On June 9, 2022, the first LIV Golf event teed off outside of London. The new tour offered players larger prizes, more flexibility, and ambitions to attract new fans to the sport. Immediately following the official start of that tournament, the PGA Tour announced that all 17 PGA Tour players participating in the LIV Golf event were suspended and ineligible to compete in PGA Tour events.
ALEX MACKAY: So I teach a course on competition, antitrust and regulation, and my research covers these same themes. So I’m very interested in questions about market power when a large firm has the ability to exert influence over its customers and other market participants. And this situation with the PGA Tour and LIV Golf is actually a great example of that.
ALEX MACKAY: So they operate about 40 weekly events and including the main tour, they also have the developmental tours. They primarily make money through media rights and by selling sponsorships for individual tournaments. So for example, in 2020, they signed a nine year 6.3 billion dollar deal with CBS and NBC to broadcast roughly 30 of their main events.
ALEX MACKAY: It could easily cost the players over a hundred thousand dollars for equipment training, travel, that sort of thing. If you don’t win any prize money over the course of the year, you could actually lose money as a PGA Tour player, at least until 2022 when the PGA Tour implemented some changes along those lines. Now, as a member to maintain your membership, you’re also required to participate in a certain number of events, typically at least 15 events.
ALEX MACKAY: Yeah, so it’s sort of the confluence of these two different forces that came together to give rise to the LIV Golf tour. The first is that there was an investor group, primarily led by, as it turns out, funding from Saudi Arabia that had been looking to invest in golf for a number of years, starting as far back as 2020. And they had been approaching players with potential interest.
ALEX MACKAY: That’s correct. So yeah, the combined purse, a little higher, but an individual player might win something like between one and $3 million for winning a tournament. But the way that golf works is, unless you’re Tiger Woods, you’re not winning multiple events every year. And so you can see these numbers and you could calculate, well, if I won every event, I would make a lot of money, but in practice, that’s not how it happens. And in fact, there are 200 plus golfers on the tour.
ALEX MACKAY: That’s right. There’s also another element they added was a team event. So they thought this was an important element from a marketing perspective as they grouped players of four into teams, and in fact, your team could win the event. And what that also did is that gave the opportunity for players to earn some money, even if they didn’t have the best day on the golf course.
ALEX MACKAY: Yeah, so first of all, the moment that the players hit their first tee shot off the first LIV Golf event in England, the commissioner Jay Monahan suspended all the players participating in the event from the PGA Tour, effectively giving them what appeared to be a lifetime ban. And he continued to suspend players that left the PGA Tour for LIV throughout the summer.
ALEX MACKAY: Leading into this announcement, there are a couple of things that were happening in the first half of 2023. I mean, some players were expressing concern about the fact that golf was tearing itself apart, but at the same time, other people were very adamant that you had to pick a side. And Monahan had said, they’ve gone down their path, we’ve gone down ours. There’s no reconciliation. So it was pretty clear that at least from the top, there was no chance of reconciliation.