The US Open will be played at Los Angeles Country Club on Thursday, but the focus of pre-tournament talk and action was last week’s blockbuster announcement that the PGA Tour, DP World Tour (European Tour) and LIV Golf were joining forces.
Details are scarce on the combined for-profit entity, and few know who’s next, including the US Open champion.
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“I don’t know what’s going on,” Matty Fitzpatrick said Tuesday. “I don’t think anyone knows what’s going on. We are signing with PIF, not signing with PIF? I have no idea. Although I think it’s confusing, it’s clear that no one but four people in the world know.
We know that the three tours have grossed about $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 annually on IRS Form 990, including executive compensation—PGA Tour Commissioner Jay Monahan earned $8.6 million in 2021. The PGA Tour’s revenue in its latest filings was $1.59 billion—five times as much as the European tour’s revenue—including $583 million from media rights, $152 million from tournaments it manages, $175 million from tournaments it sponsors and another $176 million from program sponsorships. Current media rights belong to CBS Sports, NBC Sports and ESPN. It started in 2022 and runs until 2030. Total revenue could be closer to $2 billion last year, as the 2021 financials are still affected by Covid-19 and don’t reflect the new media deal.
In the year In 2021, the European Tour’s total revenue, including media, sponsorships, tournaments and the Ryder Cup, was 253 million pounds—$322 million at current exchange rates—up 61 percent from the 2020 season impacted by COVID-19. Although most of the top pros visit the PGA or LIV Tours, the European Tour is expected to show strong earnings when it reports 2022 figures, said the person, who was not authorized to speak publicly about the results. Ticket and media rights revenue saw double-digit gains compared to 2019, while sponsorship revenue rose 50 percent. Merchandise revenue has more than doubled.
Most of the proceeds are expected to go into the new for-profit entity, which will have Monanhan as CEO and Yasir al-Rumayan, the governor of Saudi Arabia’s Public Investment Fund, as chairman. PIF, which financially backs LIV Golf, is set to invest billions of dollars. The agreement has ended all disputes between the parties but still requires approval from the PGA Tour’s policy board and is subject to scrutiny from regulators and politicians.
Sports team valuations have soared in recent years, fueled by shortages, institutional money for ownership and the perceived value of live events and broadcasts. The deals have come at ever-increasing multiples of earnings, with recent deals for the Milwaukee Bucks, Phoenix Suns and Washington Chiefs fetching more than 10 times earnings.
A golf merger isn’t the same as a sports team sale, but two recent transactions give an idea of what the world’s golf business is worth. In the year In 2020, the PGA Tour has invested roughly $550 million in “strategic alliances” with European Tour Productions, the media arm of the European Tour, and the PGA has fallen from 15% to 40% the following year. The deal values ETP more than four times its average earnings of 100 million pounds ($127 million) between 2018 and 2020. ETP revenue in 2021 was £123 million ($156 million).
Total DP World Tour revenue was estimated at $400 million last year, putting it in the $1.5 billion to $2 billion range.
The PGA Tour commands a premium multiple because it’s such a sought-after property, the same way the New York Yankees’ earnings multiple is greater than the Detroit Tigers. So, a five to six multiple of PGA Tour financials in 2022 means an estimate in the $10 billion to $12 billion range.
Pro golf tours are ultimately media and live event businesses, unlike WWE, which Endeavor agreed to buy last year for $9.3 billion. The deal valued WWE more than seven times, but WWE generated $313 million in operating income last year. The PGA’s 990 over the past decade marks a $78 million finish in 2016. The PGA Tour is structured as a 501(c)(6) organization, which means its primary objective cannot be profit. Last year, the PGA had to dip into its reserves to cover the increase in prize money.
Institutional investors are increasing cash flow multiples, and if you control the entire system, you should have the ability to generate more cash flow. However, PIF may be thinking beyond return on investment with this deal.
LIV Golf generated “approximately zero” revenue by 2022, according to court documents. As for its value and its future, Rory McIlroy, the PGA Tour’s biggest public face for the past 12 months, says the press is wrong about the blockbuster announcement. “One thing I think was really misconstrued yesterday was that all the headlines were about the PGA Tour being linked to LIV,” McIlroy told reporters before last week’s Canadian Open. “LIV has nothing to do with this, right? The PGA Tour, DP World Tour and Public Investment Fund are basically teaming up to create a new company.”
The four-time major champion added: “I still hate LIV; I hope it goes away and I fully expect it to.”
Daniel Libitt Submitted a further report.
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