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

[Friz]

I've looked a little into what it would take for LIV to actually be profitable.  For comparison, the PGA Tour, who is self-sustaining, forecast this season's Revenue to be about $1.5 Billion.  This includes revenue from annual operation of the TPC Courses, so actual Tournament based revenue is around $1.25 billion.  About $775 million of that is Media Rights, another decent chunk coming from tickets and concession revenue at events.  While some events are obviously worth more than others, on average across 40+ events each season, the PGA Tour would make around $30 million in revenue per event based on these numbers.

Just comparing those things to LIV, lets say they can get a comparable Media Rights deal...what does comparable look like?  PGA Tour's money covers around 40 events, each spanning 4 days, and around 10 hours of golf per day.  LIV has far fewer events, that are only 3 days, and are less than 5 hours each day.  They simply aren't built to have anywhere near as lucrative a media deal.  Tickets - there are fewer events and fewer days per event to sell tickets for.  Concessions - fewer hours patrons are on site leads to fewer food and beverage purchases.  So many of the paths to possible revenue are simply dwarfed by the PGA Tour.  

Then looking at expenses, the obvious one is prize money.  LIV won't shut up about how much money they're giving away...$250 million over 8 events this season is $31.25 million on average per event (remember PGA Tour's revenue per event?).  The PGA Tour, between all tournament prize money, FedEx Cup money, player impact program, Comcast Top 10, Play15 initiative, etc. is giving away $838 million this season.  Across 40+ events that averages roughly $20 million per event.  I don't have solid numbers on the cost of holding each event, but the bulk of those costs go into setting up stands, tents, towers, scoreboards.  Things that would be a fixed cost whether its a 3 or 4 day event, so LIV isn't really getting a discount for the shorter hours and fewer days outside of staffing....which I believe largely consists of volunteers on the PGA Tour.  I'm estimating operational costs of each event would be pretty comparable between PGA Tour and LIV.  And finally, no real need to say it, but LIV is spending hundreds of millions, likely will surpass the billion threshold if it hasn't already, in player acquisitions.  They've started a precedent, so I don't really think these can entirely be considered start up costs or one time fees...every time a new player joins there is reasonable expectation they'll be receiving a decent sign on fee.  These costs will surely go down in the future, but unlikely to go away completely.

I know my math isn't perfect here and there is a fair amount of estimating, but it should give a ballpark idea of what LIV is up against to be profitable.  They're spending millions more per event than PGA Tour, plus the extreme costs of bringing new players on board, with fewer paths to even come close to matching the PGA Tour's revenue.  This is not a business that is thinking about being profitable, they're not thinking about startup costs and a road to profitability....they're just buying something.  I can't see any scenario where this would start turning profitable anywhere in the future

[PatrickMurtha]

8 minutes ago, Friz said:

I've looked a little into what it would take for LIV to actually be profitable.  For comparison, the PGA Tour, who is self-sustaining, forecast this season's Revenue to be about $1.5 Billion.  This includes revenue from annual operation of the TPC Courses, so actual Tournament based revenue is around $1.25 billion.  About $775 million of that is Media Rights, another decent chunk coming from tickets and concession revenue at events.  While some events are obviously worth more than others, on average across 40+ events each season, the PGA Tour would make around $30 million in revenue per event based on these numbers.

Just comparing those things to LIV, lets say they can get a comparable Media Rights deal...what does comparable look like?  PGA Tour's money covers around 40 events, each spanning 4 days, and around 10 hours of golf per day.  LIV has far fewer events, that are only 3 days, and are less than 5 hours each day.  They simply aren't built to have anywhere near as lucrative a media deal.  Tickets - there are fewer events and fewer days per event to sell tickets for.  Concessions - fewer hours patrons are on site leads to fewer food and beverage purchases.  So many of the paths to possible revenue are simply dwarfed by the PGA Tour.  

