Thursday Threads - Brave New World Edition

That sound you hear in the background is Bobby Jones spinning in his grave.  I know it's all gonna work out, because when have they ever lied to us?

No doubt you've seen the headlines:

PGA Tour closes up to $3 billion investment from Strategic Sports Group

We know this is great, because Tiger is telling us its great:

Looking for a silver lining—because you know how I never start a day without reading at least three chapters of Norman Vincent Peale—Tiger Woods reportedly spoke on the rollout call and drove home what mattered in this deal for him.

“Golf is an amazing sport,” Woods said. “It has allowed communities to heal and grow. And we, as a team, are going to offer that according to what we believe is the true compensation and meritocracy that our sport has been built upon for all these years.

“As has been described earlier, as the Tour grows, we grow. So the more we invest into the Tour, the more we get the benefits of it. Which has never been—it’s never happened in sports history. So we’re the first. Exciting for me to be able to be part of that.”

OK, so just out of curiosity, how much are you personally "investing"?  Say what?  Suddenly a little quiet over there....

One of the ways we know we're being lied to is when language is perverted to mean, typically, the opposite of its actual meaning.   I could rattle off countless examples from politics, but let's just deal with Tiger's sense of "investment":

Why did the PGA Tour decide to take the investment?

The cash infusion from the SSG serves to shore up the Tour’s bank accounts after a bruising, expensive battle with the Saudi-backed PIF, and promises to keep those players who have

remained loyal to the Tour financially satisfied to the tune of some $1.5 billion in performance-based incentives over the next 5 years.

The money gives the Tour access to a deep Rolodex of sports business professionals whose stated goal is to help the Tour (and its players) make more money. Perhaps most important, though, the investment gives the PGA Tour a runway while negotiations for an additional investment with the Saudi Public Investment Fund (or PIF) drag through regulatory approval.

The first lie is actually the $3 billion number being bandied about, because at this point SSG is only committed to $1.5 billion.  And as we see above, that's an investment in the sense that Tiger and Patrick will get paid.  Can you feel the game growing?

I have some family business to deal with, so we're going to riff on an emergency Ask Alan column that just popped up in my Twitter feed.

Is anyone aware of how much they have hilariously overvalued the sport of professional golf? @KPNYJ

Rory is! Following his presser on Tuesday afternoon at the Crosby Clambake, McIlroy scrummed with a half-dozen scribes for about 20 minutes. It was the most candid and relaxed I’ve seen him since LIV made the scene. Among the things he said: “Guys want to be paid like an NFL quarterback, but we don’t create the same value. The ratings for the final round of the Sentry was one million and for the AFC Championship game it was 50 million. If that’s not a wakeup call, I don’t know what is.”

Golf has always been a niche sport. Peak Tiger tricked a lot of folks into believing that the game had gone mainstream, but he was a once-in-a-century attraction. Ever since Woods ran over the fire hydrant, professional golf has slowly, inexorably been returning to its traditional place on the fringe of the sports world. That LIV was willing to massively overpay for players does not change the natural order of things. Which leads us to:

Yes, but that's why (and, credit where credit is due, our Federal government has been playing this game for a long time) it's necessary to call payments to the players "investments."  But to believe this is sustainable, you have to believe that the Tour can substantially increase this "value," but good luck with that.

Billion dollar question: What does the Strategic Sports Group get out of this? How do they get a return on the investment? @Joecattle101

I appreciated the analysis of Max Homa and others who said that that the news investors are not doing this out of benevolence but because they want a profit and thus the Tour is going to have to

innovate to create a better product to generate more fan interest and more value. One problem with this thinking: golf is not a normal investment. There are a lot easier ways to make money than pouring it into a nebulous new Tour that has lost many of its biggest stars and potentially faces a competitor with a helluva lot more money. The fact is, really rich guys like shiny things, and many are jock-sniffers. They try to buy their way into every sport because they dream of Jim Nantz addressing them as “Mr.” live on national TV. Add in the fact that many/most private equity bros love golf and it’s easy to see that they’re investing in the Tour with their heart, not their head. I mean, look at how many very successful people threw money at the TGL and it was a turkey from day one. These guys will do anything to get Tiger to say hi to them on the range at Medalist.

