Given that many golf tour professionals make millions each year, it’s hard to grasp that they could be underpaid. But relative to the extraordinary growth of compensation contracts in other pro sports, PGA golfers have for the most part been left behind.
Last (full) year, Jon Rahm was the leading money earner on the PGA Tour (not including the FedEx Cup) with $7.7 million in winnings. He was top dog among the best golfers on the planet. As much as this amount is, it paled in comparison to what professional athletes make in other sports.
This reality has shown that the PGA Tour’s business model, in place with minor changes for over five decades, is now flawed and outdated. It was the Tour’s embrace of the status quo that made a challenge to its dominance nearly inevitable.
But the staid old PGA and its hierarchy is indeed feisty and has come out with guns blazing against what it considers the greatest threat to its monopoly status since golf’s biggest names attempted a coup against the Deane Beman led regime back in the 1980s.
This year the PGA Tour and its commissioner Jay Monahan’s public battle with the controversial LIV Golf Series has completely dominated the sport’s news coverage. The LIV Golf Series (a ‘Roman Numeral’ acronym for 54 or the number of holes played in each tournament) is extravagantly funded by Saudi Arabia with former golf superstar Greg Norman as its commissioner and public face.
Reports are that the Saudis (through their Public Investment Fund) have committed $2 billion to fund the LIV tour with much of the early spending contractually locking in some big name pros as “participation” compensation. The average purse for the LIV events is about $32 million, more than three times that of the average PGA tournament.
The PGA players who initially sought permission to play in the first LIV Golf Series tournament in London were immediately denied. They ignored the denial and played in London anyway, bypassing the RBC Canadian Open. They were then summarily suspended from the PGA Tour by commissioner Jay Monahan. These have now likely become permanent suspensions.
According to Sports Illustrated, a Harris Poll of Americans revealed that 74% of golf fans plan to give the LIV Series a chance. And by nearly 2 to 1 are not concerned or bothered about the source of LIV’s funding.
The three biggest names signed up by LIV so far are Phil Mickelson, Dustin Johnson and Brooks Koepka who have likely secured over $400 million to appear at LIV tournaments (initially 8 events annually) over the next couple of years eventually ramping up to a full schedule in 2024.
But even for those lesser known players who have joined the LIV Series, much higher prize money offered than the PGA or DP (old European) tours pay proved to be an irresistible attraction. It’s likely that many remaining PGA pros are strongly considering it.
Even before the first tee shot was ever hit in the LIV Series, the risk it presented was impacting the PGA Tour and the non-affiliated major events such as the U.S. Open and The (British) Open Championship. These events took aggressive action to the prize money offered likely recognizing the threat of the upstart league. In any event, what became clear to many was that the PGA’s business model for compensating its athletes had woefully fallen behind that of other professional sports.
Saudi Arabia and “Blood Money”
Much of the early criticisms of the Saudi-funded LIV Golf Series was that these pros were taking “blood money.” Much of this outrage is justifiable and stems from the kingdom’s gruesome murder of journalist Jamal Khashoggi.
Is the Saudi culture oppressive? Without a doubt. But to its credit Saudi Arabia has been making positive changes and its embrace of one of the Western world’s most capitalistic sports could move it improve more rapidly.
Certainly the United States government and many American companies have no problem trading and investing in Saudi Arabia. In fact it’s our second largest trading partner. It is also our largest purchaser of military equipment.
According to the U.S. State Department, “Saudi Arabia plays an important role in working toward a peaceful and prosperous future for the region and is a strong partner in security and counterterrorism efforts and in military, diplomatic, and financial cooperation.” Translation: Yes, we often have to hold our nose dealing with you but at least you’re not China.
“Blood money?” Yes, some. But mostly its our money from buying millions of barrels of its oil over the decades.
Are the Saudis providing another example of “sportswashing” in which an oppressive regime attempts to soften its image much like oppressive regimes did with Olympic propaganda in 1936 (Germany), 1980 (Soviet Union), 2008 and 2022 (China)? Is the kingdom of Saudi Arabia attempting to improve its global reputation by funding the LIV Series? Clearly so.
NBC mostly washed its hands of taking to task dictatorial China during its coverage of the Beijing Winter Olympics earlier this year. And recent revelations about the PGA’s extensive business dealings with China have not strengthened its “moral” position against the players for taking Saudi “blood money.”
