It has been a useful week since arriving home from Kenya. I was anticipating having a quiet, relaxing few days off, away from the clubs. But, after speaking to a few coaches and after choosing to implement the ideas of one in particular, the simulator was quickly turned on and work began. Last night (Saturday 2nd March) I attended the BB&O’s Centenary Dinner, where I was asked to be a guest speaker alongside my fellow Chipping Forecast host, Iain Carter. Iain’s stories were fantastic and it was a real privilege to see Iain in this environment, doing what he does best (as well as the on course commentary). Doing the podcast with both Iain and Andrew (Cotter) is as easy as you might imagine because they are both terrific at what they do and that makes it easy for me to show up, say a few things, occasionally swear and make the producers job that bit harder. Once the Q&A was opened up to the audience last night, to nobody’s surprise it wasn’t long before the question of LIV and the future of professional golf came up. Some thoughts…
I said as much at the dinner and I’ll write it here too; I have no real idea where professional golf is heading, but I do know what I hope for. I hope professional golf ends up at a place where it really should have started a few years ago with the emergence of LIV, and that looks something more akin to cricket with the IPL. I hope we find a way for LIV to reduce its schedule and it fit within a window, or two, where it has the opportunity to thrive. I would argue that strategically this has in fact been LIV’s major error, in that by going too big too soon, it missed an opportunity to garner a critical mass of support, principally via the leading players, where they could have become invested in the idea, seen it as a replacement of the lucrative World Golf Championships and seen the broader potential to expand globally. The brands, sponsors etc already existing within the sport would have likely followed, and LIV would have had the chance to grow and become more visible, and potentially more valuable in the way the IPL has in cricket. I occasionally wonder if it is indeed why Yasir Al-Rumayyan’s heavy involvement has been a hindrance. The deal that has just been done with the ATP Tour and PIF seems to me to be a more sensible one, whereas the LIV project at times feels like a pet project (speculative) of Yasir’s, furthered by the vengeance of Greg Norman, of course (less speculative).
I watched an interesting video on “Trophy Assets” this week. I wanted to understand a bit more on what constitutes one and how they are valued. It turns out, as you probably suspect, that they are often emotional purchases, and the price that is paid has very little to do with financial returns. Drawing the relationship between the price and value isn’t performed in the same way it would traditionally be done when considering another business venture. Take the NFL, the prices paid for this group of assets has grown substantially over the last decade, from around a multiple of four times revenues to seven times revenues. The NFL operates on average with a healthy operating margin and revenues continue to grow. That operating margin varies tremendously between different sports, with the average Premier League teams OM sitting around 8% (as per the research by Aswath Damodaran – 2012-2022). I mention these because even in spite of the economics behind the investments, whether good or bad, to the owners of franchises within these leagues it doesn’t matter a great deal, all that matters is they own the Trophy Asset. Now think about LIV golf. What do they (PIF of Saudi Arabia) own? As far as I can tell they don’t own much, if anything. If they think LIV golf is itself a Trophy Asset, I have something to sell them, and if they think LIV golf can become one anytime soon in its current form, then good luck with that too. All they ‘own’ is a player, for a set period of time, and even that has the potential to be watered down should the PGA Tour find a way of affording them the occasional appearance. This is something I cannot quite wrap my head around, that after spending billions of dollars they have no lasting stake in a valuable entity, and what they do have ownership in isn’t lasting and is falling in value due to a lack of prominence and visibility.
The SSG group, who have just invested into the PGA Tour Enterprises, now have an ownership stake in a Trophy Asset. Whether you, I, or Flushing It like it or not, the PGA Tour has history, prestige, inherent value, and therefore constitutes what could rightly be referred to as a Trophy Asset. An asset which incidentally makes money, which is more than can be said of many Premier League football clubs.
Maybe I’m just being a contrarian for the sake of it, or maybe I’m not, but I would posit that history shows us that the most likely outcome in all of this is that the PGA Tour survives and LIV golf doesn’t, unless it undergoes significant changes and seeks to fit in more cooperatively. The perception out there, I think largely fuelled by the strident pro-LIV accounts that exist on X, is that LIV is winning, or that LIV will win this war. We should be cognis(z)ant of who we listen to and the messaging we see. One thing I would ask all fellow professional golfers to realise and understand is that the money coming into the game right now won’t last forever. The money being funnelled into LIV golf also won’t last forever. Nothing lasts forever on that front. What does persist through time however, particularly as it relates to sport, are the foundational principles of open and fair competition, meritocracy, respect and passion. We should be asking ourselves what is sustainable at times like this, not what can we take for ourselves, and use history as our guide to understand what the most likely outcome will be. It will provide a sense of calm in these uncertain times, and help us decipher whether we are likely living with a lasting reality, or not.
Articles and videos below that may be of interest;
Japan’s Asset Bubble – https://internationalbanker.com/history-of-financial-crises/japans-lost-decade-1992/
Aswath Damodaran – Toys For Billionaires – https://www.youtube.com/watch?v=sx2Jx5vaRhc
A Story on Brunei – https://apjjf.org/geoffrey-gunn/2696/article