All that said, the new investors will have a big voice on the board of the new PGA Tour Enterprises and they will want to shake things up, just to justify their existence. The first order of business in the PE world is usually layoffs, so I expect the army of VPs in Ponte Vedra Beach are quite nervous these days. A lot of money and manpower goes into running the Senior Tour and very few fans pay attention—it could be vulnerable to downsizing, if not an outright shuttering. The Tour schedule is so bloated it makes a ton of sense to lop off a dozen or so of the worst-performing events. But cutting costs isn’t enough. How to generate more revenue? The real bonanza is in media rights but the Tour’s deals are locked in until 2030. Squeezing disaffected fans for a few more bucks to subscribe to streaming services would be a horrible idea. On the day that everything changed—June 6, 2023—Monahan tipped his hand on Squawk Box: “sports betting.” Golf is an ideal sport for gambling because it runs four days a week, dawn til dusk, with 150 or so players doing all kinds of things simultaneously, all it creating copious amounts of data. I think the new Tour is going to go all in on gambling—are you ready for the DraftKings Open at Riviera? The FanDuel Pro-Am at Pebble Beach? The Tour has always kept gaming at arm’s length but in this brave new world it’s all about the money and this is by far the biggest and easiest revenue stream the Tour can tap into.

So the battle lines form and it's the sportswashers against the jock sniffers....  

I think Alan gest the big stuff right there, though there is a nit or two capturing my eye.... I've been laughing since first seeing this piece from James Colgan, under this promising header:

Collin Morikawa has a 4-word solution for changing golf’s TV woes

Spoiler alert, here are those four words:

show more golf shots

An idea so crazy it just might work..... 

But back here on Planet Earth, Colgan at the very least pushes back against the prevailing economic illiteracy:

The problem with being leveraged is that, unlike the Saudis, the Tour does not presently have access to nearly $1 trillion worth of slush money — ethically questionable or otherwise — which means it needs to resort to the typical laws of economics to come up with some extra cash. An influx of private equity money, like the SSG agreement that came down on Wednesday, can help solve the issue in the short term, but in the long term the PGA Tour needs to make more money if it is going to continue to exist. And how does a professional sports league make more money?

It's slightly mangled, but way better than most golf writers.  What he's trying to say is that Tour has assumed debt to fund current operating losses, and logically requires a dramatic increase in revenues for this all to work out.  But Colgan swings and misses here:

The TV rights deals, which account for roughly half of the Tour’s annual revenue and are one of the Tour’s few viable paths to legitimate exponential growth, have been the first thing on people’s minds.

“Look, golf’s not going to be as high speed, you know, body contact, people tackling. Like that’s just [not] golf, right?” Morikawa said. “But I think most fans understand that, and I’m not going to go dance down the fairway or celebrate differently on a birdie putt on the sixth hole on Friday.”

Of course, no conversation about the economic future of professional sports is complete without an adjacent conversation on the future of sports television, which is currently in the midst of what nearly all TV executives agree will one day be called “the good old days.”

The PGA Tour, with its more than $700 million in annual rights fees, is no slouch. But the commercialization of its product has affected television viewers in a way that other sports’ efforts at profitability have not. Fans are routinely enraged by the onslaught of interruptions to coverage, by the editorial decisions that lead to those interruptions, and by the failures of the networks and governing bodies to address either of the aforementioned issues.

He goes on and on without informing his readers that these rights fees are locked in through the end of the decade....  I'm sure the Tour and SSG convinced themselves that nonsense like the TGL would add to their cash flow, but gambling, as Alan notes, has to be the crux of their projected revenue spike.

But Alan's assessment of the Tour's operations masks a whole lot of bad choices.  Of course the organization is hopelessly bloated, as is the schedule.  That said, you want to cut playing opportunities at the same time mid-level Tour talent isn't welcome at the only events that matter?  Wow, not a good stretch for Tour Rabbit Americans....

