LIV Golf tees off: Will a $2b investment be worth it?

Sascha: [00:00:02] From Equity Mates media. This is the dive. I'm your host, Sascha Kelly. Golf, But louder. That is the slogan for the latest big money tournament in professional sport. 

Audio clip: [00:00:13] The pitch is simple golf like you've never seen it before. 

Sascha: [00:00:17] Live golf run by Greg Norman and backed by the Saudi government. This tournament is throwing big money and I mean big money to attract golfers to this new competition. And it's proving to be divisive. One of the world's best golfers, Phil Mickelson, called the Saudis scary motherfuckers, only to then later agree to join the live golf tour for a reported $200 million contract. 

Audio clip: [00:00:47] I know that many of you have strong opinions, emotions about my choice to go forward with live golf. And I understand and I respect that. 

Sascha: [00:00:58] Today, we want to examine the business case behind this. The Saudis are investing $2 billion into setting up a rival golf league. Live golf is going head to head with the PGA Tour. It's Monday, the 20th of June. And today, I want to know what's the business strategy behind starting a rival golf tournament? To do this, I'm joined by the co-founder of Equity Mates and my colleague, Bryce Laskey. And I've got to say, Bryce, I am so out of my depth with this topic, so I am very glad to see your face today.

Bryce: [00:01:31] Well, it's it's a pleasure to be here. Sascha and I love golf, so I'm excited. 

Sascha: [00:01:35] Bryce, you're obviously the right expert for this interview. I'm going to start with this super basic question. Give me the layout of golfing tournaments at the moment. What is the difference between live golf and the PGA Tour? 

Bryce: [00:01:48] So the first major difference, I guess, Sascha, is the age. The PGA Tour, otherwise known as the Professional Golfers Association, has been running for about 93 years. It started in 1929, and it organises professional golf tours played by men in the U.S. and North America. It is steeped in history and regarded as home to the best golf players in the world. Now, to close out that landscape, there's also an Asian tour and a European tour. But the PGA is the pre-eminent golf tour. Live golf, on the other hand, is less than one year old. Its inaugural season is this year, 2022. So big difference there. The second big difference and one that we're going to be digging into today and that is causing headlines is the money. A few weeks ago, both live and the PGA each held a tournament live, held one in England and PGA in Canada. The winner of Live, Charles Schwartzel, he won $4 million in prise money and the winner of the Canadian Open for the PGA. Rory McIlroy, one of the most famous golfers in the world at present. He took home $1.6 million in prise money. So both great amounts of prise money.

Sascha: [00:02:57] But yeah, I'm not sending any of that back. 

Bryce: [00:03:00] You can see the stark difference already. And this pay disparity goes down through the rankings. The last placed golfer in live. Andy Ogletree, got $120,000. Now that quadrupled his career winnings as a pro. The last place golfer in a PGA tournament, however, is likely paying their own way to get there. They are booking their own Airbnbs near the course for the weekend, paying for their own transport and and food and everything that goes into it, and likely making a loss. So the big difference causing headlines is the. 

Unidentified: [00:03:31] We thought we'd never see it. I believe he thought either. Tour championship winner, Tiger Woods, a winner again, number 80. 

Sascha: [00:03:46] Yeah. And to be a professional athlete is to be like a small business. But there's always costs. Whether it's your physical health or your transport. So money is important in sport. Even I know that as someone who knows nothing about sport. So the Saudi Arabian Public Investment Fund has reportedly allocated 2 billion, as I said in my introduction, towards this competition. Does money really overcome any concern about associating with the Saudis and equally the prestige that the PGA carries? 

Bryce: [00:04:18] So money does do a lot of heavy lifting. We know that each of the eight live tournaments this year has a purse of $25 million up for grabs. That is exactly double that of this year's U.S. Open, which finished today in Massachusetts. It is one of the four majors on the on the golfing calendar. Each year at each live tournament, those millions are divided amongst just 48 players with $4 million going to the winner. So a huge drawcard for some players. The US Open had 156 competitors in comparison. So this is one way that leaves are trying to differentiate themselves and use money to attract players. 

