Right now, the PGA Tour is going through one of the worst times in its history. It has to deal with a competitor that has made operations too expensive for it to handle.
The Tour is in talks with the DP World Tour, the Public Investment Fund of Saudi Arabia as part of a framework agreement, and possibly other private equity firms that could invest billions of dollars in a new for-profit entity. At the same time, the PGA Tour Inc., which has been a nonprofit for decades, has to make some tough decisions about how to pay its purses.
That’s because the new business can’t get money from the old service.
One official from an event who did not want to be named said, “They have made it clear that none of the money will flow to the tournaments.”
That means the Tour is trying to get billions of dollars but only paying millions of dollars.
All of this is being talked about this week at the yearly meetings for PGA Tour tournaments in Palm Springs, California.
And tournaments are well aware of what is being asked of them: starting in 2025, they will have to pay a bigger share of PGA Tour funds than they do now.
A new way to pay for tournaments has been suggested. According to Sports Business Journal, which broke the story last month, non-profit tournaments would have to pay an extra fee that would go to the competition purses.
A lot of people don’t like it.
“Tournaments are not happy at all,” said one tournament head in an interview with Sports Illustrated. “They are asking each tournament for a large fee and a revenue share.”
The fees would depend on the type of event, like a playoff event, an opposite event, a normal Tour event, or a signature event.
They are already having a hard time running the events properly because they have to pay their bills and give the money they make to charity. They are afraid that this will make things even harder for them.
“I’m not expecting any good news from this,” said another tournament official about the talks this week.
The Sports Business Journal said that the Tour is working on a three-year plan to figure out a fee for each event. Half of that fee would be due in the first year, with the full amount due in 2027.
The LIV Golf League started in 2022 and started to attract players with guaranteed contracts and big purses at no-cut games. This has made it so that the Tour can’t make money.
Because of this, the PGA Tour announced a Player Impact Programme that will give $300 million in bonuses over four years and start a run of high-level tournaments in 2024 that will be called signature events.
There are eight of these events, and all but one will pay $20 million in prizes. The Sentry, on the other hand, will pay $15 million. The first two FedEx Cup playoff games are now worth $20 million each. Ten events will have seen their prize pools grow by about $8 to $12 million each year over the course of two years.
As part of the original TV rights deal, which was signed in 2020 before LIV Golf came out, tournaments agreed to increase their prize pools by up to $400,000 per year, based on the event.
The tournament’s backers are not happy about this. The head of the competition said, “Many of them are just saying they won’t do it, they’ve had enough.”
Because of this, the Tour is going to 501(c)(3) non-profits to ask for help paying the purses.
This is how the PGA Tour, which is a 501(c)(6) charity, works with the TV networks that show and stream events, the title sponsors that help pay for them, and the local host organisations that put them on.
To put it simply, each title sponsor pays a fee that is usually at least 150% of the purse. For instance, if the prize pool for a tournament is $20 million, the total cost of running the tournament could be as much as $30 million. This amount would be split between the fund, the local host organisation, and the Tour. Some of the price could be used to make the event happen, like for entertainment.
The prize money is made up of money from the Tour’s TV rights fees. The title backer gives a “entitlement fee” to each local host organisation to help it run its event.
After that, each event is on its own. It gets money from pro-ams, donations, ticket sales, merchandise sales, and food and drink stands. Everything that goes along with the event is paid for by the tournament. This includes the course rental fees, food for players and helpers, staging, and everything else.
There are also a few full-time workers at each event who need to be paid. After all of its costs are covered, each game gives its money to charity. Depending on the event, this can be a huge amount of money.
The PGA Tour is proud of how much it gives back to the community, but the real work is done at the area level. People in charge of the competition say that is now being threatened.
One person in charge of the event said, “We can only sell so many pro-am spots and charge so much for them.” “We can only build hotel venues up to a certain height.”
Tour events aren’t being told to give less to charity, but that’s pretty much what will happen. Unless events can bring in even more money. Even more work will be added to that job by other things the Tour wants.
For instance, tournaments will have to provide more private toilet areas on both the front and back nines at each spot, among other things. Players will now have to use courtesy cars, which are already popular at most tournaments. Plus, more healthy food will likely be available and teachers and trainers will be able to get to it.
“All of our financial information is given to the Tour,” said another official from the event. “They know how much we spend and how much we earn.” This means they can see what we’re doing and say how much of it they want. It seems like they might use that against us.
What if a Tour event doesn’t follow the rules? The Tour makes a deal with each event, and when that deal ends, the Tour can choose not to extend it. The Tour can then choose another organising group that will follow the rules, or it can use its own for-profit arm, Championship Management, to run the game.
Tournaments on the PGA Tour Champions, as well as the Players Championship, the Tour Championship, the Sentry, and the FedEx St. Jude, are already run by Championship Management. That is a way for the Tour to make money.
“It’s good for both of them,” said one event director.
There is also some unease among those who have been running the PGA Tour at the local level for years because it might start a new era with a for-profit arm.
