PGA Tour and LIV Merger has created a lot of questions . . and anger



A look at the proposed merger of the PGA, DPT World Tour, PIF and LIV Golf into a new entity.

In a shocking development, the PGA Tour and LIV Golf agreed to merge operations to create a for profit entity that is yet to be named. The details are a bit sketchy, but by all accounts, the Saudi Private Investment Fund (PIF) will combine its golf related commercial businesses and rights (including LIV) with the PGA Tour and DP World Tour’s commercial businesses and rights into a collectively owned for profit entity. The PGA Tour will remain a non-profit entity, thus maintaining it 501(c)(6) tax exempt status and in turn, all lawsuits will be dropped.

Tax Considerations

It’s clear that the tax exemption was a critical part of this decision, since there has been quite a bit of speculation that some in Congress want the exemption revoked. The PGA Tour almost lost that status in 2017 when Congress introduced the Tax Cuts and Jobs Act and a Senate Bill under the act had a section called “Repeal of Tax-Exempt Status for Professional Sports Leagues”. Under that section, sports leagues were going to have to prove to those on Capitol Hill that they were mostly raising money for charity to maintain a tax-free exemption. By all accounts, many on Capitol Hill believed the PGA Tour didn't qualify because it was making far more in corporate deals than it was giving to charity. PGA tour LIV Golf mergerIt was reported that Jack Nicklaus and Davis Love III were instrumental in lobbying for the PGA Tour to get the Congress and Senate to back down.

But that was over five years ago, and there has been speculation that many Republicans in Congress want that decision revisited.  The PGA Tour's recent increase in purses for events have made some Congressmen wondering if they are actually making more on the events than they are giving to charity and the decisions of the tour relating to Donald Trump owned golf courses no doubt has also gotten the ears perked of the Congressmen. The PGA Tour withdrew a major event from a Trump owned New Jersey golf course in 2021, citing Trump’s involvement in the January 6 Capitol riots, and they had already pulled events from other Trump owned courses like Doral, which Trump had called unjustified. And with Trump way ahead in the polls to win the 2024 Republican Presidential nomination, it seems evident that the PGA Tour just didn’t want the fight with Congress to justify their actions.

Lawsuits

The lawsuits were also certainly responsible, at least partly, for the merger.

LIV filed an antitrust suit against the PGA Tour and the PGA Tour countersued. LIV Golf PGAMost LIV players withdrew from the antitrust suit filed by LIV CEO Greg Norman, but recently a U.S. federal judge ruled that PIF’s management, which included individuals in the Saudi government, could not use the Foreign Service Immunity Act to get immunity from testifying, since most of LIV's tournaments are in the U.S. And, it’s pretty clear the Saudi government did not want to be deposed, fearing they would have to answer questions about their financing and possibly even questions about their human rights record, including the treatment of women and the murder of journalist Jamal Khashoggi. So, no doubt LIV told its lawyers and Norman to do what it could to make their legal issues go away.

The Fans

There is also no doubt that the decline in viewership and attendance for PGA Tour and DP Tour events was instrumental in the decision, along with the lack of interest in LIV events. LIV was only aired on CMT and YouTube and had very few viewers, so their hope is almost certainly that LIV tournaments could get proper network TV coverage until the end of the year. Similarly, many gambling companies, including BetMGM and FanDuel, refused to put up odds for LIV events, so with this new deal they may be willing to add betting on LIV which many say is crucial to convincing people to watch. The recent PGA Championship had one of the lowest ratings for a Major golf tournament ever and Brooks Koepka's win was not very popular as patrons on the course booed the LIV golfers mercilessly every time, they stepped on the first tee. No doubt this upset the Saudi government as well, if their objective as many suspect, was to sportswash the human rights abuses through golf.

The Deal

The new merger would separate the charitable and corporate entities of the PGA Tour, with the corporate entity remaining a for-profit endeavor and the charitable entity staying non-profit. PIF would put in a major investment into the for-profit entity, which would include revenues from tournaments including ticket sales, sponsorship deals and ancillary revenue from merchandise. This investment apparently gives a major boost to the PGA Tour since it appears that for the time being, at least, they would not be required to make any new investments and any new money would come from PIF. That said, it’s a benefit for LIV as well because they were struggling to find corporate sponsors who would work with them.

Under terms of the deal, PGA and DP World Tour golfers will be able to once again reapply for membership on their respective tours after the 2023 season, which ends in the fall of this year. It is expected almost all will, if for nothing else, to gain Official World Golf Ranking points. Whether that will have any affect on the contracts they signed with LIV is unclear and it’s also unclear how golfers like Rory McIlroy, Scottie Scheffler, John Rahm, Justin Thomas, etc. will react if LIV golfers are allowed to keep their signup bonuses while they get nothing as elite players.

Hideki Matsuyama apparently turned down a $300,000,000 offer from LIV to stay faithful to the PGA Tour. Without question, something will have to be done to even out the playing field in that regard to make it fair. Otherwise, there will be mutiny and boycotts.

And looking at Twitter, it’s clear that a lot of PGA players are very upset, saying that they were not consulted about the deal; had to read about it on Twitter; and most of all were lied to by PGA Tour Commissioner Jay Monahan. Staying loyal was supposed to be about morality and doing what was right for society and the game by not siding with the Saudi government, who many players accuse of human rights abuses, as well as involvement in the September 11th attacks on the World Trade Center. So, if that wasn’t really true then why did they forego a huge payout from LIV? One golfer even outright called Jay Monahan a hypocrite.

Many golf fans have also said they would not watch LIV for that reason and LIV events are often boycotted by surviving family members of 9-11 victims who say that players on that tour should be ashamed of themselves for helping the Saudi government cover up the involvement in the worst attack on U.S. soil through sportswashing. So, it will be interesting to see how they respond to this news, especially since the Saudi government will have a huge percentage of the new tour.

