Golf-onomics
Give credit where credit is due. Last year Donald Trump posted on the social media site Truth Social that a merger between the PGA Tour and LIV Golf was “inevitable”:
At the time this looked absurd. After all, the PGA is golf’s juggernaut. Think of a famous American golfer. From Bobby Jones to Jack Nicklaus to Jordan Spieth, the PGA Tour has always been THE golf league. It was either join the PGA or play as an amateur. So when the Saudi Arabian government’s Public Investment Fund (PIF) announced that it was going to form its own golf league, many were skeptical. Across the sports world, startup leagues have tried to take on incumbents and they usually fail.
But then the PIF started writing checks. They lured away Phil Mickelson and Brooks Koepka for a reported $200 million and $100 million, respectively. With half being paid upfront, these are massive paydays. LIV also promised a more modernized experience with the slogan “Golf, but louder.” In an effort to ditch golf’s dowdy perception, players for LIV Golf would be allowed to wear shorts (gasp). Music would be played on the course in-between shots. While this means spectators will no longer be able to hear the grass grow, as is conventional at a PGA event, it does mean that LIV events were attracting a younger demographic.
The PGA Tour response was furious. Players who signed up for LIV Golf were banned from playing in PGA events - a decision that immediately led to lawsuits. Most notably, the PGA Tour Commissioner Jay Monahan added a strong ethical dimension to the debate. Alluding to the number of Saudi citizens involved in the 9/11 attacks, he said, “As it related to the families of 9/11…I have two families that are close to me that lost loved ones. My heart goes out to them and I would ask that any player that has left, or that would ever consider leaving, have you ever had to apologize for being a member of the PGA Tour?" A 9/11 advocacy group accused LIV players of “betraying the United States.”
Then, without warning, the PGA announced that they were merging with LIV.
PGA players were understandably furious. Many had turned down millions of dollars and were told by their organization that joining LIV Golf was morally wrong, only to see the PGA ink a deal a year later. Senator Chris Murphy of Connecticut tweeted, “So weird. PGA officials were in my office just months ago talking about how the Saudis' human rights record should disqualify them from having a stake in a major American sport. I guess maybe their concerns weren't really about human rights?” Why the change of heart?
First, the PGA’s ability to limit LIV Golf was severely limited because of the odd organizational structure of golf tournaments. Golf has four “majors”, or tournaments far more important than any other. The four majors are Masters Tournament, the PGA Championship, the US Open, and the British Open. None of the four, not even the PGA Championship, are run by the PGA Tour. So LIV golfers could only be banned for participating in the fifth most important tournament of the year by the PGA. That’s a leaky blockade.
Second, it’s tough to compete against a competitor that doesn’t need to make money. The goal of LIV Golf is not to make money. It’s an effort at “sportswashing” by the Saudi Government. Sportswashing is when a group, organization, or country uses sports to improve its reputation or image. The 2018 assassination of journalist Jamal Khashoggi, combined with their treatment of women and a ruinous war in Yemen, had left Saudi Arabia’s reputation in tatters. They needed to boost their reputation, so they started LIV golf. Their goal isn’t to make money with the venture but to convince the world they are a credible and reputable partner. For the PGA this is a tough scenario. Golfers, especially young ones that haven’t won big tournaments or signed splashy endorsement deals, are going to follow the money. If LIV Golf is going to be willing to lose hundreds of millions or even billions of dollars a year to burnish its image, in the long run that could take a toll on the PGA.
Third, sport naturally lends itself to one league. Economists call this a natural monopoly. There’s a reason that league after league that has challenged the NFL has failed, and why the ABA merged with the NBA. Fans want to see the best players compete against each other. They don’t want one league with the best point guard and another league with the best center. The better the competition, the more people will tune in, and the more money made. This same thinking is why USC is joining the Big Ten and the University of Texas is joining the SEC in American college football. It’s better to be a mediocre player in a great conference than be a dominant player in a bad conference.
Fourth, money talks. The PGA Tour can bluster about the Saudi human rights record all they want, but when it comes down to it this was always going to be about money. If another country is willing to invest billions of dollars into your league, it’s going to take a lot to turn them down. Saudi Arabia may not be the most respectful partner, but even industry buys their oil, so it’s hard to take a firm moral stance on paying them money but not wanting them to give any of it back.
Will the merger happen? That remains to be seen. Many PGA players are currently against the merger, so they may have to be bought off. Additionally, a regulatory body in the US or Europe may block the deal on anti-competitiveness grounds. That said, given the reasons above, I expect the deal will eventually go through.