The PGA Tour, through a series of changes announced this week by its commissioner, is planning to spend money. That’s the easy part. But you know money doesn’t grow on neither trees nor fairways. So the question then is this:
How is the PGA Tour planning to get money?
Jay Monahan says it will come from three sources.
But no, the Tour will not give up its nonprofit status, the Tour commissioner said.
And no, Monahan said, the Tour will not go dollar for dollar with LIV Golf, the upstart, controversial, Saudi-backed series — and the impetus for the Tour’s changes.
We’ll begin with the new ways the established brand will be spending. On Wednesday, ahead of the Tour Championship, Monahan said that 20 players will be defined as “top players” starting next year; the device in which the Tour defines those players, the Player Impact Program, will receive a purse bump, from $50 million to $100 million, to reward those players; four more tournaments, in addition to eight announced in June, will be tabbed as “elevated events” with $20 million purses; the 20 players will play in those events, the Players Championship, the majors and three other tournaments; all fully exempt players will start the season with a $500,000 stipend; and players will receive a $5,000 travel stipend.
So again, how is the Tour affording this? This was Monahan’s explanation:
“The money comes from three sources,” he said. “One, I would say for 2020, this year that we’re in, the Tour is having its strongest year in history of the PGA Tour and is performing well ahead of budget.
“Secondly, as you’ve heard me talk about before, the Tour through the years has been very prudent in managing its finances and building reserves and being in a position to be able to invest in programs that are going to help the Tour grow. That’s what they’re there for, and that’s what we’ll continue to use them for.
“I would say additionally our partners, our sponsors and all of our partners who want to get behind and are getting behind the direction that we’re going in, want to be a part of the continued growth and evolution of the Tour. They recognize that with the changes we’re talking about today, the changes that we’ve made prior to today, and the direction we’re heading in, we’re going to be creating more value.
“When you create more value, you’re going to get more income coming into the business.”
There’s a lot to unpack there. In reference to the strong year, a large chunk of the money has likely come from the Tour’s new media rights deals, which went into effect on Jan. 1 and are worth billions through the end of the decade. The reserves, meanwhile, were not directly addressed on Wednesday, but they were in March; at the Players Championship, Monahan said that account was at $225 million, down from $300 million prior to the pandemic.
Monahan’s third point — the partners and sponsors — is notable. What those conversations were like is unknown, but they’ll help fund nonetheless. For now. Which leads us into the bigger point of whether the Tour can get into an arms race with the multi-billion-dollar Saudi Public Investment Fund, LIV’s backer.
On Wednesday, a reporter asked Monahan this question: “What’s the reaction if LIV, which seemingly has an unlimited amount of money, simply doubles what it’s offering now, or to get into a bidding war with them?”
“I’ve been pretty consistent throughout that for us, where we’re competing is with our product, and our product is our schedule,” Monahan said. “We’ve made some strong enhancements to that for top players and for our entire membership, coming into this year and certainly as we go into 2023.
“When you look at our schedule, the value of our platform and what players can achieve off of that platform based on their competitive success and the values that are conveyed through that platform, that coupled with some of these financial programs, when you look at being a member of the PGA Tour and you look at the financials moving forward, you can earn a tremendous — you can have a tremendous career. Your earnings potential is extraordinary.
Again, you’re doing it in a way where you’re preparing yourself to achieve at the highest level of the game. You’re competing for trophies that matter. You’re competing for history and legacy.
“Look at the schedule. You go to next year, our fans are going to look at the schedule in January and say, the Sentry Tournament of Champions, the WGC Dell Match Play, the three player-hosted invitationals. For the first time, I know now that these players are going to be playing there; plus I know that these players are going to be playing additional FedExCup events, 20 events. To me, that is tremendously exciting as a fan, and as we have more excitement from our fans, we grow our business.
“But to directly answer your question, when you’re dealing with a non-economic actor, you have to come back to the core of who you are, and if the core of who you are is providing the single greatest competitive access and opportunities for players, and pipeline, then how do you make that stronger? And that’s what everything starts with. That’s what came out of the meeting last week. That’s what comes out of all the discussions we have at the PAC level and with our board.”
So, in fewer words, the Tour likely has a limit. And that’s even truer when you consider that Monahan would not renounce its non-profit status, which would have allowed private investors and equity firms to invest. On that subject, the commissioner did say that the Tour could create for-profit subsidiaries, and one of those is the Tiger Woods and Rory McIlroy-led indoor golf series that was also announced Wednesday and will begin in 2024.
Of course, you may also be wondering could any of these moves have been earlier. In more or less words, Phil Mickelson had thought this before moving on to LIV.
Monahan wasn’t asked this week, though in June, after another announcement of changes, he said this: “We were planning on raising purses to these events in the future, OK? And that was part of our resource-allocation plan. The move that we’re making at the start of 2023, there’s no question that one of the things that we’re looking to do is make certain that our top events are maximized both in terms of their consequence and the financial investment, and this is an acceleration of that. So, yes, this is, that, this is something that we’re doing to respond on behalf of our members to the current environment that we’re in.”
Jordan Spieth, meanwhile, had this exchange on Wednesday.
Reporter: “Why has it taken so long? Why did it take this kind of existential threat to get to this point?”
“I don’t know,” Spieth said. “I’m not sure. I’m not sure what else could have provoked it or — it’s almost like things have been pretty good. Golf has been good. Right when Tiger’s dominance — he ends up injured, isn’t playing for a little while, he comes back and he wins the Tour Championship and then the Masters.
“You have new media rights deals around the same time. Covid hits, not good for anybody; golf numbers go up. It’s been in a good place. It’s almost like, if it ain’t broke, don’t fix it, and it wasn’t broke, and it’s just now there was maybe — this seems like a time to — a really good time to make some kind of a change.
“Also, I think with the reserves, the reserve situation and Covid, having to have those, and then they get re-built up by markets being built back up and PGA Tour’s, a lot of their separate business entities being really successful, they get a situation where they can bump all these and continue to move this direction.
“I think the timing just made sense, and it was also provoked a little bit. To be honest, yeah, I don’t know.”