Back to Alan:

What’s the likelihood of PIF investing in this, and what incentive would there be for them doing so? @KOnocomment

The incentive is the same as when the PIF pledged $500 million to the Premier Golf League, as when the PIF tried to partner with the European Tour and when the PIF sought to invest in the PGA Tour in 2021: for the Saudis, golf is the ultimate vehicle for acceptance in the Western world and access to the global ruling class. And for a golf-nut like Yasir Al-Rumayyan, it also means he gets to play in every pro-am and party with DJ on the yacht—LIV is a glorified fantasy camp for His Excellency. He’d love to be embraced in the same way by the PGA Tour firmament. You can call it sportswashing, networking or disrupting but the goal is the same: to present a different narrative of Saudi Arabia, to bring big-time sporting events to the Kingdom, to forge relationships with the decision makers at multinational corporations. Spending a few more billions on golf is not a big deal to the PIF if it can secure investment and partnership from blue-chip corporations as Saudi Arabia remakes its economy and society. Two of the pillars of MBS’s Vision 2030 are sport and tourism and golf can fuel both. So the PIF’s investment in golf has never been about a traditional ROI.

As for the likelihood of the PIF coming in, it hinges on a familiar question: what does Yasir want? The PIF doesn’t like to play second fiddle on its deals; it wants a dominant position. This would argue for the PIF backing out of the framework agreement and the buzz around Pebble Beach this week is that a deal between the Tour and the PIF is now on life support. But after all the fanfare on June 6, failing to buy his way into the Tour would be a political setback for Yasir. Does he want to lose that much face? A talking point in the wake of the SSG deal has been that PIF investment faces regulatory hurdles and that explains the delays in consummating a deal, but that’s just a smokescreen—all the American money that has now poured into PGA Tour Enterprises makes it easier for the Saudis to come in as just another minority investor, since their influence and equity has been diluted. Yasir does not want to have to defer to the John Henrys of the world. I think he walks. Which leads us to:

I think that's a reasonable precis of Yasir's Choice, but I would just add that, not only do the Saudis not like being in the second seat, it seems clear that that wasn't on the table on June 6th.

How would another pissing contest with the PIF ever be a good decision?@RedHarrington44

Keeping the PIF in this deal is the key to some sort of reunification of the sport. It certainly is in the best interests of the Tour, as it could suck up more billions of dollars in investment and turn LIV from a competitor into an awkward partner. But by signing on with SSG, the Tour has forced Yasir’s hand. If/when the deal falls apart, he’s going to be pissed…and he still has the biggest checkbook in sports. If LIV can buy Jon Rahm, every other golfer is in play, too. The pissing contest in the fall of 2024 could be epic. Which brings us to:

The issue I think Alan elides is, notwithstanding their ability to write checks, what is the path to success for LIV?   It's a train wreck, and grabbing Jon Rahm doesn't really change that.  They'll still be streaming their Friday coverage, and their CW weekend coverage will be watched by approximately no one.  

That said, the Tour declaring war on its non-signature sponsors is kinda painful to watch:

Watching the Torrey Pines event this weekend and barley recognizing anyone on the leaderboard, I really don’t see past how the PGA sustains the current model if LIV continues to reward big-name players with huge amounts of cash. Any thoughts? @LaBeets50

Even if the the Tour and the PIF can’t get a deal done, Monahan and his loyalists can declare victory: the June 6th armistice ended the brutally expensive lawsuits; the players are making more money than they ever dreamed of and now can trumpet being the first athletes to own a piece of their league; the Signature Events are a massive upgrade to the schedule; and now, with SSG, the Tour has reshaped its outdated business model and is in the strongest financial position in its history. Only one problem: the PGA Tour’s players are dreadfully boring. Lotsa nice guys who are more or less interchangeable. LIV has taken all the rascals, antiheroes, muckrakers, shit-talkers, pot-stirrers and oversized personalities. McIlroy and Jordan Spieth are the only Tour guys who move the needle and they haven’t won a major in a decade and have only two wins over the last six and a half years, respectively.

