Reimagining the Business of Professional Golf: A Business Drama in Multiple Acts

Steeped in tradition, governed by highly detailed rules of play, and with a culture that values sportsmanship and civility, professional golf had seemed for many years impervious to change. That state of quietude abruptly ended last year.

What follows is an overview of the game-changing events that have recently occurred, the questions that remain unanswered, and anticipated next steps that will shape the final form that the business of golf will take. Since this saga is ever-evolving, this overview can only reflect the state of play at the time it goes to press.

The oldest principal player in this drama is the PGA Tour, a nonprofit organization based in Florida that runs most golf tournaments. The Tour holds lucrative contracts with the major TV networks that televise such events. Five players sit on its eleven-person governance committee. To be clear, the PGA Tour oversees only a discrete segment of professional golf. It does not run the four “majors”: the Masters, the U.S. Open, the Open (the British Open), or even the PGA Championship (which is run by the PGA of America, an association of club professionals that also has responsibility over the Ryder Cup). However, it does operate a number of other tours, including one that features up-and-coming players who aspire to qualify for and join the PGA Tour.

PGA Tour events involve players competing by playing eighteen holes each day for four days (for a total of seventy-two holes). After the first two rounds of a tournament, the half of the field who have the worst scores fail to “make the cut”; they are sent home without earning a single dollar. (This has been a sore point for non-elite golfers.) At the end of four days, the player with the lowest aggregate score wins. In the event of a tie, a playoff ensues.

The first shock wave to impact the business of golf came in 2022 when LIV Golf was launched, with Australian golfer Greg Norman as its CEO and the Public Investment Fund (PIF), the sovereign wealth fund of Saudi Arabia, serving as its financial backer. LIV enticed several well-known PGA Tour professionals to join its tour with multimillion-dollar signing bonuses and the prospect of earning more money with fewer events. LIV’s format features fifty-four holes over three days of competition, and it involves team as well as individual competition. What’s more, no golfer is cut from a LIV tournament; all participants earn money. The attraction of LIV for professional golfers was simple: make more money for less work.

LIV’s exposure to the viewing public has been limited by the fact that it has not been able to reach agreements with the major television networks. LIV also does not operate a player development circuit; it has just raided the PGA Tour ranks for players.

Corporate ownership of sports leagues is not unknown; in motorsports; NASCAR and Formula One are examples. What makes LIV different is the involvement of the Saudi sovereign wealth fund. Critics of LIV have accused the Saudi government of sportswashing, using its investment in golf to distract from its human rights record, the murder of Washington Post columnist Jamal Khashoggi, and speculation about its being involved in 9/11 (though allegations of connections have been investigated, no direct link has been established). Jay Monahan, Commissioner of the PGA Tour, commented in 2022 that no golfer ever had to apologize for being a member of the PGA Tour. His criticism of LIV and PIF at the time earned him the support of 9/11 Families United, a group of family members of those who died and survivors of the attacks. In the context of sportswashing accusations, it’s worth noting that LIV is not PIF’s only foray into the world of sports: PIF led a consortium that acquired U.K. soccer club Newcastle United in 2021 and has also made significant multi-year investments in Formula One and WWE.

Following the first LIV event in London in June 2022, the PGA Tour made good on its threat of sanctioning players who joined the LIV Tour by barring them from participating in PGA Tour events. Unkind words between the golfers of the rival tours ensued, as did litigation. A number of LIV players—followed by LIV Golf itself—sued the PGA Tour in federal court in California. alleging antitrust violations. The Tour countersued for interference with contractual relations. The Tour also hired lobbyists to seek support from Congress to help fend off its new rival—all to no avail. In order to prevent further defections of its players to LIV, the PGA Tour raised purses, which put financial stress on the organization. At one point Monahan, in a telling comment, observed: “If this is an arms race and if the only weapons are dollar bills, the PGA Tour can’t compete.”

The vitriol between the two tours and their respective players made the second shock wave particularly upsetting to loyal PGA golfers and their fans. On June 6, PGA Tour Commissioner Monahan and PIF Governor Yasir al-Rumayyan announced that following secret negotiations (from which players as well as LIV Golf CEO Norman were excluded), they had entered into a framework agreement to form a new and yet-to-be-named legal entity that would combine their respective commercial and business assets (including LIV) as well as those of the DP World Tour (formerly known as the European Tour). The PGA Tour would remain a nonprofit organization and retain full control over how its tournaments were played. The PGA Tour’s board would appoint the majority of the board of the new entity and hold a majority voting interest in the new entity. Monahan of the PGA Tour would be the CEO, and al-Rumayyan would chair the board of the new entity. PIF would also hold a right of first refusal with respect to any required further cash investments.