In 2018 the PGA signed a 20-year deal with Beijing’s Shankai Sports to bring a professional tour series to China similar to what the PGA operates in Canada and Latin America.
Pro Golf Weekly’s Jeff Smith expressed his displeasure recently in a column titled “Where’s the ‘Sportswashing’ Outrage with Communist China.” He wrote, “…today, under the dictatorial rule of Xi Jinping – a neo-Maoist thug, the PGA Tour and LPGA Tour include annual treks to Shanghai, China for the WGC-HSBC Champions and Buick LPGA Shanghai, respectively, while the European Tour jets to Shenzhen for the annual Volvo China Open.”
Since financing for the joint venture comes from the Communist Chinese Party (through Yao Capital), America’s PGA Tour now has a direct link to the CCP.
The DP Tour (formerly European Tour) and its commissioner, Keith Pelley, have taken a position similar to Monahan’s over the LIV Series. But it has certainly had no difficulty taking Saudi money in the past.
PGA Tour affiliated companies like FedEx, RBC, Ping, Titleist, Nike and Callaway all do a substantial amount of business in Saudi Arabia as well. FedEx has a huge partnership with the PGA and ironically just last October, announced a $400 million, 10-year investment commitment in the Saudi economy.
Sports’ Highly Compensated Athletes
In most professional sports, athletes are paid for expected future performance based on past achievements. So-called “guaranteed” money is commonplace in virtually every pro sport — with the exception of golf.
Golf is the only major sport where a top pro can appear in front of thousands of spectators along with a television audience, play 36 holes of golf taking about 8 hours of time and yet be paid — nothing. In fact, as an independent contractor the pro golfer is responsible for his caddy fees and all travel-related expenses.
Pro golf tournaments generally begin with 154 or so players in the field who play 18 holes on Thursday and Friday. The field is then cut to the top 65 or so after 36 holes are played. Only those who make this “cut” are permitted to play the weekend and get paid anything. In many cases the players cut are “big names” or the players who garner the greatest following and produce the highest TV ratings.
Entertainment and Ratings
When the LIV Golf Series became a reality this year, the PGA hierarchy along with its more vocal players came out with verbal guns blazing even before LIV commissioner Greg Norman announced the signing of many of the sport’s biggest stars.
The PGA was showing some panic over potentially losing its top attractions. It is first and foremost an organization that entertains and as such, it needs its biggest entertainers. These are the players whose superior play, style or personality drive attendance along with viewer ratings for TV networks. Big names in contention mean more revenue for the PGA, the individual tournament sponsors and the networks.
Few individuals have enriched the PGA tour and its players more in the past than players like Arnold Palmer and Tiger Woods. Palmer’s successes and charisma effectively made professional golf profitable for TV networks to carry the sport. Far more recently, anytime Tiger Woods is playing in a tournament, ratings soar.
Additionally, Phil Mickelson has been one of the PGA’s most exciting players for three decades. His swashbuckling style drives interest and ratings when he’s in contention. Last year he became the oldest winner of a major event in history.
CBS TV ratings for Mickelson’s PGA Championship victory last year averaged 6.5 million viewers which was about a 20% increase over this year’s PGA Championship even though Justin Thomas rallied from seven strokes behind for a thrilling win.
At 46 years old and with numerous physical issues, Tiger Woods is well past his prime. But unless someone buys a tournament ticket for Thursday or Friday, no one is guaranteed to see Woods play on the weekend.
This is especially a problem for the TV networks (and ultimately a financial problem for the PGA Tour and its players) that just give full TV coverage on Saturday and Sunday for regular Tour events. They often lose their biggest draws.
It’s also where there is some separation with the goals of TV versus the PGA. TV wants ratings and “big names” in contention along with a highly competitive event. Networks want it because their advertisers want it.
The networks know what or who stirs interest. CBS anchor Jim Nance will often preview an upcoming tournament with the most popular players who are committed to play. Sometimes at the beginning of a weekend broadcast he will also announce, “We have a great leaderboard.” What he means is there are a number of top and/or popular players who are in contention so the viewer should sit back and watch.
One of the biggest criticisms with the LIV Series is all who play get a “participation trophy” — or more to the point — a substantial amount of money just for teeing it up. There are no cuts so all who play — are paid.
