First appeared in BOXSCORE
By Aron Solomon
If we’re being honest, the most interesting element of The Masters was tracking how golfers from the LIV Golf Tour were doing.
While PGA Tour golfer Jon Rahm won what many see as the pinnacle of golf’s Majors on Sunday, the two players tied for second – Brooks Koepka and Phil Mickelson – are under contract with the LIV Golf Tour and count among the two most polarizing golfers in the world today, so it was no surprise that one of the world’s top golf writers led with this on Monday morning:
While LIV golfers are able to play the major tournaments, such as The Masters, how many golfers can play and for how many years they’ll be able to play is an ongoing open question. Since LIV Golf events do not currently receive any ranking points, it will be mathematically difficult for LIV golfers to qualify for major championships.
Some of the concerns about LIV’s long-term viability are foundational.
LIV Golf is backed by the Public Investment Fund (PIF) of Saudi Arabia, which is responsible for financing the tour. The PIF is a sovereign wealth fund of Saudi Arabia, which is controlled by the country’s Crown Prince, Mohammed bin Salman.
As part of Saudi Arabia’s Vision 2030 plan to diversify its economy, PIF has invested heavily in various industries, including technology, real estate, and entertainment. PIF holds significant positions in Alphabet, Microsoft, JP Morgan, and BlackRock – their investment in LIV Golf is part of this broader investment strategy.
LIV’s business model is based on paying out more per event than the PGA Tour. This investment anticipated a quick return through a big-money streaming deal or over-the-air rights package, which isn’t on the horizon. Put as directly as possible, the Saudis fully expected that the world would be exponentially more enamored with the LIV Golf Tour than it has been.
As someone who closely follows the business side of golf, I see LIV going from not great to significantly worse over the next two years. My prediction is that the perfect storm of LIV’s stagnant business model and legal troubles is going to cause a slow implosion. I expect that in the next 12-18 months, we will collectively ask what happens to the gargantuan contracts LIV signed with big-name golfers to get them to come over to the new tour.
To date, LIV Golf’s biggest (some would argue “only”) success has been in attracting some of the biggest names in golf with its significant financial incentives.
According to Forbes’ 2022 highest-paid golfers list, seven of the world’s top 10 highest-paid golfers now play for LIV Golf, including Dustin Johnson, Patrick Reed, and Brooks Koepka. All competitors in the fields in the first three LIV Invitational events were massively compensated for making the move. Charl Schwartzel, LIV Golf’s first winner in London, made more money for those three days of work ($4.75 million) than in any year of his two-decade PGA Tour career.
It’s important to remember that the golfers’ contracts with LIV Golf are with the organization itself, not with the PIF. So if the business end of the LIV Golf Tour doesn’t work out as PIF has intended, and they realize that the entire package might be much more of a sports and public relations dud than they had ever imagined, there is a chance the investment could dry up as the Saudis can’t be saddled with a loser here.
So no matter who is backing the LIV organization, as Attorney Michael Epstein points out, “If the agreements are between these golfers and the LIV organization itself (and not co-signed in any way by the tour’s founding investors), if the tour can’t pay and there are no guarantees, the golfers’ legal remedies are less than clear.”
Part of what could make it difficult for LIV to eventually pay its golfers’ contracts is ongoing litigation with the PGA Tour. If this ends up hitting LIV’s bottom line because of judgments or settlements, this could make some of the big contracts impossible to pay.
And just this month, LIV took a serious hit in court in a procedural ruling in the antitrust lawsuit filed by LIV Golf against the PGA Tour. The court ruled that LIV, PIF, and PIF’s Saudi governing body were subject to discovery. This important ruling runs counter to the Saudi backers of the LIV tour’s core argument that sovereign immunity should get them out of this part of the legal process.
The timing of this antitrust lawsuit is critical here. The trial is set for January 2024, which is why the case is now in pre-trial. There is a very good chance given the complexity of the case that deadlines will be pushed back and this doesn’t go to trial until June or July 2024.
In the interim, the fortunes of the LIV Tour are intertwined with the lawsuit. Continued underwhelming viewership and attention being paid to the tour would be a loss for LIV that could make a loss in court one too many. As so much of the success of a new sports venture is based on optics, for LIV to be liable in the long-term, they need to rack up some wins, not just second-place finishes.
About Aron Solomon
A Pulitzer Prize-nominated writer, Aron Solomon, JD, is the Chief Legal Analyst for Esquire Digital and the Editor-in-Chief for Today’s Esquire. He has taught entrepreneurship at McGill University and the University of Pennsylvania, and was elected to Fastcase 50, recognizing the top 50 legal innovators in the world. Aron has been featured in Forbes, CBS News, CNBC, USA Today, ESPN, TechCrunch, The Hill, BuzzFeed, Fortune, Venture Beat, The Independent, Fortune China, Yahoo!, ABA Journal, Law.com, The Boston Globe, YouTube, NewsBreak, and many other leading publications.