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LIV Golf: A Look At The Past, Present, And Future Of The Saudi-Backed League

Jan 23, 2023

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Today At A Glance:

LIV Golf took the sports world by storm last year. The Saudi-backed golf league handed out more than $250 million in prize money. They signed some of the world’s top golfers, including Phil Mickelson, Dustin Johnson, and Cameron Smith, and they spent $800 million on the first season — while receiving little-to-no revenue in return.

And they don’t appear to be slowing down. LIV will expand its schedule from 8 to 14 tournaments this year. Prize money will increase from $255 million to $405 million, and they recently signed a multiyear media rights deal with CW.

So today’s newsletter looks at the Saudi-backed league's past, present, and future.

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Friends,

It’s no secret that Saudi Arabia is investing in sports. They pay Formula 1 more than $100 million annually. They purchased Premier League club Newcastle United in 2021 for $415 million, and they have spent millions more across the WWE, major boxing competitions, entire esports leagues, and more.

But their most significant sports investment so far is LIV Golf.

The upstart professional golf league was created to challenge the PGA Tour, and Saudi Arabia has reportedly committed at least $2 billion to the cause, primarily using capital from its $600 billion sovereign wealth fund.

LIV Golf spent year one signing big-name PGA Tour players and flaunting their deep pockets, but now they have a TV deal that puts their product in more than 100 million homes across the United States.

So today’s newsletter will break down everything you need to know, including how we got to this point and what the future of professional golf might look like. Enjoy!

(Image: Dustin Johnson at his inaugural LIV Golf press conference via Reuters)

Recapping LIV Golf’s First Season

The LIV Golf Invitational Series is an upstart professional golf league run by CEO Greg Norman (former world No. 1 and two-time Open Champion) and backed by Saudi Arabia's Public Investment Fund (PIF) that wants to disrupt professional golf.

Saudi Arabia’s Public Investment Fund (PIF) currently has about $600 billion in assets under management, making it the world’s 6th largest sovereign wealth fund. And the value proposition behind LIV Golf is primarily based on two items:

More money: Each LIV Golf event features a total purse of $25 million, including $20 million in individual prize money based on traditional stroke play. The first-place individual finisher wins $4 million, and the last-place finisher (48th overall) earns $120,000. And for context, Dustin Johnson earned more than $35 million in year one (not counting his signing bonus), compared to $3.8 million for his two career major wins — the 2016 US Open and 2020 Masters.
More freedom: LIV’s tournaments include a 3-day, 54-hole stroke play format with no cut, compared to the traditional 4-day, 72-hole format with cuts on the PGA Tour. There were also only 8 LIV tournaments in year one (vs. 48 on the PGA Tour), and players are allowed to play in any other golf tournament they want.

LIV Golf immediately made headlines by committing nearly $1 billion to multi-year agreements with some of the world’s most popular golfers, including Phil Mickelson, Dustin Johnson, Brooks Koepka, Bryson DeChambeau, Cameron Smith, and others.

LIV Golf’s Guaranteed Contract Payments to Top Players

Phil Mickelson: $200 million+
Dustin Johnson: $150 million
Brooks Koepka: $150 million
Bryson DeChambeau: $125 million+
Cameron Smith: $100 million+

LIV held eight tournaments in four different countries. They grew their social media accounts to nearly 1 million followers. They handed out $255 million in prize money and now have more than 125 employees across three global offices.

Top 5 Prize Earners In LIV Golf’s Inaugural Year

Dustin Johnson: $35.6 million
Branden Grace: $16.6 million
Peter Uihlein: $12.8 million
Patrick Reed: $12.2 million
Talor Gooch: $10.3 million

Still, LIV Golf reportedly spent $800 million on its first season and received little-to-no revenue in return. Remember, they didn’t have a TV deal, they only had one sponsor, and in-person tickets were frequently discounted.

The eight LIV Golf tournaments also averaged just 67,000 viewers on YouTube, although LIV says that number is 1.1 million when you include its website.

LIV Golf Average Viewership On YouTube

London: 104,000
Portland: 90,000
Bedminster: 76,000
Boston: 117,000
Chicago: 61,000
Bangkok: 21,000
Jeddah: 27,000
Miami: 40,000
Total Average: 67,000

So LIV’s first year was full of ups and downs. They burst onto the scene and spent big money on big-time players. They successfully hosted eight tournaments around the world and handed out more than $250 million in prize money. And while many people still have a difficult time looking past the obvious allegations of sportswashing, Saudi Arabia has publicly said they are committed to building this out for a decade-plus.