The PGA’s “all players are subject to a cut” structure is sacrosanct to the Tour as it’s been in place since its inception. The reality of the LIV Series will, in my opinion, force this policy to be altered.
There are already many exceptions to this “cut” standard. Each major (other than the PGA Championship) has its own cut rule. Some tournaments (World Golf Championship tournaments and a few others) don’t have a 36-hole cut. They reduce the field in advance allowing only players to participate based on previously meeting each tournament’s unique criteria.
Imagine getting tickets for a Saturday baseball game in Detroit for you and your son mostly to see future Hall-of-Famer Miguel Cabrera play since he is your son’s favorite player. But now imagine a rule that because Cabrera struck out four times on Friday night, he is not permitted to play on the weekend. Not only would the fan disappointment be tremendous but ticket sales would suffer greatly because fans wouldn’t know if their favorite players would be on the field.
The same is true for golf.
Though the PGA Tour may have dismissed the impact thus far of the LIV Series, there’s no way the TV networks have. You can’t financially dismiss the loss and draw of names like Mickelson, DJ, DeChambeau, Koepka, Garcia and others. These are exciting, popular players. Keep in mind that in professional sports, marketability nearly always blossoms after competitive success. Past achievements (even recent ones like Scottie Scheffler’s four wins thus far in 2022) drive current popularity.
The networks know that at its core, the PGA Tour is first and foremost, an entertainment entity. If it has no entertainment value, it has no life.
Arguably Tiger Woods’ prime four year period was from 1999 to 2002 when he won 7 of his 15 majors and 27 total tournaments. During this four year period, the combined viewership of the Masters and U.S. Open averaged twice what it did over the last four years (26 million to 13 million).
A ‘Tiger Woods’ obviously can’t be replaced but there are a number of current popular players that do indeed energize fans. So, (1) the PGA Tour cannot afford to lose them at all and (2) TV cannot afford to lose them on the weekends as ratings will ultimately drive revenue.
Recent PGA Changes
Every professional sport makes occasional changes in order to make it more interesting or enjoyable for fans whether it was the introduction of the 3-point line in basketball or the designated hitter in baseball.
Fans often scream about quick penalties called when a quarterback is hit hard in pro football but the rules were changed by NFL owners to protect the star players which drive overall interest. Sometimes adjustments have to be made to reflect modern market realities. It’s just good business practice.
The PGA itself has made changes to its subjective cut rule recently when it dropped the number of players qualifying to be paid from 70 to 65.
The PGA will eventually have to make other changes to this policy as well. There are already subjective rules that the Tour has adopted. For example, one is that in order to achieve a lifetime exemption on the PGA Tour, a player must have 15 years of active participation and at least 20 Tour wins. The “cut” rule is subjective as well.
It would make great sense for the Tour to adopt a new rule for those players who, say, have been on tour for at least 10 years and have won 5 times to be granted “no cut” status.
It would make great sense for the Tour to adopt a new rule for those players who, say, have been on tour for at least 10 years and have won 5 times to be granted “no cut” status. It means that players like Bubba Watson, Matt Kuchar or Rickie Fowler would have earned the privilege of always playing on the weekend in any tournament they enter. The Tour still needs guys like these.
Some of Tiger Woods records will likely never be broken: 142 consecutive cuts made; winning four straight majors and shooting par or better for 53 consecutive rounds.
He also has the record for career winnings of $120,851,706. No one on the PGA Tour is currently close to that but this record will be broken someday (Jack Nicklaus won 73 tournaments and earned “just” $5.7M over his career). It’s obviously a tremendous amount of money but it still doesn’t quite match the $122 million two-year extension for NBA’s (Portland Trailblazers) Damian Lillard.
Lillard’s a great player but Portland’s playoff record since he’s been with the team is just 22-39. It’s impossible for the best golfers in the world not to take note.
Though Portland with Lillard on the team hasn’t won any championships, it’s owner isn’t insane. Lillard does put fans in the seats. He clearly drives revenue enough to justify this enormous paycheck.
Though the PGA will likely never admit it, it too recognized this professional-sport-compensation-disparity. Last year it initiated an under-the-radar “Player Impact Program” (PIP) providing $40 million to players who scored the highest on four subjective criteria that really amounted to, well, a popularity contest.
