Come on.  

 

For what it's worth, the morning sports talk radio show I sometimes listened to was really laying into the "Sponsors paying more than double in order to increase the purse sizes. But felt like they were getting exactly the same thing for now twice the money." aspect. 

They believe the economics were all thrown out of whack, when the LIV threw huge checks at guys. The PGAT went to their sponsors with an effort to double the purse sizes, in order to keep pace with the whacky amount of money being tossed around. It sounded like at first the sponsors played ball, but then after rethinking it, they realized fattening the purses did nothing to help them sell more cars, watches, booze what-ever. 

So, perhaps combined that with the lawsuits.

Edited June 9, 2023 by ChetlovesMer
spelling

[saevel25]

Yea, the sponsor model might be broken. If the PGAT was using sponsors as the way to pay their players.

Other sports have huge TV deals. Not sure how the PGAT does it. It might be tournament based. It seems like golf coverage is all over the place. 

How the NFL Makes Money: TV, Tickets, and Sponsorships (investopedia.com)

Maybe the PGAT needs to restructure their revenue model. If that means lowering tournament prize pool, then that will just foreshadow the downfall of LIV as a successful way to do business. With out a huge TV deal, they are just burning money on a failed venture because they overestimated the value of their product. 

Edited June 9, 2023 by saevel25

[StuM]

1 hour ago, dsc123 said:

Not only that, you're telling me they got into these lawsuits and what, were surprised that they'd have to pay their lawyers?  Monahan didn't first ask the lawyers, hey, so what do you think this is going to cost us?  Come on.  

There may be some logic.  They may have known the potential costs but hoped to thwart the LIV in the court of public opinion.  But now, upon reassessment, they decide their strategy is not working and now it may be time to end the financial bleed.

[Hardluckster]

1 hour ago, iacas said:

I think once the lawsuits are dropped, they’re dropped. They could re-file but they can’t just say hey never mind.

Have they been dropped? I know that both sides agreed to drop them but didn't realize that had actually taken place already. 

[ChetlovesMer]

4 minutes ago, StuM said:

There may be some logic.  They may have known the potential costs but hoped to thwart the LIV in the court of public opinion.  But now, upon reassessment, they decide their strategy is not working and now it may be time to end the financial bleed.

[iacas]

49 minutes ago, saevel25 said:

Yea, the sponsor model might be broken. If the PGAT was using sponsors as the way to pay their players.

Other sports have huge TV deals. Not sure how the PGAT does it. It might be tournament based. It seems like golf coverage is all over the place. 

How the NFL Makes Money: TV, Tickets, and Sponsorships (investopedia.com)

Maybe the PGAT needs to restructure their revenue model. If that means lowering tournament prize pool, then that will just foreshadow the downfall of LIV as a successful way to do business. With out a huge TV deal, they are just burning money on a failed venture because they overestimated the value of their product. 

They have a very large TV deal.

[turtleback]

 

23 hours ago, iacas said:

Whoa whoa whoa. No to that.

Rory's self-respect is his to determine. You get to have your opinion of Rory, but you don't get to tell him (or us) what his opinion of himself is. 😄 

Pedantic nonsense.

[iacas]

16 minutes ago, turtleback said:

Pedantic nonsense.

No. Literally the definition.

[chspeed]

8 hours ago, dsc123 said:

What doesn't make any sense to me is the claim that this merger is driven by the mutual desire to stop the bleeding and fallout from the lawsuits.  

On costs, for example.  Lawsuits are expensive, yes.  But businesses smaller than the PGA Tour are in big lawsuits all the time.  You're telling me the PGA Tour can't afford 2 or 3 lawsuits that have been going on for a year or two?  Not only that, you're telling me they got into these lawsuits and what, were surprised that they'd have to pay their lawyers?  Monahan didn't first ask the lawyers, hey, so what do you think this is going to cost us?  Come on.  

I agree. I'd be surprised if the lawyer bills were a significant part of this decision.

7 hours ago, iacas said:

Yes. I think it's possible that they didn't realize it might literally cost them $200M. They could have stuck it out for $50M, but $200M was too much.

Are these numbers public, or is this hypothetical?

7 hours ago, klineka said:

I think you're underestimating how much money these lawsuits were costing the PGA Tour. The costs were expected to reach well into the tens of millions of dollars for each side. 

Still, tens of millions is nothing for a business that has $200-$300M in reserves and is fighting to protect their entity.

 

7 hours ago, klineka said:

The PIF probably could have bled the PGA Tour dry of cash if they really wanted to by dragging those multiple lawsuits out over multiple more years, especially considering that the PGA Tour was going to have to come up with money from somewhere to pay for the substantial increases in purses for the designated events. I highly doubt every designated event sponsor was going to be willing to double their investment for essentially the same product.