Then looking at expenses, the obvious one is prize money.  LIV won't shut up about how much money they're giving away...$250 million over 8 events this season is $31.25 million on average per event (remember PGA Tour's revenue per event?).  The PGA Tour, between all tournament prize money, FedEx Cup money, player impact program, Comcast Top 10, Play15 initiative, etc. is giving away $838 million this season.  Across 40+ events that averages roughly $20 million per event.  I don't have solid numbers on the cost of holding each event, but the bulk of those costs go into setting up stands, tents, towers, scoreboards.  Things that would be a fixed cost whether its a 3 or 4 day event, so LIV isn't really getting a discount for the shorter hours and fewer days outside of staffing....which I believe largely consists of volunteers on the PGA Tour.  I'm estimating operational costs of each event would be pretty comparable between PGA Tour and LIV.  And finally, no real need to say it, but LIV is spending hundreds of millions, likely will surpass the billion threshold if it hasn't already, in player acquisitions.  They've started a precedent, so I don't really think these can entirely be considered start up costs or one time fees...every time a new player joins there is reasonable expectation they'll be receiving a decent sign on fee.  These costs will surely go down in the future, but unlikely to go away completely.

I know my math isn't perfect here and there is a fair amount of estimating, but it should give a ballpark idea of what LIV is up against to be profitable.  They're spending millions more per event than PGA Tour, plus the extreme costs of bringing new players on board, with fewer paths to even come close to matching the PGA Tour's revenue.  This is not a business that is thinking about being profitable, they're not thinking about startup costs and a road to profitability....they're just buying something.  I can't see any scenario where this would start turning profitable anywhere in the future

That is very helpful, thanks! It certainly backs up my intuitions. I am sure that some players are jumping now because they figure, Get the sign-on money while the getting’s good, which a year or two from now it might not be. It’s like angling to produce a series for Netflix in 2018 as opposed to 2022. 

[PatrickMurtha]

4 hours ago, iacas said:

I am. Screw those people.

I try to keep negative emotions at bay, but yes, I am pretty close to feeling this way. I have had a few mild disappointments in players so far - Kaymer, Oosty, Schwartzel, McDowell - but no real “Oh, no!” moments, although I am sure that one or two are coming. Whatever my feelings were about a player, a defection knocks those down about 10 notches, unless I was already an anti-fan (Brooks, Bryson) and there was nowhere lower to go. I didn’t ever hate Patrick Reed, but he is exactly the type of player who WOULD jump, and I was not surprised. I had been cooling off on Phil and Sergio for a while as each became increasingly petulant. 

(Speaking of Kaymer, where did it all GO? I kept thinking he was due for a Stenson-type career resurgence, but obviously that is never going to happen now.) 

[JetFan1983]

Jay Monahan walking into work today: 

 

[GolfLug]

Good post @Friz, but I don't think they (Saudis) care to be directly profitable from the actual 'tour'. Like, ever. 

[PatrickMurtha]

2 minutes ago, GolfLug said:

Good post @Friz, but I don't think they (Saudis) care to be directly profitable from the actual 'tour'. Like, ever. 

On some level, perhaps the one that matters to actual fans, the Saudis are not serious. And if the product doesn’t amount to more than a flash of circus (certainly what it looks like NOW), how can they expect anyone else to be serious about it either? LIV is a subject perfectly fit for media / social media discussion (as here! 🙂 ), at least for a while, but then some newer brighter shinier object or scandal-du-jour displaces it…I don’t get any feeling of “building to last” AT ALL. And so I await the inevitable reverse defections, a few months down the road, accompanied of course by the whole confessional / redemption bit. One could write the script in advance. 

[Friz]

11 minutes ago, GolfLug said:

Good post @Friz, but I don't think they (Saudis) care to be directly profitable from the actual 'tour'. Like, ever. 

