The US Open tees off Thursday at the Los Angeles Country Club, but the pre-tournament talk and action was focused off the course after last week’s blockbuster announcement that the PGA Tour, DP World Tour (European Tour) and LIV Golf are joining forces.
Details are sparse on the combined for-profit entity, and few know what’s next, including the defending US Open champion.
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“I just don’t know what’s going on,” Matt Fitzpatrick told the media on Tuesday. “I don’t think anyone knows what’s going on. Are we signing with the PIF, are we not signing with the PIF? I have no idea. Even though I guess it is confusing, it’s pretty clear that nobody knows what’s going on apart from about four people in the world.”
We do know that the three tours have a combined revenue of roughly $2.4 billion. And based on recent transactions, the combined entities are probably worth more than $10 billion.
As a nonprofit, the PGA Tour reports its financial results each year via the IRS’ Form 990, including executive compensation—PGA Tour commissioner Jay Monahan earned $8.6 million in 2021. Revenue for the PGA Tour was $1.59 billion in the latest filings—five times as much revenue as the European Tour—with $583 million from media rights, $152 million from tournaments it managed, $175 million from tournaments it co-sponsored and another $176 million from program sponsorships. The current media rights deals with CBS Sports, NBC Sports and ESPN kicked off in 2022 and run through 2030. Total revenue likely approached $2 billion last year, as 2021 financials were still impacted by COVID-19 and didn’t reflect the new media contract .
In 2021, the European Tour reported total revenue, including media, sponsorships, tournaments and Ryder Cup of £253 million—$322 million based on current exchange rates—up 61% from the COVID-19-impacted 2020 season. Even though most of the top pros have gravitated to the PGA or LIV Tours, the European Tour is expected to show strong financial gains when it reports its 2022 figures, according to someone familiar with the results who was not authorized to speak publicly. Ticketing and media rights revenue had double-digit gains versus 2019, while sponsorship revenue rose nearly 50%. Merchandise revenue more than doubled.
Most of the revenues are expected to flow into a new for-profit entity that will have Monahan as CEO and Yasir Al-Rumayyan, governor of Saudi Arabia’s Public Investment Fund, as chairman. PIF, which financially backed LIV Golf, is prepared to invest billions of dollars into the venture. The deal ended all litigation between the parties but still needs approval from the PGA Tour policy board and could face scrutiny from regulators and politicians.
Sports team valuations have soared in recent years, fueled by scarcity, institutional funds used for ownership and increasing value attributed to live events and broadcasts. The transactions have occurred at increasingly higher multiples of revenue, with the Milwaukee Bucks, Phoenix Suns and Washington Commanders all priced at more than 10 times revenue in recent deals.
The golf merger is not the same as a sports team sale, but a couple of recent transactions give a sense of what the global golf business is worth. In 2020, the PGA Tour invested in European Tour Productions, the media arm of the European Tour, at a roughly $550 million valuation under a “strategic alliance,” and the PGA bumped its stake from 15% to 40% the following year. The deal valued ETP at just over four times revenue, which averaged £100 million a year ($127 million) between 2018 and 2020. In 2021, ETP revenue was £123 million ($156 million).
Total DP World Tour revenue was an estimated $400 million last year, producing a valuation in the $1.5 billion to $2 billion range.
The PGA Tour would command a premium multiple as the more desirable asset in the same way the revenue multiple for the New York Yankees is higher than the Detroit Tigers. Therefore, a revenue multiple of five to six on 2022 PGA Tour finances means a valuation in the $10 billion to $12 billion range.
The pro golf tours are ultimately media and live-event businesses, not unlike the WWE, which Endeavor agreed to buy last year at a $9.3 billion valuation. The deal valued WWE at more than seven times revenue, but WWE also generated $313 million in operating income last year. The PGA’s 990 shows “revenue less expenses” topped out the past decade at $78 million in 2016. The PGA Tour is set up as a 501(c)(6) organization, which means its primary motive cannot be profits. Last year, the PGA had to dip into its reserves to cover the increase in prize money.
Institutional investors are increasingly looking at cash flow multiples, and if you control the entire system, you should have a greater ability to generate more cash flow. However, PIF is likely thinking beyond just its return on investment with this deal.
LIV Golf generated “virtually zero” revenue in 2022, according to court documents. As for its value and future, the PGA Tour’s biggest public-facing backer over the last 12 months, Rory McIlroy, says the press got it wrong on the blockbuster announcement. “I think the one thing that I think was really misunderstood yesterday was all the headlines were PGA Tour merges with LIV,” McIlroy told the press last week ahead of the Canadian Open. “LIV’s got nothing to do with this, right? It’s the PGA Tour, DP World Tour and the Public Investment Fund are basically partnering to create a new company.”
The four-time major champion added: “I still hate LIV; I hope it goes away and fully expect that it does.”
Daniel Libit contributed additional reporting.
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