LIV Golf says it can make a profit by responding to critics who question its business model

After holding its first event in London, LIV is now ready to test the US market this week with its tournament in Portland.Images: getty

As LIV Golf prepares for its first event on American soil later this week, the fledgling Saudi-funded Tour promises it will eventually be a profitable business and sees last week’s counter move by the PGA Tour – significantly boosting purses for several events next year – as proof that its concept will resonate with golfers and fans alike.

By luring golfers away from the PGA Tour with huge sums of money, including nine-figure deals with the most recognizable stars, LIV Golf has fractured a golf industry unaccustomed to seismic change. He has positioned himself as an existential threat to the PGA Tour and its business practices, threatening to reshape a traditionally frozen landscape in several ways.

With every player LIV misses – four-time major winner Brooks Koepka most notably last week – the PGA Tour’s hold on the industry appears to be gradually eroding, while LIV executives believe they continue to gain strength. momentum during their eight-event inaugural season. But with its first London event over and its first national competition drawing closer and closer – play begins Thursday at Pumpkin Ridge in Portland – LIV has yet to shake the narrative that it lacks a viable and n will ever get a return on investment from the Public Investment Fund, Saudi Arabia’s sovereign wealth fund.

Interviews with LIV executives, who spoke on condition of anonymity to speak candidly about their long-term strategy, reject that idea, saying their two-pronged business model, focused on both the league and its 12 golf teams generating income, offers “unlimited potential”. And due to the massive size of her war chest, LIV has time and a longer trail to profitability.

“The PIF is over half a trillion dollars,” one executive said. “They didn’t get there by making investments that weren’t prudent. The thought is exactly this: we are going to be profitable. »

During a press conference last week, PGA Tour Commissioner Jay Monahan launched a blistering verbal attack on LIV, offering his most pointed comments yet on the threat the Tour poses.

“If this is an arms race and the only weapons here are dollar bills, the PGA Tour can’t compete,” he said. “The PGA Tour, an American institution, cannot compete with a foreign monarchy spending billions of dollars trying to buy the game of golf.”

Monahan also said that LIV “isn’t concerned with real game growth.” This echoes criticism from US sports industry insiders that LIV does not aim to be a regular revenue- and profit-driven business. Legitimate questions linger over whether LIV can secure a lucrative media rights deal and attract big brands as sponsors. Challenges abound, ranging from several potential television partners and brands having contractual relationships with the PGA Tour, as well as concerns from some about being tied down to a tour funded by a country with a heavy record of human rights abuses. ‘man.

When LIV explains her long-term financial vision, she puts forward two elements, a bit like a traditional American stick-and-ball team sports league: there is the profitability of the league and also the value of its 12 teams, each of which includes four golfers. Twenty-five percent of each team is owned by the main player who joined the team. The remaining 75% belongs to the league to help teams get off the ground.

Even at this early stage, LIV executives say they have engaged in discussions with some of the most prominent private equity firms investing in sports globally, who want to invest in teams, but declined to name them. . Because they’ve been fully funded for years, LIV executives said, they don’t need the money now. On the contrary, they say they are focused on getting the product right during this year of testing and learning.

LIV expects to start making money from its events, but how soon remains an open and important question. QuintEvents manages the ticket office and reception of the property. Pricing for the Portland event ranges from $70 for an individual one-day pass to $10,300 for a three-day premium club experience that includes access to the inside ropes and seating on the first floor. line up for the awards ceremony. It comes after attendance was reported to be sparse in London with a fair share of cut-price tickets.

Beyond the events, LIV believes in its unique team concept and estimates that its teams could become profitable within a few years and valued at over $100 million each in just five years. With the commercial values ​​of players forming teams estimated at between $10 million and $20 million in off-course revenue, they said, opportunities will exist to sell commercial rights as a team. It remains to be seen, however, how this model fits the individual transactions that players may have. To date, Bryson DeChambeau, Dustin Johnson, Phil Mickelson and Patrick Reed join Koepka as the most notable players on LIV’s roster, which is led by two-time Open Championship winner Greg Norman.