There is a very easy solution: the Tour needs to let LIV golfers play in its events. Allow them seven sponsor’s exemptions per season as nonmembers. The LIV’ers would not be eligible for equity, the FedEx Cup or the retirement plan money. But their presence would be a massive boost to Tour events and the corresponding TV coverage. For the LIV golfers, they would have access to valuable World Ranking points and maybe new endorsement deals. Win-win.

Let's agree that the non-signature events are going to suffer greatly.  The space-time continuum seems to mystify the Rory's of the world, who while shouting the importance of knowing when he and the cool kids will play, seems not to understand that they're also telegraphing when the elites will NOT play, see, for example, the Farmers.  See also, for example, Farmers not renewing their sponsorship commitment.

But that last 'graph is bold new ground.  I wonder how the LIV contracts are structured and whether they're exclusive.  Obviously the guys are free to play in the majors and they've been allowed to play in Euro Tour events, but it seems a bridge too far, at least until the next shoe drops.

How long before Jay leaves? @NDHickman

I’d put the over/under on this autumn. The LIV epoch has been so an acrimonious and chaotic for the PGA Tour it simply wasn’t feasible to even consider finding a new commissioner while things were moving so fast. And Monahan had the support of the two most powerful members of the Tour board, Jimmy Dunne and Ed Herlihy, so he wasn’t going to get moved out against his will. Monahan is feisty and prideful—he will want to see this through to the bitter end, and the much remains unsettled in regards to the PIF. But that will be done and dusted by the end of this season, making it a natural time for the reconstituted Tour to move forward with new leadership. How much longer does Monahan want to remain in his foxhole? He went from Covid to fending off the PGL and now the endless war with LIV, a relentless four years of strife. He’s already had one major health scare. Presumably he’s been socking away much of his $15 million salary. If I was Monahan, I’d take a nice retirement package, accept my green jacket and let someone else deal with Patrick Cantlay.

Nobody seems to want to deal with that perfect penis, though Jay's future sinecures are the least of my concerns.

What will the equity splits be like? Rory 10% and 150th guy 0.001%? That’d probably be ‘fair’ in terms of equity value generated but I imagine it wouldn’t make too many Tour players happy? @Blulinski

The details remain hazy, by design. The Tour wants everyone to pretend to be happy and postpone the bitching for as long as possible. No doubt the equity payouts will be modeled after the PIP distribution: shadowy algorithms and mysterious metrics but ultimately Monahan and his cabal slicing up the pie in whatever way keeps Tiger, Rory and other top players happy.

The equity model strikes me as the ultimate red herring.  The Tour was, or at least, should have been run for the benefit of the members, so why do we need to award them equity?

More importantly, it will inevitably reflect a static assessment of who matters now.  But, what have we discovered in all this?  None of them matter at least to the extent of moving the needle.... But Patrick will get his equity, the squeaky wheels always do.  The long-term implications be damned....

The big question: what happens to the charitable nonprofit commitment of the Tour? @StephenFDiamond

What an adorable question! So quaint, so old-fashioned. But Stephen, it’s not 1968 and Dean Beman ain’t walking through that door. More like Gordon Gekko.

The charitable giving was always a bit of a smokescreen, but the implications of running their tournament schedule as a for-profit undertaking, including the need to provide an ROI to their investors, has been under-analyzed for sure.

The real issue might be at the local event level, where sponsors are being dramatically squeezed for greater rights fees at the same time the Tour is driving the best players away from their events.

What most surprises me is that Alan wasn't asked and didn't offer any assessment of what happens to LIV should a deal be struck with the PIF.  How do you unwind it, or turn into something not competitive to the Tour.  Obviously the team component has captured attention and is supposed to be Yasir's passion, but team events are a yawn when placed in the context of stroke play events.  The talk is of doing something in the Fall, which has a logic to it, but even LIV is smart enough to not compete with the NFL.  Stay tuned, dear readers.

I'm going to leave you here and pick up things on Monday morning.  Enjoy the views from Pebble, but perhaps you can spare a prayer for snow in the Wasatch Range.