What’s also not certain is how this would play out in terms of scheduling, if the plan is to have the PGA Tour, DP World Tour, Championship Tour, Korn Ferry Tour and LIV Tour all offering men’s golf. The PGA Tour has raised the profile and purse money of many of its events to counter LIV’s crazy high purses, but where would that leave an event like this week’s Canadian Open with a first-place prize of $1.6 million?

If the schedule is filled with LIV tournaments that have $6 million purses and team prizes and the new enhanced PGA Tour tournaments then then it’s almost a certainty that the Canadian Open would only consist of Canadian players who view this as their national championship, players on the bubble that need points to qualify for the U.S. Open, players who feel obligated to play because they have personal sponsorship deals with RBC and a bunch of amateurs and Korn Ferry Tour players. That is precisely what the PGA Tour was hoping to avoid since they say it’s unfair to the fans at those tournaments who pay good money to see the best players. It’s also unclear whether the PGA Tour will adopt some of LIV’s ideas such as teams competing for extra prizes and the option to play in shorts for comfort rather than long pants, which has always been the norm on the tour. What is almost a guarantee is that the PGA and DP Tour will not adopt the 54 hole or scramble format of LIV and it wouldn’t be surprising to see LIV abandon those as well to come in line. But this scenario is only if the tours stay separate entities.

Tours may merge

A more likely scenario that most are suggesting is that the Tours will actually merge, and LIV will be absorbed into the PGA Tour. Jay Monahan will stay as Commissioner of the new tour and a PIF representative would be Vice President. Whether that would be Greg Norman, PIF Governor Yasir Al-Rumayyan or someone else is unsure. But if that does indeed become the case, it seems that if the board or players oust the Commissioner, then the V.P. will take over, which basically gives Monahan security, since no PGA player will agree to work with Norman or a Saudi spokesman. PGA LIV PIF There seems to be consensus that players returning to the PGA or DP World Tour from golf will have to pay a fine for their actions, which will be a percentage of the amount of money they made from LIV. It will have to be enough to be meaningful, but also not so much that players like Phil Mickelson will tell them where to go and keep his whole signup bonus. It is possible that players could be told to give back up to 25% of their signup bonuses, which would then be distributed to the top players on the PGA Tour like McIlroy, Rahm, Scheffler or there is also a chance the PGA Tour will do something like the U.S. Department of Justice did with PokerStars and the FullTilt fiasco and tell PIF that if they want the deal to go through they have to offer $100 million sign-up bonuses to the top 10 players on the PGA Tour that did not go to LIV to keep everyone happy.

I asked a sports analyst that I have dealt with for over two decades what he believed was the main reason this deal was done, and his response was two words - Indy Car. He was referring to the IRL-CART split in 1996 when Tony George, who owned the Indy Motor Speedway, created a new series called the Indy Racing League (IRL) which featured cheaper, single rear engine cars that only ran on ovals. He then passed a rule that year which limited the 33-car Indy 500 field to 25 IRL cars and 8 CART cars. CART had all the best teams and drivers, but the IRL, under George, had the rights to the Indianapolis 500. In response, the CART series, which was at the height of its game and attracted record crowds and interest, decided that it would run its own race, the World 500 to counter the Indy 500. It failed miserably but interest in the Indy 500 also declined since the best cars weren't there. Sound familiar?

The fight continued for years until CART blinked first and Penske, Ganassi and Andretti agreed to the terms dictated by George on acceptable chassis and sent cars to the Indy 500. But by then the damage was done. Viewership and TV deals for both series plummeted, and the Indy 500 was seeing its worse ratings ever. CART eventually dissolved in 2008, but it really wasn’t until 20 years after the split that viewership of the newly found Indy Car series rebounded. Every analyst said that the fighting killed all Indy Car racing and the only series that really benefitted from the feud was NASCAR, which seemed to get a lot of former Indy followers.

He believes that golf was going in that same direction and that the fighting between LIV and the PGA Tour was killing golf as a whole. He also said it wasn’t just the PGA Tour that was being affected, but also the Champions Tour (owned by the PGA Tour) which saw a huge bump in viewership when Phil Mickelson started playing, but saw a big drop in interest when he was no longer allowed to play Champion Tour events. So, in his view this was absolutely necessary because without the merger you would end up with two very fractured entities that could have lost interest for a whole generation that simply wasn’t interested in the infighting.

So, what seemed almost impossible even a month ago at the PGA Championship has occurred with LIV and PGA Tour agreeing to a merger. Many golf analysts will say it’s good for the game, but others are asking if it’s really good overall. Twitter today is filled with tweets from people saying that the PGA Tour sold out its morals for money and that this deal props up the Saudi government, which is responsible for many atrocities. And players on the PGA Tour are also asking what the last two years of comments by the PGA Commissioner, along with Tiger Woods, were really about if in the end the Tour was going to sell out. Moreover, the tours will have to explain to players like Rory McIlroy, John Rahm and Hideki Matsuyama what the point of being loyal to the tour was when they could have simply taken hundreds of millions of dollars as a signing bonus and then rejoined the PGA Tour less than two years later.

Jay Monahan is in Toronto this week for the Canadian Open and reports are that a group of players not playing in the group are flying up to have a meeting with him and the players that are in the Canadian Open. Oh, to be fly on the wall. There are still a lot of issues that need to be resolved and they likely will be announced in the coming weeks, but looking at social media, it’s clear that right now PGA Tour loyalists are just plain angry and Jay Monahan has some real ‘splainin to do.

Read insights from Hartley Henderson every week here at OSGA and check out Hartley's RUMOR MILL!


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