Speaking privately to employees, PGA Tour commissioner Jay Monahan said the financial costs of the spending war with LIV Golf have brought about the shift that has stunned the golf world. “We cannot compete with a foreign government with unlimited money,” Monahan said, referring to the Saudi Public Investment Fund. “It was time… We waited to be in the strongest possible position to get this deal,” he said.
Two days after the PGA Tour agreed to team up with Saudi sponsors of rival LIV Golf, Tour Commissioner Jay Monahan gathered his team on Thursday to explain the deal and its surprising setback.
From an atrium inside the PGA Tour headquarters, Monahan’s message was clear, according to a person who heard the comments. The PGA Tour could not afford to fund a long spending war against Saudi Arabia and its huge coffers.
The Tour, Monahan told employees, had spent about $50 million on its legal fight, which still had years to go, and had drawn $100 million from its reserves to pay for its schedule. The model was not viable, he said, because the Tour would have to continue to pay with its reserves in the future.
“We can’t compete with a foreign government with unlimited money,” Monahan said. “It was time… We waited to be in the strongest possible position to get this deal,” he said.
Cuando Monahan aseguró que le habían preguntado cómo explicaría a su propias hijas por que hizo un pacto con Arabia Saudita, dado el trato que reciben las mujeres, mencionó a sus hijas por su nu y luego hizo a larga pause para serenarse antes de responder, relató person.
Monahan went on to note that “the circumstances we found ourselves in” forced him to “think about all of our players. I have to think of everyone in this room.”
“I understand all the human rights concerns,” Monahan added. “I had them myself,” he admitted.
Since the PGA Tour agreed on Tuesday to combine its business assets into a new for-profit entity with the golf-related business of Saudi Arabia’s Public Investment Fund (PIF), in a deal that also includes the European DP World Tour, a plus A clear picture emerged from the merger which sent a boost to the entire golf industry. A key point, according to people connected to the case, is that in its effort to keep up with the billions of dollars pumped into LIV, the PGA Tour was on the verge of being financially drained by the Saudis.
“Characterizing this settlement as being made due to legal costs and other uses of reserves is an oversimplification,” a PGA Tour representative said in a statement. “With the end of the fractured landscape in the world of men’s professional golf, the PGA Tour has never been a more valuable property…This transaction will make professional golf more competitive with other professional sports and sports leagues.”
The idea that the PGA Tour’s sudden change in attitude and willingness to do business with the Saudis was driven, at least in part, by their financial prospects, contradicts the Tour’s own public narrative. Since the deal was struck, PGA Tour officials have said the tour’s financial future is bright.
But, due to its new rival, its expenses have increased significantly over the past year.
When the LIV launched a year ago, it brought unprecedented funds to professional golf. The $25 million in prize money offered in its regular season tournaments was a record. And to further entice talents such as Phil Mickelson and Dustin Johnson to sign, LIV was offering huge appearance fees, some of which exceeded $100 million.
Monahan said bluntly last year that “if this is an arms race, and if the only weapons here are dollar bills, the PGA Tour can’t compete.” But as the LIV continued to select the best golfers – it announced Brooks Koepka as an addition at the same press conference last June in which Monahan spoke those words – the Tour still entered this race for financial weapons.
For the 2023 season, the Tour featured a series of tournaments with significantly increased prize money. Prize pools for these tournaments have increased by $100 million from 2022. Monahan last year said the increase in prize pools came from sponsor contributions and tour bookings.
Last year also saw the second season of the PGA Tour Player Impact Program (PIP), a fund he set up to compensate golfers for the contribution they make to the sport and not just be compensated for pure meritocracy. of how they find themselves in golf. tournaments. PIP awarded $100 million to 20 golfers in 2022.
Meanwhile, the Tour was paying various law firms to defend him around the country. First, he faced a Justice Department antitrust probe into the Tour and other major golf bodies, The Wall Street Journal first reported, and got a frontline attorney. .
The Tour then found itself embroiled in a legal battle with LIV, who had sued it accusing it of anti-competitive behavior aimed at crushing a nascent rival. The Tour counterattacked by accusing LIV of interfering in its affairs. The Tour had two powerful law firms – Keker, Van Nest & Peters and Skadden, Arps, Slate, Meagher & Flom – as well as other advisers.
Litigation costs rose rapidly, with both sides demanding the other hundreds of thousands of pages of documents in the process and wrangling nearly every aspect of the proceedings. And it looked like the 2024 trial date could be pushed back, as the sovereign wealth fund was determined to continue appealing to ask him to turn over documents, claiming he had sovereign immunity. People familiar with the situation said that with possible appeals, the Tour would have estimated the costs of the legal bills in the hundreds of millions, rather than the tens. The Tour faced the possibility of tripling the damage if they lost, said a person connected to the matter.
The Tour had also asked for more money from sponsors, including for higher prize pools at events, according to sources connected to the matter. But there was little appetite to meet rising costs. On the contrary, at least one of the sponsors of a major event was considering staying in the golf business, one of the people said.
The Tour has therefore decided to settle its problems with an agreement which puts an end to the litigation and the auction for the players. The agreement between the PGA Tour, PIF and DP World Tour sees PIF Governor Yasir Al-Rumayyan chairing the unnamed new venture. Monahan will be the CEO and the PGA Tour will be able to elect the majority of the board members. The Saudis are expected to pump billions into the company, according to Al-Rumayyan.
Monahan, in his speech to employees, noted that he would conduct a review of LIV and make a recommendation to the new board on how and if it should continue.
A person familiar with the deal said that during the negotiations, Al-Rumayyan offered to drop the dispute even if they couldn’t reach an agreement, so the Tour saw the value of the partnership beyond the cost savings.
The PGA Tour, unlike other major professional sports leagues in the United States, is not run by billionaire owners. It is a non-profit organization, whose stated mission is to develop the sport by organizing tournaments and promoting the interests of tourism professionals.
The clearest picture of the Tour’s finances comes from its latest available reports for fiscal year 2021. Tour revenue was $1.59 billion, while Monahan’s total compensation was $13.9 million. .
The records also shed light on why spending such a large portion of his reserves wasn’t sustainable, even if it wasn’t going to bring the Tour down anytime soon.
But if the dispute dragged on, the PGA Tour came up against an entity with vastly superior resources.
The Saudi sovereign wealth fund had $606 billion in assets last year, $45 billion in cash and cash equivalents and $85 billion in treasury assets in its portfolio.
Source: Latercera
I am David Jack and I have been working in the news industry for over 10 years. As an experienced journalist, I specialize in covering sports news with a focus on golf. My articles have been published by some of the most respected publications in the world including The New York Times and Sports Illustrated.
