New PGA Tour Enterprises

[MtlJeff]

They are still working with the Saudis for a potential partnership agreement, correct? How does this affect that?

I think i saw it written that the PIF could still invest and buy a percentage of the new company, they left it open for that. I guess the valuation of PGA Tour Enterprises would be more with LIV and it's players in the fold, so PIF would just invest and own whatever share of the larger company they negotiate.

And at that point, golf is a monopoly again controlled by VCs. Good luck with that, players!

 

[Bosco...]

So like does it come with a free duffel bag or maybe a golf towel?

 

[tequila4kapp]

The investors have to receive ROI on their money. This has to mean a different business model (ie, giving the players equity in the Tour does nothing to generate more revenue). The only thing I can think of is going to a World Tour concept to access new markets. Color me skeptical...there will be excitement in areas for a while over the new shiny Tour toy that comes to visit but eventually they are left with the same problems the tour currently has, all of which makes the product not especially compelling.

Also, I do not understand how bringing in this partner mends fences and enable the partnership with LIV. I know the Tour and LIV are saying the right things publicly but this smacks to me of Jay once again doing anything he can to stick it to LIV.

 

[CrashTestDummy]

PIG/LIV will step in and buy the DPWT who is getting nothing from this deal.

I think that is a possibility. Before, it was supposed to be a deal creating PGA Enterprises in partnership with PGA, DP World Tour, and the PIF.

 

[frontTsociety]

I’ll take “how to turn $billions into $millions” for 300 Alex….

 

[GoldenBuff]

All of this is still so confusing. Backroom money deal. Now what? I'm ready to get past of the money and power junk and focus on captivating, competitive golf. And at risk of sounding like a broken record, that's not LIV.

 

[Greg Kulbick]

The biggest question is how will Monahan screw this up?

He already has by doing this deal and excluding the PIF, who have literal and figurative F you money. The PGAT dragged its feet on the negotiations that had gotten the PIF to stop poaching players. When word got out the PGAT was trying to do the same deal with another group, they went and got Rahm. What do people think is going to happen now?

 

[frontTsociety]

He already has by doing this deal and excluding the PIF, who have literal and figurative F you money. The PGAT dragged its feet on the negotiations that had gotten the PIF to stop poaching players. When word got out the PGAT was trying to do the same deal with another group, they went and got Rahm. What do people think is going to happen now?

Back the dump truck up to Kim and Fowler. That’s what I would do. Their wild popularity is well beyond wins and losses, and it would be an almost death knell to the PGAT.

 

[hadi05]

I'll admit I don't understand a lot of this and need an 'Explain it to me like I'm 5 years old'.

Might even dial that back to a 4y/o.

I don’t understand either

 

[hadi05]

@JB can you break this down for us a little?

 

[Greg Kulbick]

Back the dump truck up to Kim and Fowler. That’s what I would do. Their wild popularity is well beyond wins and losses, and it would be an almost death knell to the PGAT.

It would follow the road map. They've taken personalities. Just about wiped out half the PIP top ten that first year.

 

[hofstbr]

Simple version:

• A bunch of rich guys that own professional sports franchises have an investment group (SSG).
• The rich guys want to get richer, so they invested $3 billion in the PGA Tour, creating an new entity call PGA Tour Enterprises.
• This new arrangement will allow 200 current (and potentially former) players to have ownership (equity) in PGA Tour Enterprises. There will be different ownership tiers based on yet to be disclosed terms, but likely to include things like tour wins, longevity and future commitment to the tour.
• PGA Tour Enterprises would still like to find a way to work with the Saudis/LIV/PIF, but they're likely in a stronger negotiating position because of this new investment.
• The rich guys will get richer as PGA Tour Enterprises continues to rise in value (as nearly all major sports franchises do). Estimates have the current PGA Tour Enterprises entity worth about $12-$13 billion.
• What is unclear is the return on investment the rich guys will receive in the shorter term, but you have to believe it will be something based on how much profit the new entity makes.

 

[hadi05]

Simple version:

• A bunch of rich guys that own professional sports franchises have an investment group (SSG).
• The rich guys want to get richer, so they invested $3 billion in the PGA Tour, creating an new entity call PGA Tour Enterprises.
• This new arrangement will allow 200 current (and potentially former) players to have ownership (equity) in PGA Tour Enterprises. There will be different ownership tiers based on yet to be disclosed terms, but likely to include things like tour wins, longevity and future commitment to the tour.
• PGA Tour Enterprises would still like to find a way to work with the Saudis/LIV/PIF, but they're likely in a stronger negotiating position because of this new investment.
• The rich guys will get richer as PGA Tour Enterprises continues to rise in value (as nearly all major sports franchises do). Estimates have the current PGA Tour Enterprises entity worth about $12-$13 billion.
• What is unclear is the return on investment the rich guys will receive in the shorter term, but you have to believe it will be something based on how much profit the new entity makes.