During the calendar year of 2021, Tiger Woods played exactly zero rounds on the PGA Tour but came in first in the PIP and was awarded $8 million. This exceeded Jon Rahm’s leading PGA winnings for that year of $7.7 million.
Evidently not all of the PGA Tour players are compensated based solely on competitive merit.
This program increases to $50 million in 2022 with the winner getting $10 million. Any bets Tiger doesn’t win again this year?
Another new (2021) PGA initiative is the “Play 15” program that doles out $50,000 for any PGA touring pro that plays in at least 15 tournaments. Yes, if you’re wondering, that’s the same number of tournaments each pro is required to play during the year to remain in good standing with the Tour.
Add to these the “Comcast Business Tour Top 10″ which provides bonuses to those finishing in the top 10 of FedEx Cup points at the end of the regular season. Last year, Colin Morikawa was in first place before the start of the playoffs and was given a $2 million bonus. A total of $10 million was distributed. This year that bonus pool doubles to $20 million.
Another obvious impact from the high-paying LIV Series is the dramatic increase in purses for PGA events. This year’s schedule will push prize money close to $450 million including the two FedEx Cup events ($75 million).
A number of PGA players have complained that if the LIV Series players were allowed to continue to play in PGA Tour events, they would be “double dipping.” But more likely what they mean is that a number of the LIV players have already leapfrogged them by getting big sums of LIV money and don’t want to have to compete with them for Tour money as well.
What has really happened with this battle thus far is that golf is getting considerable more publicity within the sports community than it has since Woods won the Masters. All touring pros — at least so far and including the PGA pros — have financially benefited. Purses are higher and the remaining PGA Tour pros now don’t have quality players like Dustin Johnson or Brooks Koepka competing against them every week. Each tournament these players are not in the field means less talent competing for a higher purse. If these guys were ever permitted to come back to the PGA tour, they would have no advantage over any other competitor.
Up until recently, the PGA Tour was the only truly big league in town for pro golfers. They couldn’t play elsewhere when a scheduled tournament was to occur (with now over 45 scheduled events, it doesn’t leave many weeks free) anywhere else in North America and must play in at least 15 events each season (except for health or injury reasons).
These rules illustrate how valuable these pros are to the PGA. They demand players stay in the corral to protect the tournament sponsors and the Tour in general by maximizing the quality of play. But if these players were so valuable wouldn’t perhaps temporary suspensions for a number of the LIV pros be more reasonable than permanent ones? If going nuclear early on was intended to keep no more pros jumping the PGA ship after it issued these in February, the strategy thus far has failed miserably. They’ve taken their best shot and are still losing players.
When I began the research for this article I developed a list of 20 highly recognizable PGA players who had previous success on the tour and/or had a significant following. (These are shown in the chart below.) These players are now missing nearly half the cuts and have to be concerned about their future earning potential.
A few like Pat Perez, Ian Poulter and Matthew Wolfe had to be removed from this list of 20 because they’ve already committed to the LIV Series. Most of the remaining pros have been top players in the past as reflected by their collective 102 wins and 8 major victories.
Whether age or injuries have stolen their ability to consistently compete, they are quite vulnerable to the lure of the LIV Series. They also know they remain marketable. If these names were added to those LIV already has in its stable like Johnson, DeChambeau and Koepka, it’s not hard to see that the upstart tour could easily compete with some of the PGA events like the recent John Deere Classic which, no offense to winner J.T. Poston, had a star-lacking final leaderboard.
For followers of professional golf like myself it’s inconceivable that 33-year-old Ricky Fowler could be as low as 148 in the Official World Golf Rankings or 34-year-old Jason Day at 141. Nine time PGA Tour winner Brandt Snedeker has made just 40% of his cuts this year and is down to 326 in the OWGR!
It’s difficult to believe that pros like these men aren’t looking very closely at the LIV Series.
Is the PGA Tour an “illegal monopoly” as Greg Norman maintains?
The PGA has a history of strongly protecting its business model and organization. It has been successful against antitrust accusations (by Morris Communications on real-time scoring) and even lawsuits including one from a former player (Harry Toscano).
Whether it’s a monopoly or not is subject to debate but what is clear is the PGA Tour is taxpayer subsidized.