Oh for sure, that was always my assumption.  There were a few posts in here talking about money though, and I'd been curious enough previously to try to determine if there was even a path to it being self-sustaining in the future.  Figured I'd share as much as I knew and took my assumption to a pretty confident expectation

Interesting piece will be if at any point the Saudi's determine it is not accomplishing their goal....whether they're not getting the public interest they were hoping for or if they truly are hoping to find profits, or something else....the fact that it can never be self sustaining, if the Saudi's pull out, its done.  And that could be 10 years from now, it just seems the entire tour's existence is dependent on the Saudi's acceptance of bankrolling something that doesn't give financial returns

 

Edited June 21, 2022 by Friz

[jmanbooyaa]

As more big names jump to LIV(i think we all knew this would happen after 1st event) some do surprise me. Phil, not in the least. Same for Sergio. DJ and Brooks is a bit of a bummer. To me they are basically saying their games are no longer good enough so take the money and coast. I could be wrong just what it looks like on the outside to me.  If Fowler goes that would fall in line with DJ and Brooks. I understand there will be new players to take up the “star” roles left behind but it does suck that the Cups will suffer. Court battle to come sooner rather than later especially if LiV gives out world rankings. I still think no matter the court ruling The Master will say no to these players. 

[Zeph]

Paris Saint-Germain (PSG) is a French football club that was aquired by the Emir of Qatar in 2011, making it one of the wealthiest clubs in the world. Since then, they have bought some of the best players in the world, sporting a roster with names like Mbappé, Messi and Neymar. Mbappé was given a €100m signing bonus and €50m salary when signed in May.

There are now rumors and indicators that Mbappé has an important voice in deciding who they fire or hire in the team. Some even suggesting he has a veto. A coach has been fired and new people pulled in that Mbappé has worked with before.

I wonder what other consequences LIV can have on professional golf. I can’t imagine them throwing all this money out there for this to fizzle out in a year or two. If you make enough money just playing, will they find motivation to win? There’s more money at the top, but if you already make millions, how does that affect the motivation?

If the top players move to LIV, will they begin having some influence over the tour? Players, events, locations. Not that I expect him to, but if Tiger signed, could he run the show behind the curtains?

[PatrickMurtha]

1 minute ago, jmanbooyaa said:

As more big names jump to LIV(i think we all knew this would happen after 1st event) some do surprise me. Phil, not in the least. Same for Sergio. DJ and Brooks is a bit of a bummer. To me they are basically saying their games are no longer good enough so take the money and coast. I could be wrong just what it looks like on the outside to me.  If Fowler goes that would fall in line with DJ and Brooks. I understand there will be new players to take up the “star” roles left behind but it does suck that the Cups will suffer. Court battle to come sooner rather than later especially if LiV gives out world rankings. I still think no matter the court ruling The Master will say no to these players. 

Good points! Brooks’ play in the just-finished US Open gave the impression that his mind was elsewhere, and sure enough. 🙂 But I do think, of all the defectors with proven records, he probably has the most game left. Bryson’s injuries - wasn’t bulking up supposed to make him more durable? - render him a big question mark, and Patrick Reed has ALWAYS been a question mark. 

I fully expect Fowler and Bubba to be among the next jumpers. 

[Vinsk]

“Money isn’t going to change my life,” Koepka said at the time.
 

What an idiotic thing to say. It’s already changed his life considerably. Typical Brooks attitude. Just denies the obvious. 

[ShawnSum]

 

 

[Friz]

46 minutes ago, ShawnSum said:

 

 

This.....is disappointing to me.  I understand there may be a need to provide financial incentive for certain players to stick around, but if you've got $160 million to juice prize pools, using it to create a bunch of guaranteed money, no-cut events is not the answer I want as a fan.

I don't know if this is what the players needed or demanded, but this just doesn't excite me at all

[PatrickMurtha]

2 minutes ago, Friz said:

This.....is disappointing to me.  I understand there may be a need to provide financial incentive for certain players to stick around, but if you've got $160 million to juice prize pools, using it to create a bunch of guaranteed money, no-cut events is not the answer I want as a fan.