Looking Ahead To LIV Golf’s Second Season

LIV Golf has announced several changes for its second season in 2023.

The name will be rebranded from LIV Golf to LIV Golf League.
The number of events will increase from 8 to 14, and the prize fund will increase from $225 million to $405 million.

The league is also looking to sign its first league and team sponsors before its second season starts next month. But more importantly, LIV says that its 12 teams — a crucial part of their business model — will now act as individual franchises like you see in other sports leagues.

This means teams can sell minority stakes in their franchises or sell them outright if the situation presents itself. And each team captain is receiving a 25% ownership stake in their franchise, with LIV retaining the other 75% for now.

LIV Franchise Ownership Stake Breakdown

LIV: 75%
Team Capitan: 25% (guaranteed)

I imagine this was initially used as a way to sweeten the deal for guaranteed player contracts (think Phil Mickelson & Dustin Johnson), but the increasingly drastic difference in money has forced the PGA Tour to respond.

For example, Tiger Woods and Rory McIlroy arranged a meeting last year between many of the PGA Tour’s best players. They put together a list of changes they would like the PGA Tour to make, and several have been implemented. This includes:

12 elevated events with increased purses of $20 million to $25 million and a requirement that top players play in at least 20 events
Increasing Player Impact Program prize pool to $100 million and eligibility to 20 players (up from 10)
Calendar-year schedule starting in 2024
“Earnings Assurance Program’’ that guarantees $500,000 to each player who makes it to the PGA Tour through the Korn Ferry Tour and above. The program will affect 215-220 players, with rookies and returning members receiving the funds upfront with the expectation to compete in a minimum of 15 events
$5,000 travel stipend for non-exempt players outside the top 125 and miss the cut at tournaments

LIV Golf has since filed a lawsuit against the PGA Tour alleging anti-competitive practices and monopolistic behavior, and the PGA Tour is countersuing.

And for additional context, The Masters will allow LIV Golf participants to compete at this year’s tournament, while Team USA is not allowing LIV golfers to play in the Ryder Cup.

The CW Media Rights Deal

Last week, LIV Golf announced that they have signed a multiyear deal that makes CW the exclusive partner for the league’s United States broadcasts.

The financial terms haven’t been disclosed, but here are some of the details, according to ESPN and Sports Illustrated:

It’s at least a three-year deal.
No rights fee is being paid, but that could change after two years.
There is a revenue-sharing agreement in place for advertising.
LIV will be responsible for covering production costs at each tournament.
CW will air all 14 of LIV’s events on its network and app. However, Friday coverage will only air on the CW app, while Saturday and Sunday coverage will air on both cable and the app.

For context, the PGA Tour is in the middle of a 9-year, $6.3 billion broadcast rights deal (through 2030) with CBS and NBC. ESPN is also paying the PGA Tour $75 million a year as part of a 9-year deal worth $675 million, which made ESPN+ the exclusive streaming partner of the PGA Tour.

But still, this LIV-CW announcement can be looked at in several ways.

Anti-LIV people will say that CW is most famous for One Tree Hill, Gossip Girl, and Smallville and that they have never been the exclusive home for a live mainstream sport. And pro-LIV people will say that CW is available in 120 million U.S. households and that it’s currently the 21st-most watched network in the U.S. for average primetime viewing — significantly higher than the Golf Channel.

But, like most things, the reality is probably somewhere in the middle.

Amazon and Apple reportedly turned down LIV Golf, and with the PGA Tour already in bed with NBC, CBS, and ESPN, a large network media deal was always going to be an uphill battle. But still, the average PGA Tour fan is 64 years old, and making tournaments accessible via cable television was of the utmost importance.

Ps. I’ve seen many golf fans talking about how YouTube has 2.6 billion monthly active users, but there is a reason why every major sports property still values cable over streaming.

This arrangement wouldn’t work for a traditional sports league, of course. Every business eventually has to turn a profit, and even the craziest venture capital firms would get sick at the idea of losing billions of dollars each year with no revenue.

But LIV Golf is working with a bottomless pit of cash, and it’s clear they placed a premium on finding a TV partner as soon as possible, even if that meant they received no rights fee and had to pay several million dollars in production costs themselves.

So it’ll be interesting to see how this plays out. The most obvious outcome is that LIV sees a tick-up in viewership based on being available in 120 million U.S. homes — rather than just on YouTube and their website.

But the more significant challenge will always be seeing if LIV can build a sustainable competitor to the PGA Tour — because no matter how much money Saudi Arabia has and is willing to invest, they won’t continue forever if the model isn’t working.

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I hope everyone has a great day. We’ll talk on Wednesday.

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