LIV Golf's Business Plan Coming More Into Focus, With Expansion Possible in 2024
LIV Golf is in the middle of its second season but hasn’t yet made it to its first anniversary.
The upstart spent hundreds of millions of dollars during the first season while recruiting players, signing venues and running tournaments–and at the same time suing the PGA Tour for antitrust violations while trying to figure out what it wanted to be once established.
The latter is a work in progress and the limited success of the first season has created an eagerness to grow exponentially while still trying to figure out the best path forward.
One of the bigger issues of 2022 was large expenditures that were either necessary but not approved or unnecessary and unaccounted for—supposedly to the tune of $180 million.
As a result, LIV’s benefactor PIF (the Saudi Private Investment Fund) forced out certain executives during the offseason including LIV Golf Managing Director Majed Al Sorour and Chief Operating Officer Atul Khosla.
The PIF is now more involved in the day-to-day operations of LIV Golf, which is still a work in progress and showing growing pains as it hopes to mature into a full-fledged alternative to the PGA Tour.
The issues are varied and many were discussed during the week of the LIV event in Tucson. Here is a summary of multiple conversations Sports Illustrated had with eight LIV sources and current players.
10 vs. 14 Events
When LIV Golf officials started to discuss signing players in 2021 and 2022, they were unsure of even how many events they would host in their first season.
The discussion was focused on six or eight events in season one, expanding in season two to 10 events with the potential for season three to have a maximum of 14 events.
The number was never assured, except for the floor in the second year of 10 and ceiling of 14.
The number 10 came from players hesitant to sign because no floor was set and anything less than 10 would have been unacceptable.
Fourteen was part of the discussion with players who wanted to play fewer events than they did on the PGA Tour and the compromise came down to 14.
Some players have read the 10-14 rule in their contract differently, believing that they are not required to play in more than 10 events and suggesting that if they play in the additional four, they should be compensated for those additional events.
Brooks Koepka had been mentioned as one of the players concerns about how the 10-14 provision is being interpreted, but in discussions with the four-time major winner, he steadfastly says he is comfortable with how LIV is progressing and is not unhappy with any of the contractual provisions of his agreement.
Brooks Koepka said there was no questionable fine print in his contract.
Courtesy LIV Golf
“I’m fine, I’m satisfied, I’m content with every decision I’ve made,” Koepka says.
And when asked about any fine print in the agreement between himself and LIV, Koepka was equally content.
“I knew everything I was getting into,” Koepka says.
Each contract is different so it is impossible to know exactly what each says, but generally the 10-14 provision is understood to be consistent in each contract.
Currently, Martin Kaymer and Hudson Swafford are not playing due to injury. Kaymer will likely return at some time this season but Swafford is out for the year.
The contracts provide for absence due to injury, with neither player having to pay back any of their signing bonus.
Where the Team Money Goes
In 2022, the team earnings were divided equally between the four team members since all expenses for the teams were covered by LIV Golf.
“Call it a bonus year,” was how the team money distribution to the players was described.
While it was possible in 2023 to do the same in 2022, the plan changed and team money goes back to the teams to be either distributed to the players or used for team expenses, which would include a general manager, staff and travel expenses.
Currently, the teams have four different ways to generate revenue: prize money, sponsorship, merchandise and retail sales. They will also benefit from profit sharing when LIV Golf is profitable.
Players have expressed some concern about the payments going to the teams since LIV already owns 75% of the teams and they feel they may be getting shortchanged.
According to sources, the payments to individual players was never part of the business plan.
Instead, LIV knew that the teams would take time to ramp up revenue streams, so as part of the plan in 2023, LIV provides operating capital to each team depending on their needs.
That capital will eventually be paid back to LIV when the team is sold.
The 75/25 percent breakdown may seem unfair in the early stages of the tour, but when you factor in the amount of money put into the prize fund for both individual and team winners, the amount of loaned capital, the expenses of putting on an event and the fact that no money flows back to LIV until the team is sold, the players seem to be getting a pretty good deal.
The team prize money could also be adjusted as LIV continues to review what is best for the tour.
Currently the top three teams earn prize money, but the possibility of expanding that payout to the top five is under discussion.
What It Costs to Break a Contract
LIV Golf maintains that some of its players still want to play on the PGA Tour.
But with the exception of playing a one-off event in a player’s hometown or somewhere they have had success; many LIV golfers seem content to play their 14 plus majors and call it a season.
None want to play a full season on the PGA Tour, which is good because their LIV contracts, while not prohibiting them from playing a full schedule on another tour, does force them to honor their commitment to LIV and if for some reason they wanted to leave LIV, the penalty clause is two, three or four times their signing bonus to break their agreement.
This penalty clause effectively keeps the players part of the LIV stable until the contract expires after the 2025 season.
Expansion Plans
The 2023 season is set, but 2024 could see an expansion of teams from 12 to 15.
By adding three more teams of four players, the LIV format of a 54-hole shotgun start would not be affected and would provide a path to allow others to participate.
The expansion could come from the Asian Tour International Series or Monday qualifiers.
Many scenarios have been discussed with nothing carved in stone, which is not unusual since LIV is still flying by the seat of its pants with many ideas being discussed.
How Relegation Works
The process of replenishing the 48 players who are part of LIV in 2023 is in full swing and it’s complicated.
LIV maintains a points list with the top 24 in each event receiving points.
At the end of the season, the top eight on the points list will receive a two-year exemption and ninth through 24th will receive a one-year exemption.
The top 25 through 44 are effectively in no-man’s land without any exemptions, but would be set for the next year if a team offered them a contract.
Players from 45 to 48 will be relegated and will have to requalify to play on LIV the following year.
According to sources, LIV believes that the 2024 season will see somewhere between eight and 12 new players spread out amongst the 12 teams.
Some turnover will be through relegation and some by teams not re-signing players
One curveball in the relegation process are the individual players’ contracts. Some are exempt through the top 24 and others are exempt through the top 44.
Until certain key contract information is made public it will be impossible as a fan to understand the importance of a shot as the season winds down, since one shot could make the difference in receiving points and a player keeping his spot.
According to LIV sources, some of this information will be forthcoming.
Courting Sponsors
Teams are starting to ramp up staff and starting to sell sponsorships, but the process of staffing– which requires LIV involvement–is slower than some would like to see and is one of the growing pains that the new tour is experiencing.
LIV officials have been complaining to teams that they are not doing enough to generate revenue.
One team, Fireballs, captained by Sergio Garcia, has a sponsor, Akron, a Mexico-based oil company company.
The other 11 are still working on potential sponsors.
According to those involved in the sales process, the Saudi involvement in the league is no longer the potential impediment as it potentially was in the past.
Instead, potential sponsors come in two categories: companies that are involved with the PGA Tour and have no interest in working with LIV, and current or former sponsors of the PGA Tour that have become disillusioned with the Tour and are looking for alternatives.
Most teams are in active negotiations with companies and believe agreements will be inked soon.
At the same time, attendance at LIV events is showing promise with the second round of the Tucson event sold out and all three days of general admission tickets at LIV Adelaide sold out at 14,000 a day and a waitlist implemented.
Add in 7,500 hospitality tickets sold and LIV believes that a total of 60,000 will be on the grounds in Australia next month.