The PGA Tour Landed a Massive Investment, Now the Question Is How to Grow It
PEBBLE BEACH, Calif. — Pebble Beach was all smiles on Wednesday when the PGA Tour announced a new partnership with Strategic Sports Group (SSG) and a cash investment of $1.5 billion into the Tour coffers, with an additional $1.5 billion waiting to be invested in the new for-profit entity called PGA Tour Enterprises.
Many players focused on how PGA Tour Enterprises will take the $1.5 billion invested and create a grant program that will compensate nearly 200 PGA Tour members by making them equity holders, with future PGA Tour players potentially participating as well.
That's a lot of money in Tour coffers and players directly participating in the largesse, but such a small part of what must happen to make this deal and ultimately the investment successful.
The fact that a deal was not announced between the PGA Tour and the Public Investment Fund of Saudi Arabia may mean that a potential agreement, as outlined last summer, may be in jeopardy.
The Tour said there's progress in ongoing negotiations with PIF, yet it is no longer as necessary as it was in the just seven months ago.
But what is it that John Henry, the owner of the Boston Red Sox, Steve Cohen, the owner of the New York Mets and Arthur Blank, owner of the Atlanta Falcons, see in investing billions in the PGA Tour?
PGA Tour commissioner Jay Monahan and Strategic Sports Group's John Henry were all smiles while signing their investor agreement, but what happens next?
Chris Condon/PGA Tour via Getty Images
Everyone involved in the SSG bid are astute businesspeople with worldwide interests in sports.
Why invest so much in a sport that is niche at best and whose biggest events—the four majors—are owned by entities other than the PGA Tour?
The only clue comes from the statement in the press release announcing the deal:
“The money will provide strategic focus on maximizing revenue generation for the benefit of the players and on finding opportunities to enhance the game of golf across the world.”
The first half of that goal is supposedly accomplished with the $1.5 billion to the players, but to whom and how much is unclear. And what about the next $1.5 billion?
Bernhard Langer, speaking Wednesday on a call for the PGA Tour Champions's Chubb Classic held later this month, was asked if he foresees players on that Tour participating in the newly found largesse.
“We are affiliated with the PGA Tour. The better the PGA Tour does, the better we should do,” Langer said. “Hopefully they will not forget us totally and leave us in the dust. Hopefully we will benefit from whatever develops.”
Langer has played in 15 Chubb Classics with five wins. In 2009, the purse for the South Florida event was $1.6 million and remained there for the next 12 times he played it.
Finally, in 2023, the event raised its purse to $1.8 million and it remains there this year. Langer and his compatriots are familiar with being left behind, at least in terms of purses.
The other aspect of that statement—enhancing golf across the world—is intriguing and some could read into it as the creation of a world tour.
But how do you monetize that?
The idea seemed exciting in 1999 when the World Golf Championships began, bringing the best players to the world's best venues.
What everyone quickly learned is that the players didn’t want to go everywhere. They wanted to stay in the U.S.
Sponsorship was harder to find outside the U.S., making the WGCs just glorified PGA Tour events with a couple of overseas stops mixed in for variety.
The concept took a while to die, finally taking last rites last year in Austin, Texas.
Dermot Desmond is an Irish businessman and financier, with a net worth of $2.2 billion according to Forbes, is well versed in private equity.
“If you're going to get value for the investors for one and a half billion, then they're going to have to generate additional revenues, sponsorships, and I think that can only be done on a global basis,” said Dermot Desmond, an Irish businessman and financier with a net worth of $2.2 billion according to Forbes.
“I think we have to see what the plans are, what investors' plans are to get a return. What enables this to do is that all those other PGA Tours in Asia and Europe, South Africa, Australasia, it means that they could merge all together. But also, the PGA Tour has the financial clout to support them with the resources that they've generated.”
Desmond is well-versed in private equity and his philosophy, which Rory McIlroy has spoken of many times, is to expand the base and again go down a path that was previously unstainable.
World golf is tricky, but clearly Desmond believes that the billions of dollars invested in PGA Tour Enterprises will tip the scales.
At the same time, isn’t that what LIV and the PIF are trying to do?
With the Asian Tour under the sphere of Saudi influence, could they not do the same with other tours that are fledging?
Is it possible that the PIF grabs from its pot of $776 billion and starts aggressively going after professional tours, like a game of Risk, with world golf domination the goal?
The 54 LIV Golf players teeing it up this week in Mexico are familiar with playing overseas and have now embraced it.
Will PGA Tour players do the same and embrace not only traveling overseas, but deferring to the new entity when asked for the good of the business?
In the past, the phrase "independent contractor" was always used when a player didn’t want to do something. Does that mindset have to change to challenge a tour that has all its players under contract and showing up at every event?
The investment of billions of dollars only begs more questions with few answers.
Adding to the confusion: What happens with the DP World Tour since it was not part of this deal?
What other revenue sources can PGA Tour Enterprises tap? Will the sponsors pay more? Not likely. The Tour is already going after the tournaments to pitch in more money. The television networks are not getting the fields they were promised and ratings are not meeting their projections.
Lastly, how did the new entity come up with a valuation of $12 billion?
I have so many questions and very few answers. I believe current policy board member Jordan Spieth when he says some of this, specifically the grant program, will be sorted out in 30 days.
I also agree with him that doing the deal with SSG made sense since they have a lot of smart people involved and the Tour needs their help.
Maybe that's a backhanded way of saying those currently at the PGA Tour are not up to the task.
Yet Cohen bought a controlling interest in the New York Mets in October 2020 for $2.4 billion and last year had a payroll of nearly $350 million.
The Mets were 75–87 in 2023, 29 games back of the Atlanta Braves and fourth in the five-team National League East division.
Throwing money at a problem is not always the solution.
What will the PGA Tour do next?
