PGA, LIV tours to merge
- Thread starter Bob Montgomerys Helmet Hat
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The weirdest take I’ve seen is that the PGA Tour did this because they were concerned about losing an antitrust lawsuit, as if merging to avoid an antitrust lawsuit removes all legal jeopardy.
Monahan reports to the board of directors. The players do have board seats but it's a minority position. (I think they have 6 of 14 but I could be wrong). Given that Monahan stated he negotiated the deal with 2 board members (Jimmy Dunne and Ed Herlihey) I would think he's got some idea that he has the votes. I don't believe the players themselves have the authority to remove Monahan as commishoner. My guess is that would need board approval.
The players have a players advisory council (PAC). It's a small group of players that represent the overall membership, a mix of elite players, the middle class and the mules. I don't think the PAC has the authority to block the financial part of this deal, namely the PIF funding. What they do have significant say over is the policy changes as a result of this. The PAC is going to have to approve any changes to the schedule or formats as a result of this. The big one will be the LIV players coming back. Whatever process they come up with will have to be approved by the PAC.
Sally Jenkins, as usual:
PGA Tour’s deal with LIV Golf benefits someone, but not the players - The Washington Post
PGA Tour’s deal with LIV Golf benefits someone, but not the players - The Washington Post
On Herlihy:
I don’t think it’s a crazy take at all.
The reporters who cover the legal/business aspects of sports generally reported that LIV’s case was weak. I’m not always impressed by the lawyers who are employed by those outlets (to be fair, they’re routinely asked to opine on subjects that are far from their wheelhouse), but I’m sure most of them consulted folks who know a lot more about antitrust law than I do. That said, I was surprised by their certainty — it seemed to me that LIV had a plausible claim, so I figured it was anyone’s guess how a court would rule. But I didn’t think too much about it, since I’m far from an expert, and I haven’t followed developments in recent months.
We don’t know why the PGA suddenly decided to make peace. If they saw the antitrust suit as more of a 50/50 proposition than a slam dunk, that would explain a lot. Not saying that’s what happened, but as rank speculation goes, the idea hangs together better than most.
Yep, players are being taken for a ride (a board member using his own law firm to basically orchestrate this is... wow, rotten). Decent chance the players just lie there and take it but reactions this week at the RBC should be interesting. Those who remained chose not to sign up for being part of the whole Saudi thing and now they're front page news for being owned by them. The tour PR team has its work cut out for it. Who is the first player to say something nasty about the Saudis? You know it's coming. Entertainment factor: HIGH!
Some of the reporting on the "why" is that the legal expenses related to the antitrust lawsuit was bleeding them dry. The other aspect is the new designated event structure was not sustainable and they needed funding.
I'm curious if this would eventually get reviewed by the FTC, even if they're trying to avoid calling it a merger. Normally they'd be predisposed to avoid a monopoly but the implications for the US/Saudi relationship seriously complicates things.
I also don't quite get the victory lap being taken by Bryson and the LIV players. Their tour and model, the "grow the game" bullshit, is getting nuked by Monahan. The players are going to have to go back to the PGA Tour and play under Monahan's rules again. Additionally, they're probably going to have to serve some sort of penalty plus pay some sort of fine to get back in on level terms. They are portraying this as victory for LIV which is far from accurate.
Here's a headline this morning following that interview:
https://www.nj.com/sports/2023/06/liv-golfer-bryson-dechambeau-on-saudis-ties-to-911-and-cold-blooded-murder-nobodys-perfect.html
Nice work Bryson!
Exactly. I can’t imagine that the PGA maintains a significant amount of excess cash for this type of litigation. LIV on the other hand?
Seems like the mistake by most folks was the belief that LIV had the resources to withstand endless losses as opposed to winning the litigation battle of attrition.
Not surprising. Given his comments a few weeks ago it wouldn't shock me if he knew.
He said he got a text from Jimmy Dunne Monday night and then had a conversation with him yesterday at 6:30am when he found out the news.
Also, this probably sums everything up well:
View: https://twitter.com/KylePorterCBS/status/1666439154593308673?s=20
Well, merging makes the antitrust case moot as it eliminates the plaintiff.