Sascha: [00:04:59] So they do actually have a limit on the number of players or it's just not that many people are playing yet. 

Bryce: [00:05:05] So one of the things that Liv are saying to players is that you can come and play in a reduced field in order to give yourself a better opportunity to win money.

Sascha: [00:05:13] Okay. 

Bryce: [00:05:14] So in the intro, you spoke about Phil Mickelson. So let's take him as an example. He's one of the greatest golfers of all time. And in February, Mickelson said he wasn't going to leave the PGA. He did say that the Saudis were scary. Yes.

Audio clip: [00:05:27] He went on, we know they killed Khashoggi and have a horrible record on human rights. They execute people over there for being gay. Knowing all of this, why would I even consider it? He asked. 

Bryce: [00:05:37] However, later in the year it was announced Mickelson was going to move across to leave golf. 

Audio clip: [00:05:43] I've also seen the good that the game of golf has done throughout history, and I believe that live golf is going to do a lot of good for the game as well.

Bryce: [00:05:51] Reportedly with a contract of $200 million. Now that's just a sign on fee. It doesn't include any prise money for each of the tournament. 

Sascha: [00:06:00] People actually do have to choose between PGA and Live. They can't play both tournaments concurrently. 

Bryce: [00:06:06] So the PGA are pretty uptight about the fact that a lot of these players are looking to move and play in another competition. Obviously, you can understand that taking some of the best players away and playing elsewhere is going to impact the current profile of the PGA and the PGA Tour, as we'll touch on a little later, have said that any players that go across and play in the live golf tournament will have their memberships cancelled from the PGA. So they won't be able to play any PGA tour for the rest of the year ongoing. 

Sascha: [00:06:38] That's super interesting. And I think it leads really nicely into the next question I wanted to ask, which is the questions about the Saudis, I guess, questions that arise because of their stance on human rights. 

Bryce: [00:06:50] Yeah, well, that's right. So the golfers that have moved across have come under a lot of hate. They've been asked if they'd play for Vladimir Putin or in apartheid South Africa. 

Audio clip: [00:06:58] If Vladimir Putin had a tournaments, would you play them? That's speculation. I'm not even going to comment on speculation. 

Bryce: [00:07:07] And some players have appeared quite uncomfortable answering these questions, as you could imagine. But look, at the end of the day, money speaks. And it hasn't stopped some of these players moving across some of the biggest names in golf at the moment, like Rory McIlroy, they're super anti leave golf. 

Audio clip: [00:07:22] I don't want to kick someone while he's he's dying, obviously. But I thought they were naive, selfish, egotistical, ignorant. A lot of words to describe that. 

Bryce: [00:07:33] Similarly, Jon, Rahm, they're suggesting that the PGA is where history is made and that's where you can make your name as a golfer. So, as I said, the PGA has suspended the memberships of all players who went across to live golf. They are still allowed to play in majors, though, and take home the big cheques that live are offering. On the first day of Live Invitational outside London, the PGA Tour Commissioner Jay Monahan suspended Mickelson, Johnson and 15 other members from the PGA Tour. 

Audio clip: [00:08:00] It's been an unfortunate week that was created by some unfortunate decisions, those decisions being players choosing to violate our tournament regulations.

Sascha: [00:08:12] So we're not here to talk about the geopolitics of this tournament, although I do think that, as you've mentioned, it's worth saying that Saudi government have been accused and denounced by various international organisations and governments for violating human rights, and they also abstained from the United Nations vote adopting the Universal Declaration of Human Rights. So you can understand that while money speaks, it certainly is a grey area where some people feel that their personal politics might override the checks that are being written. So we're acknowledging that. But we're going to leave that to the side for today because we want to look at the business case. So let's talk about that in just a moment. We'll take a quick break. But when we come back, let's unpack why Saudi Arabia would want to get into golf. Welcome back to the Dive. As I said before, we're not here to talk about the geopolitics of the region. We're going to look at the financial and business rationale for the Saudi government investing in a golf tournament. Please enlighten me. Why would a government want to get into golf? 

