LIV Golf Invests $100 Million in Asian Tour

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Hey Golfers -

Last week, LIV Golf invested an additional $100 million in the Asian Tour, bringing LIV Golf’s total investment to $300 million. The additional investment will be used for the Asian Tour International Series, and the money will be capitalized over ten years.

The purse size in the International Series will be as high as $2.5 million. For reference, the PGA Tour purse sizes range from $3.7 million to $20 million. The AT&T Pebble Beach Pro-Am had a purse size of $8.7 million. The Asian Tour’s ‘premier’ event, the Saudi Open had a purse of $5 million, Harold Varner III made under $1 million in prize money.

There is a lot to break down today, so let’s get to it.

LIV Golf Investments' majority shareholder is Saudi Arabia’s Public Investment Fund (PIF). The PIF was founded in 1971 and has $500 billion in assets under management. Think of the PIF as a massive Venture Capital Firm - with the significant distinction as a government-controlled and owned fund.

The Public Investment Fund has made numerous investments.

• Live Nation

• Facebook

• Boeing

• Uber

• Citigroup

• Disney

• Bank of America

The PIF investing in LIV Golf is not the first sports-related investment for the fund. Nearly two years ago, PIF invested in the purchase of Newcastle United FC for $400 million, making it the richest Premier League club.

Over ten years, the $300 million investment in the Asian Tour is relatively small.

So what has changed? This week, it was reported that LIV Golf is looking to spend $2 billion in guaranteed money for players to join the tour. Here are a couple of reported player offers.

• Bryson DeChambeau - $135 million

• Ian Poulter - $30 million

Bryson later denied the report. Dustin Johnson and Lee Westwood referenced signed NDA’s when asked about guaranteed money.

LIV Golf’s business model is becoming more apparent. They are the intermediary between the PIF and Asian Tour.

Suppose LIV Golf wants to be a profitable business; it finds itself in an interesting cycle. They need a TV contract. To get a TV contract, they need players. Spending $2 billion on guaranteed money for players has me curious how it will become profitable. In May of 2021, it was rumored that Brooks Koepka and Dustin Johnson received offers between $30 million and $50 million. Which begs the question, have LIV Golf’s guaranteed offers increased?

The PGA Tour forecasts revenue of $1.52 billion in 2022 - 85% of revenue comes from tournaments and media. The media portion is interesting; we will come back to that later. The PGA Tour has a TV contract worth $700 million annually. In 2022 the PGA Tour forecasts operating expenses of $716 million.

It is unknown if the guaranteed offers are multi-year, although we can assume they are. Let’s imagine they are five-year offers that would be $400 million per year to have players on the proposed tour. Benchmarking the PGA Tour’s TV contract of $700 million, I would be surprised to see the proposed tour even getting half of that. It is difficult to understand how LIV Golf Investments has a profitable business model with our current information. 

It is certainly possible that PIF and LIV Golf have no intention of becoming profitable. If they spent $5 billion on this experiment over several years, that is just 1% of its assets under management.

LIV Golf Investments and the Public Investment Fund could be aligned on their goal of an alternative tour but have different motives. Greg Norman has proposed an international tour for decades but never had the opportunity. The PIF can be interpreted as sportswashing in their efforts of the proposed tour, especially if it is not a profitable business.

Below is the definition of sportswashing. You can form your own opinion.

Phil Mickelson had a lot to say in Saudi Arabia. He spit out a few numbers; let’s take a look.

• PGA Tour has $20 billion in digital assets

• PGA Tour makes $50 million per year on its media channel

• Phil paid the PGA Tour $5 million for The Match(s)

Back to the media portion of the PGA Tour’s revenue. It is lumped in with tournament revenue, so we aren’t sure how much it is. We can guess it is around 5% of total revenue, not insignificant. Regarding the LIV Golf proposed tour, will they monetize media the same way the PGA Tour does, or let players have control? Allowing the players to have control will sacrifice even more revenue.

One of the more interesting items Phil mentioned was leverage. It is plausible to think most of the players playing in the Saudi Open are using the tournament as leverage. The PGA Tour has already announced significant monetary improvements.

• FedEx Cup Bonus increased to $75 million from $60 million

• Comcast Business TOUR Top 10 increased to $20 million from $10 million

• PIP increased to $50 million from $40 million

• Introduced the Play15 Bonus of $10 million

• Prize money increased to $427 million from $367 million

• THE PLAYERS increased to $20 million purse from $15 million

Quite a few questions are surrounding LIV Golf Investments, and that is understandable. There has been a relative lack of transparency compared to the proposed Premier Golf League. In October, I wrote about the PGL; you can read about their proposed alternative tour here.

This is one of the more fascinating business topics in golf for me; for various reasons. I am very interested to see what happens in the coming months.

Have yourself a Monday, talk to you next week!

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