Agree that these lawsuits would have/still might drag on forever. I think the real financial issue was probably around the fact that PGAT couldn't compete with the purses. The sponsors were all about backing the PGAT - until they got they new invoices, at which point they balked. Players got itchy, saying they want the LIV money, and the PGAT had little choice. Ironically, I'm willing to bet that those crazy LIV purses will go down now that LIV won.

[iacas]

14 minutes ago, chspeed said:

I agree. I'd be surprised if the lawyer bills were a significant part of this decision.

Are these numbers public, or is this hypothetical?

It's not public, but… it's been talked about in various circles.

This kind of litigation is not inexpensive.

14 minutes ago, chspeed said:

Still, tens of millions is nothing for a business that has $200-$300M in reserves and is fighting to protect their entity.

No, that's not accurate. It's a ton, and they likely do NOT have even half of $300M in reserves. Sponsors aren't ponying up for the elevated events, so they're adding to those purses, too.

The PGA Tour isn't operating smoothly and with high profits (ignoring the non-profit accounting part).

[Vinsk]

Meanwhile…Channel CW:

[DeadMan]

1 hour ago, iacas said:

This kind of litigation is not inexpensive.

In addition to this, the PGA Tour’s best strategy was to drag it out and make it as embarrassing as possible for LIV and the PIF. Their lawyers were doing a good job of that, but the legal bills on this thing could have run into 9 figures if it got all the way to a final judgment. With a significant potential for the Tour to lose at the end of it all. A lot of antitrust experts thought LIV would get a preliminary injunction when the case started. My reading of the complaint was that LIV itself had a strong case. 

For PIF, they had some adverse rulings and were likely about to be subject to discovery. Ending the case is good for them, too  

Bottom line, the whole legal fees and strategy were a big part of this announcement.  

[Brock]

On 6/7/2023 at 10:11 AM, iacas said:

And I'm saying that they don't just get to do that whenever they want. They can be asked to increase their investment, and get the first right of refusal should the new entity want/need/seek more capital.

Furthermore, that doesn't necessarily increase their ownership stake.

People shouldn’t be naive to think PIF won’t be the one(s) calling the shots. There will be a board to make it look diverse but reality is PIF will continue to steamroll whatever is in front of them. Any capital needed is rounding error to PIF. 

 

[Dr. Manhattan]

3 hours ago, Brock said:

People shouldn’t be naive to think PIF won’t be the one(s) calling the shots. There will be a board to make it look diverse but reality is PIF will continue to steamroll whatever is in front of them. Any capital needed is rounding error to PIF. 

 

 

This is true, but Saudi also has had some financial issues recently. At any moment, they could pull the funding in golf. They've said they expect a return on investment. Golf has a pretty small audience compared to other sports. If we get a few years down the road and Saudi is not happy with the investment return, I would not expect them to continue pumping money into it. This article does a pretty good job describing some of the issues they've had recently: 

The Rest Of the Story: The Overlooked Saudi Sand Trap Behind the Golf Treaty

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The hidden risk to the PGA-LIV combination? Saudi money is not as limitless as it may seem.

 

[DeadMan]

15 hours ago, DeadMan said:

A lot of antitrust experts thought LIV would get a preliminary injunction when the case started

This should say the players instead of LIV. I forgot LIV wasn’t involved until after the preliminary injunction was denied. 

[turtleback]

11 hours ago, Dr. Manhattan said:

 

This is true, but Saudi also has had some financial issues recently. At any moment, they could pull the funding in golf. They've said they expect a return on investment. Golf has a pretty small audience compared to other sports. If we get a few years down the road and Saudi is not happy with the investment return, I would not expect them to continue pumping money into it. This article does a pretty good job describing some of the issues they've had recently: 

The Rest Of the Story: The Overlooked Saudi Sand Trap Behind the Golf Treaty

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The hidden risk to the PGA-LIV combination? Saudi money is not as limitless as it may seem.

 

Small audience, but high profile.

 

And I do not believe any part of this or other sports washing, such as the purchase of soccer teams, has anything to do with investment return.

Edited June 10, 2023 by turtleback

[iacas]

How the PGA Tour-LIV Golf Merger Came Together - The New York Times

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The agreement to remake a global game stunned most of the sporting world after seven weeks of clandestine negotiations.

If you delete your cookies you get one free NYT article per month. 😉

[May Jonahan]

On 6/9/2023 at 10:08 PM, Brock said:

People shouldn’t be naive to think PIF won’t be the one(s) calling the shots. There will be a board to make it look diverse but reality is PIF will continue to steamroll whatever is in front of them. Any capital needed is rounding error to PIF. 

 

PIF is 100% calling a lot of the shots. They just figured it's easier to give Jay the reigns as opposed to having Norman fight everyone