Bryce: [00:09:18] Two main reasons, Sascha. The first is obviously financial, and that is to make money. And we'll dig into that in a second. And the second is an attempt from the Saudis to improve that global image by associating itself with the shame and reputation of golf and to, I guess, try and get that global halo effect, otherwise known as sports washing. 

Sascha: [00:09:40] Sports washing. That's a new one. We've talked about greenwashing. Yes. Seems like these washing adjectives are very common at the moment. But let's go back into the money making point, because I think that's why we're here today. I've said earlier, I've said several times they're investing $2 billion. No more chump change. How do you expect to make a profit on that size of investment? 

Bryce: [00:10:02] Yeah, it is a huge sum of money, a huge investment. And you are going up against the PGA Tour. So it's certainly not a small task. The Saudis want to reduce their economic reliance on oil and effectively diversify their income. And this is where the involvement of the Saudis public investment fund comes in. As you touched on, at least $2 billion has been set aside for live through this public investment fund, proving that they're serious about this new competition as an investment. It also aligns with Crown Prince Mohammed bin Salman's Vision 2030 plan to modernise the conservative kingdom. So there is plenty of money in golf. The PGA Tour projects to make over $1.5 billion in revenue this year. And that's mainly thanks to TV and media rights, sponsorship and ticket sales. And for fans, Live offers a different viewing experience to the traditional PGA Tour. 

Audio clip: [00:10:59] I saw the value of what the product was really about for the players serve, the fans, growing the game on a global basis, which by the way, of being a global player as a professional golfer, I saw the value in what golf can bring around the world.

Bryce: [00:11:14] There are only three rounds played as opposed to four, and there is a team element to play. And they also play with a shotgun role at times, meaning that players start on different holes of the course and all take off at the same time. So there's a lot more action going on. It's meant to be faster paced. And so I assume that the Saudis or live golf at least hope to make this a more accessible and captivating form of golf. 

Sascha: [00:11:39] Could you say that an equivalent would be the 2020 cricket as best test cricket as best one day cricket like changing up the rules to make it more accessible for an at home audience. 

Bryce: [00:11:50] You could try and draw that comparison. Yes, they are changing the format to accommodate some of the demands that are on players. You know, the PGA plays almost 52 weeks a year. It's incredibly demanding on players, whereas the live golf is saying we're only going to do, you know, a limited number of tournaments over a longer period of time. And they're going to be shorter and sharper. So, yes, that they're trying to make it faster, more engaging and hopefully attract some viewers that way. 

Sascha: [00:12:16] Anyone who is not a fan of golf, that's probably their number one criticism is that it's slow and boring. 

Bryce: [00:12:21] I beg to differ a bit anyway. 

Sascha: [00:12:24] Okay, so let's go to the big one. That's probably a bit more of a grey scale and harder for us to define, but that's talking about improving their global image, or to use that phrase that you introduced me to before sports washing, because. 

Audio clip: [00:12:38] I should go quickly about these suggestions of sports washing. What do you say to that? What's your response? I'm really not sure about this terminology, but. 

Bryce: [00:12:46] So live golf claims that its goal is to holistically improve the health of professional golf and to help unlock the sport's untapped potential. 

Audio clip: [00:12:56] Live golf has given them the opportunity for another pathway to to be the independent contractors. Go play where they need to play when they want to play for more money. 

Sascha: [00:13:06] Those are some pretty ambitious goals to be putting down in words. 

Bryce: [00:13:10] Yeah, pretty ambitious. And well, that's why there's $2 billion behind it. So it'll all be in front of us to see if it does pan out. But critics certainly argue that it's an effort by Saudi Arabia to polish its global image. Sports events have great reputations that glamorous. They invite prestige and prestigious characters. So these kind of events contribute to creating a new image for Saudi Arabia. They contribute to the country's efforts in rebranding itself and stature. This is otherwise known as sports washing. It's an attempt to improve a bad reputation by investing in popular sports or athletes. And so the Saudis, this isn't their first time they've been accused of doing it with Formula One racing and also the English Premier Football League. So golf is their next target. It's an incredibly prestigious sport. And so the Saudi. These are hoping that by aligning themselves with some of the biggest names in the game and attracting them across, that they're going to actually improve their global image. 