I don't know if this is what the players needed or demanded, but this just doesn't excite me at all

I’m getting the sense that fans barely enter into these equations at all. 🤔 It’s as if that is a factor that can simply be taken for granted. But unless I’m missing something, the fan base is not growing, and the heavily overlapping recreational player base is not growing either, so I’m puzzled by the entire drift. 

On that topic, there cannot be another professional sport whose fandom consists so largely of those who actively play it as amateurs. I won’t weigh in as to whether this is good or bad (although it is interesting). But I can say that as a non-playing, in fact never-playing fan of golf, I feel like a unicorn sometimes. And I have been frequently brushed off by fans who DO play on the grounds that the sport just can’t be appreciated or understood if you don’t. But who says that about football?  

[iacas]

12 minutes ago, Friz said:

This.....is disappointing to me.  I understand there may be a need to provide financial incentive for certain players to stick around, but if you've got $160 million to juice prize pools, using it to create a bunch of guaranteed money, no-cut events is not the answer I want as a fan.

I don't know if this is what the players needed or demanded, but this just doesn't excite me at all

They don’t necessarily have the 160 million, they can get sponsors to pay for it.

Also, without the top players, who would the fans have to watch? You have to take care of them first.

[ChetlovesMer]

1 hour ago, Friz said:

And that could be 10 years from now, it just seems the entire tour's existence is dependent on the Saudi's acceptance of bankrolling something that doesn't give financial returns

Interesting question. How will the Saudi's judge whether they are getting "return" for their investment? 

[PatrickMurtha]

19 minutes ago, PatrickMurtha said:

I’m getting the sense that fans barely enter into these equations at all. 🤔 It’s as if that is a factor that can simply be taken for granted. But unless I’m missing something, the fan base is not growing, and the heavily overlapping recreational player base is not growing either, so I’m puzzled by the entire drift. 

On that topic, there cannot be another professional sport whose fandom consists so largely of those who actively play it as amateurs. I won’t weigh in as to whether this is good or bad (although it is interesting). But I can say that as a non-playing, in fact never-playing fan of golf, I feel like a unicorn sometimes. And I have been frequently brushed off by fans who DO play on the grounds that the sport just can’t be appreciated or understood if you don’t. But who says that about football?  

To expand on this: The amount of energy that golf puts into making fans / viewers of non-players is…wait for it…zero. Of no other sport in the world could this be said, so it is a curious fact. Further, the attitude seems to be that it would be IMPOSSIBLE to interest a non-player in spectator golf, and therefore pointless to try. This does not suggest a high level of confidence in the inherent attraction of the sport. 

1 hour ago, Friz said:

Interesting piece will be if at any point the Saudi's determine it is not accomplishing their goal....whether they're not getting the public interest they were hoping for or if they truly are hoping to find profits, or something else....the fact that it can never be self sustaining, if the Saudi's pull out, its done.  And that could be 10 years from now, it just seems the entire tour's existence is dependent on the Saudi's acceptance of bankrolling something that doesn't give financial returns

 

Shrewdly stated. What I have found interesting about the whole business is not that many players care overridingly about money (d’oh), but that there are a bunch of other things they seemingly don’t care about at all - reputational decline, public embarrassment, ethical issues, history and tradition, potentially being shut of majors and OWGR, etc. And one of these non-factors is the one you point to: This entire enterprise is at the WHIM of folks who, beyond being undoubted bad actors, are simply not dependable in any respect. They are whimsical now, and they surely will be in the future. Phil Mickelson and Brooks Koepka think they can TRUST in these people? If so, they are not as smart as I thought they were.  

[Darkfrog]

15 hours ago, iacas said:

 

I think he is probably the best, still in his prime player to take the LIV Golf path (maybe DJ fits this as well). That said, I couldn't care less, since IMO Brooks is one of the most dull and off-putting players in professional golf. Outside of his hot streak in majors a few years ago, and the ridiculous drama/feud with Bryson, he's not much more than a Talor Gooch to me, as far as appeal/interest.