“The guys are invested, they have a new point of view on the [team] logo, their perspective on who they want on their team,” the exec said. “And they understand the concept of ‘Wait a second, I’m going to be a team operator, I’m going to be a team owner.’ Phil may stop playing golf in four or five years, but he will own a team.

Players are paid partly up front and then at various stages such as their first event and their first full season. Contracts vary.

LIV sees itself as a global brand with worldwide distribution and partners. Officials hope that international players will attract interest from major brands in their respective countries. They are more inclined to seek partners with an international reach and expect strong growth, particularly from the Middle East and Asia, where public opposition to Saudi Arabia’s politics and policies can be more moderate. Under the LIV model, brands can sponsor the league or a specific team, serving, for example, as Mickelson’s official team watch.

LIV executives believe the competing teams could be worth up to $100 million each within five years.Images: getty

But industry experts say LIV is unlikely to enjoy significant support in the mainstream US golf market. A senior golf industry official doesn’t expect a notable US-based brand to sponsor LIV anytime soon. The source called LIV’s entry a “hostile takeover” of the PGA Tour, adding that LIV would suffer a “natural death” in a few years when “they get tired of burning money.” No matter how much money you have, at some point you get tired of burning money.

Beyond taking care of product and readers, securing a media rights deal is the top priority, sources said. It’s not an easy task, especially with CBS, ESPN and NBC in the first year of a nine-year, more than $6 billion deal with the PGA Tour, and Fox showing no appetite for golf. . Regardless of headwinds, the odds of LIV Golf events being broadcast on linear or OTT/streaming platforms in 2023, a LIV executive said, are “very high. We absolutely know that we need TV partners.

A bright spot for the London event, which aired on DAZN, Facebook, the LIV Golf website and YouTube, was that the average YouTube audience age was under 40, a sweet spot for the demographic. they aim to achieve.

The PGA Tour responded to golfers attending the London event by suspending 17 current or former members who played without release. During last week’s press conference, Monahan seemed to take aim at LIV’s claim that he was trying to develop the game.

“When someone tries to buy the sport, dismantle the institutions that are intrinsically invested in its growth, and focus only on a personal priority, that partnership evaporates and we end up instead with one person, one entity, using endless sums of money to steer employees, not members or partners, toward their personal goal, which may or may not change tomorrow or the day after,” Monahan said. “I doubt that’s the vision that each of us has for the game.”

His comments came after the PGA Tour decided to replicate part of the LIV model, unveiling hopes to increase purses to an average of $20 million for at least eight events and, although details are yet to be defined , introduce three new events that will include no cuts, limited fields and prize money over $25 million.

LIV officials almost felt emboldened by the PGA Tour’s decision. As one LIV executive put it, “Plagiarism, the best form of flattery… Rory [McIlroy] should thank LIV players because that’s the only reason their purses are going up… You said it was exposure and now you’re basically doing the same thing.

As LIV continues to refine and amplify its public messages, look for it to emphasize the freedom of player choice, the idea of ​​American capitalism that they believe will resonate with people. Consider the perspective of longtime NFL agent Leigh Steinberg, who used the existence of startup football leagues, including the World Football League in the 1970s and the USFL in the 1980s. , as leverage to negotiate record contracts for its clients. He said LIV Golf had “every right to exist,” saying “we had an AFL, which you don’t remember because it’s part of the NFL. We had an ABA. Someone wants to start a new golf tour, Hunky Dory.

Steinberg acknowledged human rights issues in Saudi Arabia and said sports should be consistent in their approach to relations with these countries. In the meantime, he said the PGA Tour “should just shut up and deal with how it treats golfers. It is their defense here. If you have happy golfers, they won’t want to leave.

LIV thinks the Portland event will be a “great start”, but they point out that it’s a long game, and that the event in Bedminster, NJ, from July 29-31, followed by the September events in Boston and Chicago will be where the LIV Golf ladder comes to life, especially if it continues to attract more players.

“What we have, fortunately, is that we have time on our side,” the executive said. “We’re not a private equity investor who says, ‘Hey, I need to raise money in three years, so I need an exit strategy. We are not that investor. We’re an investor who says, “Hey, I see this as a strategic play in golf for the next decade, the next two decades.”

Writer Liz Mullen contributed to this report.