PGA Is a Wealthy Non-Profit Organization
The PGA Tour is a 501(c)(6) tax-exempt organization which, according to the Tax Foundation, means it doesn’t pay federal or state income taxes “due to their activities related to social welfare.”
“The Principal Mission of PGA Tour, Inc. is the promotion of the sport of professional golf and the common interests of the touring professional golfer as well as growth of the game.”
According to NewsMax its tax structure is like the American Cancer Society (CEO paid $982K) or Yale University (President paid $1.6M).
How can this be? It’s undeniable the PGA Tour primarily exists for its players and management. The PGA Tour states on its Form 990: “The Principal Mission of PGA Tour, Inc. is the promotion of the sport of professional golf and the common interests of the touring professional golfer as well as growth of the game.”
So if the mission of the PGA is to benefit the touring professionals, what’s so charitable about that goal? How can this be legal?
Interestingly, professional golf has pro football to thank for this. When the NFL merged with the American Football League in 1966, Congress created a special tax loophole for pro sports leagues.
Though these leagues continued to enjoy the tax benefits of their 501(c)(6) status and spent considerable sums lobbying to keep it, pressure finally got Major League Baseball to give up its tax exemption in 2007 and the NFL in 2015.
Not the PGA Tour, however, which both continues to spend much of its revenue on lobbying activities and enjoy its non-tax status even though the IRS says the PGA cannot “be organized for profit to engage in any activity ordinarily carried on for profit.”
The PGA’s lobbying efforts must be effective since it doesn’t really hide the fact that it is a profit-making organization that includes a chief commercial officer (paid over $4M) and which ruthlessly fights any competition to preserve its de facto monopoly. Leave this ranch and not only is it permanent splitsville, we’ll do what we can do destroy your marketability and popularity with your fans. Don’t believe that? Then you missed hearing Ian Poulter get booed in Scotland at the first tee at St. Andrews. Few in Europe have meant more to its Ryder Cup team that Poulter has over the last two decades.
Has this business model allowed the PGA Tour to handsomely compensate its executives and employees? Absolutely. Has the PGA kept its purses lower by restraining/eliminating competition for its players? Certainly. Can it continue to do it? No way. Not now.
Several years ago an indepth ESPN “Outside the Lines” analysis of the PGA Tour’s tax structure from IRS data found the it has avoided hundreds of millions of dollars in federal taxes over the last few decades.
The PGA Tour routinely boasts that its total charitable giving over the last 75 years now totals over $3 billion but this statistic is somewhat deceiving.
Some of the tournaments run by charities spend way more in prize money for the players/entertainment, country club fees, food services and other tournament requirements than they do on actual charitable giving.
“Outside the Lines” had a charity ratings organization, Charity Navigator, examine how much of the Tour’s revenue truly goes toward charity. “The lion’s share of the money is going to big prizes, cash prizes for athletes and all the promotion around it, so it’s really pathetic, actually,” Charity Navigator president Ken Berger said.
According to “Outside the Lines,” only about 16% of the PGA Tour’s revenue went to actual charities. Most of the donations to charity are distributed by the local organizations that run the tournaments, not by the PGA itself. In 2018, the PGA had direct donations of just $42.7 million out of its $1.47 billion in revenue that year.
The Tour took credit for $190 million that year but the difference was what was provided by the local non-profits that ran the events though they clearly would not have had the money without the PGA’s involvement.
Jay Monahan was paid $8.9 million in 2019 (the latest year for which a Form 990 could be obtained). That year his PGA earnings would have been exceeded only by Brooks Koepka’s winnings, who was the top earner among the pros that year. Eight other executives were paid at least $2 million.
The PGA Tour now has a new $65 million headquarters, its employees are paid $140 million and it has over $225 million in reserve. Not bad for a non-profit (i.e., taxpayer subsidized) organization.
So is the LIV Golf Series just a traveling exhibition event with a minor competition element? Certainly the PGA, many touring pros and nearly the entire sports media think so. After all, show up and you’re gonna collect a sizable check. But there still is quite a difference between the $4 million for first place and $120,000 for last.
Many have called the LIV Golf Series the “has-beens” tour and in a number of ways, it is. Many of the players are past their prime and are now only marginally competitive on the PGA tour. But in 1980 the PGA collaborated with another group of “has-been” pros who could no longer realistically compete with younger players but still had a significant following (most notably Arnold Palmer) and formed the PGA Senior Tour (later the PGA Champions Tour).