The press release announcing the deal also indicated that the parties would “work cooperatively and in good faith to establish a fair and objective process for any [LIV] players who desire to re-apply for membership with the PGA Tour or the DPA World Tour.” The press release also indicated that they would cease all litigation between the parties. Good to their word, the parties soon thereafter filed a joint motion in federal court in California to dismiss the pending lawsuits with prejudice.

Monahan admitted that a subsequent meeting with the PGA Tour players was “intense” and “heated.” One player was quoted as saying that the players who remained loyal to the PGA Tour and had not followed the money felt betrayed. 9/11 Families United was also highly critical of the deal.

How much remains to be negotiated became evident when the New York Times on June 26 broke a story based on its having obtained a copy of the framework agreement. The newspaper reported that the agreement was a scant five pages long (slim even for a typical M&A letter of intent). Apart from the mutual agreement to dismiss the pending litigation, the only other firm commitments found in the agreement involved mutual confidentiality and non-disparagement covenants, a ban on recruiting players to rival tours, and a deadline of December 31 of this year for entering into a final, binding agreement (unless mutually extended). That final agreement will ultimately require the approval of the PGA Tour board. In short, the “merger” is far from being a done deal.

Where things go from here is as difficult to predict as picking the winner of the next PGA or LIV tournament.

Within days of the deal becoming public, the PGA Tour announced that Tour Commissioner Monahan had experienced “a medical situation” and would be stepping away from his day-to-day duties until further notice. Fortunately, during Monahan’s medical leave the PGA Tour had the benefit of having on its board two veteran dealmakers: Board Chairman Edward D. Herlihy, a corporate partner at Wachtel, Lipton, Rosen & Katz, and investment banker James J. Dunne III. Both men were involved in the earlier rounds of negotiations and presumably were well positioned to keep things moving forward. Even more fortunate, Monahan, more quickly than expected, sent a memo to the PGA Tour policy board on July 8 announcing that his still-undisclosed health condition had “improved dramatically,” allowing him to return to his CEO role on July 17. What Monahan’s health episode demonstrates is that any point in any deal, whether during negotiations or during post-closing integration, the sudden and unexpected unavailability of a key player, decision-maker, or champion of the deal can be very unsettling and potentially derail the transaction.

On his return, Monahan and the PGA Tour Board will face a variety of substantive questions, including:

• Who should replace independent board member and former AT&T CEO Randall Stephenson, who abruptly resigned shortly following Monahan’s announcement of his planned return? (In his resignation letter, Stephenson wrote that he had “serious concerns with how this framework agreement came to fruition without board oversight” and that “the construct currently being negotiated by management is not one I can objectively evaluate or in good conscience support, particularly in light of the U.S. intelligence report concerning Jamal Khashoggi in 2018.”)
• What value should be placed on the business assets that each party will be contributing to the new entity?
• Will there continue to be a LIV Tour, separate and apart from the PGA Tour?
• Will the PGA Tour adopt certain attributes of the LIV Tour?
• Under what terms will the LIV players be able to play in the PGA Tour events?
• Should PGA Players who did not migrate to LIV be compensated for their loyalty? If so, who decides what each of them should receive?

Other open questions involving third parties include:

• How will television networks and other media outlets cover professional golf events on a going-forward basis? Will new contracts need to be negotiated?
• Similar questions can be raised regarding sponsors of the two tours and individual players; how will they react? Will those agreements also require renegotiation?
• Will a significant number of disaffected fans simply tune out professional golf?

As for coming attractions, the U.S. Department of Justice has indicated that it is investigating the PGA/PIF/LIV deal for possible antitrust violations. It was recently reported that the parties agreed to drop the anti-poaching provision from the framework agreement, presumably in order to reduce their antitrust risk profile.

Further congressional inquiry or even proposed legislation may follow the three-hour hearing of the Senate Permanent Subcommittee on Investigations at which PGA Tour board member Dunne and Chief Operating Officer Ron Price appeared on July 11.

Next to be served up: professional tennis? The head of the Association of Tennis Professionals (ATP) Tour recently confirmed that “positive” talks had taken place with PIF and other parties regarding investment in the men’s professional tennis tour.

Even occasional viewers of televised golf will acknowledge that during the final round of a tournament, they cannot forecast who will win in advance. To learn the final outcome, they must stay tuned until the very end. So too with this current golf-related business drama. We may have seen the first two acts, but it is far from clear how many more there will be, and what professional golf will look like when the final curtain comes down.