We are back with the second piece in our new Saturday series! Every weekend, you'll receive my thoughts on something big that happened this week in the worlds of business and finance. Today's topic of choice? The LIV Golf Invitational Series.
Let's get started 🤝
In case you haven't heard, there's a professional golf tournament going on in London this weekend. But this particular tournament wasn't organized by the PGA Tour. In fact, the PGA Tour has banned any players who participated in this London exhibition.
This London tournament is the first event held by LIV Golf, a new professional golf organization backed by Saudi Arabia's Public Investment Fund. The same Saudi Arabia that Phil Mickelson described in the first sentence of the above quote.
So what's the deal with this new organization? Why is it surrounded by controversy? Why are big-name pros risking expulsion from the PGA to participate? Let's dive in.
In 1994, the former World No.1 golfer Greg Norman had plans to launch a World Golf Tour independent of the PGA. While his original idea never came to fruition, he was given a second chance in 2022. The Saudi-backed LIV Tour approached him with a new idea (and billions of dollars) to disrupt the PGA Tour, and Norman was sold.
Norman and company pinged golf's biggest names, offering some of them hundreds of millions of dollars to play in this new league. Phil Mickelson was reportedly offered $200M, and Dustin Johnson received a $125M deal.
Hundreds of millions of dollars to play their sport seems like a no-brainer, right?
There were two small issues:
Most professional sports leagues have player unions that negotiate on the behalf of athletes. From the NBA, to the NFL, to the MLB, unions have increased minimum salaries, improved health & safety standards, and made sure players receive a fair cut of sponsor and media revenue.
The PGA doesn't have a players union. In fact, it considers its players to be independent contractors that often pay for their own travel, entry fees, and $50 locker room fees. You would think that as independent contractors, professional golfers would at least have more flexibility outside of tournament play than athletes in other sports, but this isn't true either.
Per the PGA Tour Player Handbook, PGA Tour members "cannot participate in other golf tournaments or events on a date when a PGA Tour cosponsored tournament or event is scheduled." And those events are scheduled 47 weeks per year.
Basically, the PGA is an organization that gives its players all of the responsibilities of full-time employees with none of the benefits. This is most evident in its pay structure.
Win, lose, or draw, athletes in other sports get paid to play. Excluding sponsorships, golfers only get paid by their performance per tournament. And yes, the world's best get paid well. But pay rates drop off quickly once you leave the upper echelon of golfers, especially when compared to other sports.
Moses Brown, the 250th best player in the NBA (as determined by fantasy sports rankings on the NBA's website), makes $1.9M.
Meanwhile, the 250th ranked golfer in 2019 (the last pre-Covid year) Robert Allenby, made just $14,715 in tournament earnings.
To be fair, the NBA is projecting $10B in revenue this year, vs $1.5B for the PGA Tour. But still, a league with 6.6x higher revenue is paying its 250th best player 130x as much as the 250th highest ranked PGA golfer. Does not compute.
Golfers don't have leverage, because they lack both a players union and an alternative league. After Phil Mickelson's quote at the beginning of this piece, the golfer continued to elaborate on why he is partnering with LIV:
The LIV Tour provides leverage. LIV offered Mickelson two times more money ($200M) in one contract than he has made over his entire career from tournament winnings ($100M).
Suddenly, the PGA doesn't have a monopoly on golf's best players.
This week, the PGA announced that players who participated in any LIV events would be suspended from PGA play. Undeterred, 48 players, including Phil Mickelson, Dustin Johnson, and Sergio Garcia, flew to London anyway.
Getting paid the GDP of a small country to participate in the tournament obviously played a large role in the athletes' decisions, but one aspect of the PGA's ban influenced their moves as well:
The PGA doesn't own the four majors.
The US Open, The Open Championship, The Masters, and The PGA Championship are all independently operated (though the latter does share the same name as the organization). The organizers of these tournaments set their own entry requirements, and the USGA recently stated that all qualifying players would still be welcome at the US Open next week.
The majors are the most prestigious tournaments in golf. For the sport's top players, a ban from the PGA doesn't carry all that much weight as long as they can still play in Augusta and St. Andrews.
So why is everyone up in arms about players joining the LIV Tour? Why did Rory McIlroy call out his fellow golfers?
To be blunt: because Saudi Arabia does a lot of bad stuff to a lot of innocent people. In the last decade or so, they have killed a Washington Post journalist for writing articles critical of the royal family, imprisoned citizens for speaking out against the government, and publicly flogged someone for creating an online forum that facilitated anti-Saudi speech. Women are discriminated against, homosexuality is outlawed, and millions are subject to Draconian laws.
So yeah, it's a pretty bad look taking money from these guys. But everyone has a price.
History has shown that in the world of sports, money and morality operate on a sliding scale.
Three years ago, in response to China's increasing aggression in Hong Kong, Daryl Morey, the general manager of the Houston Rockets, tweeted his support for Hong Kong.
In response, the Chinese Basketball Association suspended its cooperation with the Houston Rockets, and several Chinese media outlets announced they would no longer broadcast Rockets games. Then China halted the broadcast of all preseason NBA games.
Morey eventually deleted the tweet, the NBA made sure to distance itself from his comments, and Lebron James referred to Morey, an NBA general manager with an MBA from MIT who has friends that live in Hong Kong, as "uneducated."
FIFA officials were found guilty of accepting bribes from Qatar to host the 2022 World Cup. The country would have to spend $200B to build infrastructure to support the tournament. With 120 degree summers, the event would have to be rescheduled to November, which would interrupt the Premier League schedule. Qatar barely has a national football team of its own. None of it made sense.
Yet Qatar won the bid anyway. Corruption 101.
Since winning the bid, Sepp Blatter and the rest of FIFA leadership at the time of the selection have been arrested or forced to resign, more and more details of FIFA's rampant corruption have come to light, and 6,500 migrant workers have died during the construction process.
But guess what? Every country is still going to play in the World Cup. Companies are still going to advertise their products to billions of spectators, and fans around the world are still going to cheer for their nations' squads.
The LIV Tour is no different. Yeah, it is being bankrolled by a horrible regime that routinely tortures and kills citizens for having different views and independent voices. But billions of dollars have a way of helping sports organizations overlook these minor transgressions.
What is the NBA's price to ignore China's anti-democracy aggression in Hong Kong? Approximately $5B.
What is FIFA's price to overlook a corrupt bidding process and the deaths of 6,500 workers? Approximately $7B.
What is Phil Mickelson's price for accepting money from a heinous Saudi regime? Approximately $200M.
In the world of sports, morality can be purchased for the right price, and Saudi Arabia has a blank check.
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