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Sporting Econ 101: Pro Golf Has New Finances, But Unclear Future

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Professional golfers aren’t like other pro athletes. Unlike team sports that lock up players to exorbitant contracts with bonuses for hitting certain milestones, golfers are essentially contractors that compete for a prize pool, receiving a payout based on their finish in an event.

Each golf event has four rounds, typically played Thursday through Sunday, to determine the winner. The leader with the fewest strokes taken is the winner. Of course, if you watch golf, you probably already know that.

Finishing in first place usually nets a golfer around 18% of the purse. Second and third place receive 10.8% and 6.8%, respectively.

The money gets smaller and smaller the further you go down the placement. They continue to plummet until 70th place gets its due. Many events on the PGA Tour have cuts, requiring golfers to maintain a certain score to stay in contention across the first two rounds. If they miss the cut, they don’t get paid. Not to mention, golfers need to meet skill thresholds to be good enough to receive a PGA Tour card. 

Each golf event has a varying purse. Some are sponsored like the Waste Management Phoenix Open, the Charles Schwab Challenge, the RBC Canadian Open, etc. The PGA profits heavily from advertising and sponsorships. In 2013, Forbes contributor Monte Burke wrote a piece outlining how the PGA Tour brought in more revenue than previously imagined. However, it is a non-profit organization, something that puzzled pro golfers. Much of the cash went to broadcast payments, not to prize purses. Burke said over $998 million in investments to the World Golf Foundation in 2013, which promotes many of the PGA’s events. Ten years on, the financial landscape is changing rapidly.

Photo courtesy The Masters

Most golfers aspire to win one of the four major tournaments: The Masters, the U.S. Open, the British Open, and the PGA Championship. These carry some of the biggest prize pools on the Tour. They are also some of the most prestigious honors a golfer can earn. Other tournaments like The Players Championship can have significant payouts too. The Players Championship had the highest purse on the tour this season with $25 million. 

But even as purse size increased, golfers wanted more.

They believed the PGA Tour was undervaluing them as marketing tools, maximizing the Tour’s profits over the golfers that make it so popular.

That’s when LIV Golf entered the fray in 2021, backed by investments from Saudi Arabia. LIV Golf was led by Greg Norman, the former Tour player who advocated heavily for increased payouts during his career. Norman also felt the PGA Tour wasn’t appealing to golf’s international audience. LIV Golf offered players way more benefits than the PGA: no cuts, only three rounds of golf instead of four, travel expenses covered, and much bigger purses.

Photo courtesy of PGA

Of course, LIV Golf was criticized heavily for its investors, but it forced the Tour to take action. A new Player Impact Program provides cash bonuses for prominent golfers who bring attention to the game. The PGA stipulated those who finish in the Top 20 of the Program’s rankings must compete in all noteworthy events. The hope was this would discourage more big-name players like Brooks Koepka and Dustin Johnson from leaving. It worked to an extent. 

The PGA injected over $153 million in prize pool increases this year to keep players from joining LIV. A new type of outing called “designated events” would offer more lucrative payouts across 13 events on the Tour. They include the Sentry Tournament of Champions, the WM Phoenix Open, the Players Championship, the World Golf Champions-Dell Match Play, the RBC Heritage, the Wells Fargo Championship, the Travelers Championship, three player invitationals, and three FedEx Cup Playoff events. The Tour also began offering $500,000 in upfront cash to golfers who took a 3-year hiatus from participating in events. It will count as an advance on season earnings. The rule change countered LIV’s biggest perk outside of more money: travel costs covered.

Photo courtesy LIV Golf

The PGA and LIV were not cordial with one another. They both filed lawsuits against each other for various reasons. Tiger Woods and Rory McIlroy voiced strong opposition to those joining LIV. The PGA tried to block LIV defectors from returning to the Tour (they later backtracked on this) and tried to increase purses. 

The arguing has to come to a “resolution.” The PGA and LIV announced they would be merging to become one entity. While some were unhappy with the new investors, it seemed like it was the best for both parties. The PGA was struggling to compete with LIV’s money; LIV was struggling to compete with the PGA’s superior TV product. The lawsuits against one another are expected to be dropped, and money will be plentiful now. 

Nothing formal has been signed between the PGA Tour and LIV at the time of writing. There are still inquiries going on by the Securities and Exchange Commission over monopoly concerns leaving golf’s future murky. We don’t know what the new league will be named nor how it will operate. For now, it’s business as usual, and we’ve already seen some spectacular moments in this PGA season.  

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