Audio clip: [00:14:08] The Saudi Arabia, did you have hesitancy about going into business with them? No, not at all. 

Sascha: [00:14:13] So essentially it's the same as, you know, if you're following some of these players on Instagram or you're a big fan of theirs, you would see that they're travelling and you would stop making associations with the country just because of their association with these particular individuals. 

Bryce: [00:14:27] Yeah, using the, as we said, the halo effect and the shaping of a sport to, I guess, try and downplay and diminish or cover up some of the nastier things that are going on in the country. And we are we already spoken about the human rights record and plenty of other things that the Saudis are doing that they know is tarnishing their global image. So this is an attempt by them to improve on that.

Sascha: [00:14:48] So, Bryce, I guess the $2 billion question is, will this work? Is this a good investment? You said earlier the PGA expects to take in $1.5 billion annually. So there's certainly a lot of money on the table. I guess my question to you is, do you think this will work? 

Bryce: [00:15:03] It's super hard to tell, but there are instances and examples in the past where investing in sports teams, we've even done a show on it here on the dive. Sports teams are good investments and investing in sport can can be quite profitable. Now, the PGA does make 1.5 billion in revenue a year and the sport is becoming increasingly popular. So it's no surprise that the Saudis have chosen this as a sport to go after. I'm a fan of golf and I do love watching the players that they are going after. Bryson DeChambeau, Phil Mickelson, Dustin Johnson So I can certainly say the the reason behind going after some big names and drawing some eyeballs across, whether or not it's going to be a meaningful enough investment to actually have the effects of sports washing and improving the image of Saudi Arabia. I'm not sold on that. I think there's there's way too much work to be done there. And I think this is just another play from them to to try and do so. So a lot of work to be done for the Saudis, a lot of money behind it. This isn't going to be the end of this. There's going to be headlines galore. Plenty of the big names in the sport are continuously going head to head on this. So, yeah, I guess we'll see what happens. 

Sascha: [00:16:13] Yeah. And I guess my point, not being a fan of the sport, but just listening to what you are saying today is how much pressure is the public and the fans going to be putting on these individuals for kind of ignoring the political ramifications of these decisions? And and I guess, combined with the PGA who don't want to be losing their stars. So you can't underestimate how powerful the political backlash can be and how much pressure can be successfully applied. Because I know that you said that the prise money is double, quadruple, huge amounts, but they're still walking away with 1.5 million if they're winning some of these golf tournaments. I mean, they're still taking away sizeable chunks of money. 

Bryce: [00:16:53] They are, but they're not taking home 200 million plus contracts, saying on the PGA Tour, that's the difference. And I think there are plenty of examples in history where sports players have done very controversial things. But then when it comes to the crunch, fans still follow them when it comes to supporting their sports teams. So will it play out here in the in the big game of golf? We'll soon find out. 

Sascha: [00:17:15] I'm going to have to ask you to keep me updated on this one. I think we'll leave it there for today. Thank you so much for joining us for today's edition of The Dive. If there's a story you want us to talk about or if you're a golf fan and you have a strong opinion on whether these stars should be leaving the PGA, then contact us at the dive at Equity Mates dot com and let us know. We'd love to hear what you think of this story. Also, follow us on all social media channels. All those details where you can get in contact with us are in the show notes below. Remember to give us a rating and a review on your favourite podcast app. I did see some five star reviews come through last week and I've got to say a huge thank you. If you did that, it just makes the world of difference to add discoverability and always make sure that you're subscribed or you're following so that every time there's a new episode, it's right there in your podcast player. You don't have to go looking for us. Thank you so much for joining me today, Bryce. It's a pleasure having your voice on the on the show for once. 

Bryce: [00:18:09] No worries. Sascha 

Sascha: [00:18:11] Until next time.