Nor is this the first time an established pro sports league has been challenged by an innovative upstart challenger that was, at least initially, funded by a wealthy benefactor.
In the 1960s both the American Football League and the American Basketball Association successfully took on their respective elder leagues. Likewise the World Hockey Association’s surviving teams were absorbed into the National Hockey League in the late 1970s. However, other attempts like the USFL and XFL saw their challenges fall short.
In 1960, billionaire Lamar Hunt funded the upstart American Football League which launched a prolonged battle with the established National Football League. When AFL owners made overtures to the NFL about a possible merger, they were flatly rejected. The two leagues did have a tacit agreement, though, that although they might compete for the top graduating college players, they would not try to bid away each other’s existing players.
This all changed when the New York Giants ignored this “agreement” and stole away Buffalo Bills’ kicker Pete Gogalak by offering a superior deal. The AFL immediately responded by naming the Oakland Raiders’ aggressive head coach, Al Davis, as its commissioner in 1966.
Davis shook up the old and established but haughty NFL by quickly signing eight of its quarterbacks including stars, John Brodie and Roman Gabriel to AFL teams. The NFL realized that it could no longer remain standoffish so in June 1966, the two leagues agreed to a formal merger (in a secret meeting between Cowboy’s owner Tex Schramm and Lamar Hunt) within six months of Davis’ appointment as commissioner).
The condemnation of LIV, especially against Norman and Mickelson, has been fierce and constant. For the PGA Tour, including the players that can still win or finish high along with PGA management, LIV is indeed a threat to what has been a great vehicle for both establishing a historical sports legacy and achieving considerable wealth.
Like any “monopoly” over the years, the PGA Tour has expended most of its energies thwarting competition rather than analyzing its business model or changing itself. It grew stagnant and the emergence of the LIV Series has forced it to recognize and deal with that staleness. If the LIV Series hadn’t come along to shake it up, something or someone else would have recognized the PGA’s weaknesses and challenged it.
Could it have added programs like the Player Impact Program, the Play 15 and Comcast Business Tour Top 10 before the threat of the LIV Series surfaced? Of course it could — and should have. It’s why the LIV’s competition made it raise the total prize money available to the remaining PGA Tour members.
Will these two sides ever decide to come to the table to talk? It seems unlikely at this point but just a few more key player losses and the PGA may be forced to be more conciliatory.
One of the PGA Tour’s most outspoken opponents of the LIV Series, Rory McIlroy has certainly softened his stance recently. In February he said the LIV Series was “dead in the water.” Now after major recent PGA defections he believes that both sides should sit and talk.
McIlroy stated, “In hindsight there were probably steps that were missed that wouldn’t have made it as messy.” …”I wish it hadn’t got that messy.”
Whether the business model of the LIV Golf Series offers a superior product to the interested public is yet to be seen. If the LIV Series is to have any longevity, one would think it would have to be at least self-sustaining at some point in the future with a TV contract unless the Saudis consider it a permanent public relations boost and decide to deficit fund indefinitely. Obviously possible.
This week, the U.S. Department of Justice announced it would be looking into possible antitrust violations by the PGA Tour specifically involving its treatment of players playing for the LIV Series and their Official World Golf Ranking (OWGR). (Both the PGA’s Monahan and DP Tour’s Keith Pelley are on the OWGR board.)
The timing of the announced investigation by the DOJ is curious given that President Biden is now in the Middle East and is visiting Saudi Arabia as this is published purportedly to convince it to produce more oil to reduce global prices.
In any event this PGA vs. LIV story has dominated golf discussions this year and it likely has a long way to go. Commissioner Monahan has quite a challenge in front of him as he may be no further along in trying to have his players catch up to what those in other pro sports are paid than his predecessor, Tim Finchem.
In late 2000, Finchem boasted that the PGA prize money for the upcoming year would be $163.5 million, about double what it was just four years before (which was Tiger Woods first full year on the PGA Tour). This announcement was shortly after the Boston Red Sox signed Manny Ramirez to a then stunning $160 million, 8-year deal.
When asked about the comparison Finchem responded, “We still have an awful long way to go.” Jay Monahan may feel the same way.