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LIV Series Outmaneuvering of the PGA Tour

LIV Series Outmaneuvering of the PGA Tour

LIV Series Outmaneuvering of the PGA Tour

LIV Series Outmaneuvering of the PGA Tour

Since 1968, golf’s version of the National Football League (NFL) or Major League Baseball (MLB) has been the Professional Golf Association (PGA) Tour, which holds weekly golf tournaments throughout North America. Smaller than the other professional sports leagues, the PGA still has enjoyed a monopoly and a substantial tax exemption as a 501(c) organization.

Numerous other minor leagues are associated with the PGA Tour, including the Latin America Tour and the European Tour, which mostly act to develop talent for the PGA. For the top golfers in the world, the PGA Tour is the only option, and they must abide by the PGA’s rules.

The four major golf championships (The Masters, the U.S. Open, The Open, and the PGA Championship) pull the highest TV ratings. That number significantly drops for other golf events— unless a golf superstar is competing for the win, such as Tiger Woods, Phil Mickelson, Rory McIlroy, or Jordan Spieth, to name a few; these golfers bring in the highest viewership when they are in contention.

Grueling Schedule

To make up for low viewership, the PGA Tour hosts 47 events per year. In essence, it is a yearlong tournament schedule. While Tour players don’t attend each event, the average Tour player participates in 25 events per year, which is a physically grueling schedule.

The demanding schedule is accompanied by low tournament payouts. For example, the average PGA Tour player makes $1.4 million per year. The average across the MLB is $4.4 million and, in the NBA, it is $8.5 million. At the top end, the highest paid PGA Tour golfer in 2021 was Jon Rahm, who brought home $7.7 million in prize money. In 2022, the MLB player Max Scherzer has earned $43.3 million so far and, in the NBA, Steph Curry has earned $48 million.

As a former PGA Tour member, Greg Norman knows the issues with the league. Envisioning a professional golf league that works in the players’ best interests, Norman helped develop the LIV Tour, backed by the Saudi Arabian Public Investment Fund (PIF)—a competing golf league that offers more prize money, three-day instead of four-day tournaments, and team-based formats.

Threatened Response

The PGA Tour immediately felt threatened, knowing that the LIV Tour would be an existential threat to its monopoly. Instead of considering the merits of a different system, the PGA attacked the financial backer, leveraging the ethical missteps of the Saudi government as a morality play. The PGA Tour’s strategy was to shame their new competitor and those who chose to be associated with it, mimicking what happened with the ill-fated 2021 Super League in European football.

The PGA Tour’s hard stance of banishing any players that joined the LIV Tour destroyed any chance of the two leagues working together or coexisting, turning the competition into a zero-sum game. While the PGA held a key piece by having locked up three of the four major broadcast TV partners, the PGA knew that it couldn’t compete financially against the PIF backing.

Cost Leadership

The LIV Tour applied a cost leadership strategy, outspending the PGA for talent. Giving nine-figure sign-on bonuses for major stars, they were able to recruit the PGA Tour’s main ratings draws. Phil Mickelson, Bryson DeChambeau, Brooks Koepka, and Dustin Johnson took the life- changing money and have not looked back. The LIV Tour systematically stripped the PGA of its notable ratings talent. While the PGA Tour still has talent, it has lost the name notoriety that maintains its ratings.

The LIV Tour started with only YouTube TV with which to share its events. The LIV is  playing a long game, banking on the idea that the PGA will lose its influence with the main networks, which will not want to pony up money to show events without stars and viewers but rather will want to showcase the sport’s superstars.

The PGA could have decided to let players play on both tours. Financially, the PGA would have taken a hit on smaller tournaments but would have maintained its influence and kept the respect and loyalty of their players. Now, they are forced to improve their product while competing against an entity with a bottomless bank account. Their “checkers moves” against the LIV’s “chess moves” will ultimately lead the PGA to extinction.

References

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