The last bullet point to me is where I struggled. Why even do this. What gains are they going to have for the investment

 

[mson]

The last bullet point to me is where I struggled. Why even do this. What gains are they going to have for the investment

I'd assume they have ideas/plans to increase viewership, etc. based on their experience with other sports related investments. I kept seeing a stat about how the Masters had around 12M viewers, which is still well below even a regular season NFL game. Assuming they can increase viewership, the value of media deals, etc., then the value of the business and their investment goes up.

 

[Pharaoh]

Back the dump truck up to Kim and Fowler. That’s what I would do. Their wild popularity is well beyond wins and losses, and it would be an almost death knell to the PGAT.

I laugh everytime someone says death knell for pga. People really don’t understand how many great golfers pga has always coming up. They can simply reload. LIV is mainly over hill or heading past their prime golfers. PGA will be just fine. LIV wouldn’t exist without having to take golfers from the pga.

 

[David7]

This seems like another train wreck waiting to happen; I suspect this will cause the agreement to fall through and they will once again be rival tours.

I don’t think this is the silver bullet the PGAT thinks it is; the Red Sox owner and friends will want to see a profit. They can’t endlessly eat losses like the PIF can.

 

[hofstbr]

The last bullet point to me is where I struggled. Why even do this. What gains are they going to have for the investment

This seems like another train wreck waiting to happen; I suspect this will cause the agreement to fall through and they will once again be rival tours.

I don’t think this is the silver bullet the PGAT thinks it is; the Red Sox owner and friends will want to see a profit. They can’t endlessly eat losses like the PIF can.

 

[David7]

He already has by doing this deal and excluding the PIF, who have literal and figurative F you money. The PGAT dragged its feet on the negotiations that had gotten the PIF to stop poaching players. When word got out the PGAT was trying to do the same deal with another group, they went and got Rahm. What do people think is going to happen now?

Exactly. This is now going to become basically the PIF vs XFL type money. Not going to end well for the PGAT.

 

[hofstbr]

They're still rival tours and they probably won't have to eat losses like PIF. I have to believe that the Tour is profitable already, even with the LIV departures. SSG is counting on the value of the Tour continuing to rise like all of the other major sports franchises have at 13-20% per year, every year, for the last 10 years. Those kind of returns would do wonders for your 401k!

 

[Bernoulli]

I'd assume they have ideas/plans to increase viewership, etc. based on their experience with other sports related investments. I kept seeing a stat about how the Masters had around 12M viewers, which is still well below even a regular season NFL game. Assuming they can increase viewership, the value of media deals, etc., then the value of the business and their investment goes up.

I would assume that increasing viewership would increase value. The question I have is how do they accomplish that. Giving players equity interests and giving them more money doesn’t necessarily increase viewership.

It’s a big assumption to make.

 

[Greg Kulbick]

They're still rival tours and they probably won't have to eat losses like PIF. I have to believe that the Tour is profitable already, even with the LIV departures. SSG is counting on the value of the Tour continuing to rise like all of the other major sports franchises have at 13-20% per year, every year, for the last 10 years. Those kind of returns would do wonders for your 401k!

The PGAT is a non-profit, and had to enter into secret negotiations with the PIF to merge because they were outspending their future TV deal earnings.

 

[MrDC]

Humpty Dumpty, we'll be hearing ideas from the King's horses and men for quite some time while they try to put pro golf back together again.

Bottom line is without the viewers and fans it doesn't matter what moves they do, no interest = no money and only LIV can survive that.

 

[mson]

I would assume that increasing viewership would increase value. The question I have is how do they accomplish that. Giving players equity interests and giving them more money doesn’t necessarily increase viewership.

It’s a big assumption to make.

I don't know the specifics, but they've invested in sports before, so I'd think they have their own playbook of ideas and what's worked for other sports. Fenway also did a partnership with LPGA last year so there's some directly relevant experience here (though not sure how successful the partnership has been). Agree, giving players equity doesn't directly translate to increased viewership, but with players being the core piece that drives everything, they have to put some pieces in place to try and make sure they stay.

It does feel like a completely different/massive risk for the investors relative to something like owning a team. In that scenario, you're doing all the same things (growing media $, ticket sales, licensing, etc.), but without a huge threat of a competing league that has already poached a lot of talent.

 

[CrashTestDummy]

The PGAT is a non-profit, and had to enter into secret negotiations with the PIF to merge because they were outspending their future TV deal earnings.

I think the PGA started negotiating with PIF because of expensive lawsuits with the PIF and they realized if you can't beat 'em, join 'em.

 

[BigMac]

I'll admit I don't understand a lot of this and need an 'Explain it to me like I'm 5 years old'.

tl;dr - "We're looking for any way we can to diminish our dependence on PIF for the enormous amounts of money we crave, so we'll work any backdoor deal we can to that end."