But I think the bigger issue with the lawsuit is that from what I understand (see this article: https://lawprofessors.typepad.com/nonprofit/2023/05/the-pga-no-longer-qualifies-for-tax-exemption.html) - the PGA Tour books its payments from sponsors as "sponsorships" rather than "advertising revenue." The biggest difference is that sponsorships are related business income and since the PGA Tour is a 501(c)(6) non-profit organization, they haven't been paying taxes on that money.
Advertising is likely unrelated business income which requires - you guessed it! - taxes!
If LIV was trying to get discovery into these payments, then PGA would literally have no choice but to settle.
On this point... I was just at the Connecticut Sun v. Las Vegas Aces game last night. The two best teams in the WNBA, in the best state in the country for women's basketball (thanks UConn). And the place was about 1/3 full. Official attendance: 4,368. Not even 5,000 fans at the premier game of the WNBA season so far. And truth be told, the WNBA has never been better. The amount of legit talent in the league right now is off the charts for women's basketball. Talent-wise, they really need to expand. But the money just isn't there to support expansion. So these teams are freaking loaded. But fans still aren't coming to the games.
I love women's sports, but the vast, vast, vast majority of the country doesn't. And I don't know what can be done about it.
As for this PGA-LIV tour "merge"...I need some time to process it. I'm with others that isn't super excited to see players that abandoned the PGA Tour to pursue LIV money back in the PGA Tour fold. But maybe the LIV Tour did what they (people like Mickelson) hoped it would: it radically changed the PGA Tour, brought in tons of new money, and made the PGA Tour better for the players. So....a win, I guess?
Why couldn’t the PGA Tour avoid unrelated business tax the way colleges and universities do with respect to income from their athletic programs? The rules are the same, as is the rough shape of the business — ticket sales and broadcast rights comprise the bulk of revenue and aren’t taxed; other deals can usually be structured to qualify (at least arguably) for the exemption for sponsorship acknowledgements.
The product is good IMO. In terms of play it looks an awful lot like early 90s men's tour golf. Driving distances are basically in line with what the men's tour was doing until the late 90s distance jump (a handful averaging 280+ with many in the 270s). They're not as robotically perfect as the men's tour has gotten either. The folks upset that the men's tour is hitting the ball too far really should just watch the women. The product they want already exists.
I'm not an expert on the rules (for a long primer, please see this: https://www.forbes.com/sites/taxnotes/2022/03/15/the-ncaa-vs-taxation-how-colleges-are-caught-in-the-middle/?sh=3d87dd997e74) or what is going on in college athletics or the PGA but it is my understanding that the PGA is absolutely structuring payments the same way college athletics are: i.e., the bulk of the PGA's revenues (in the billions) is accounted for as sponsorships and thus is not UBIT.
The issue is that there are some rules around what has to happen for these sponsorships to be remain untaxed and perhaps the PGA was worried that discovery would lead to the release of information that would not be in compliance with these rules.
Or that the PGA was doing things generally that was against the 501(c) requirements.
Just speculating here.
For a longer law review article on the topic, see: https://pennstatelaw.psu.edu/_file/NCAA26.pdf
The PIF is the winner. They gained a seat at the table of the PGA Tour.
I don't think Mickelson wins. He was the architect of LIV and LIV is now dead. Yes, LIV spurred change on the PGA Tour. At the same time, he could've taken all these ideas and worked on incorporating and implementing them through the PGA Tour. He was either the first or second most powerful player out there, he didn't need to run to the Saudi's with all his brilliant ideas to fix the game. He was broke and needed money quickly.
Secondly, as I mentioned earlier, the LIV players are not going to get off easily. Jay now controls LIV and is going to detonate the second their season ends. The players are not going to get a free walk right back onto the PGA Tour as if nothing happened. They are likely going to have to pay significant fines and serve some kind of suspensions before being eligible to return, and when they do return they may not even be eligible for prize money right off the bat. And they have no choice in the matter, there is no other place for them to go play.
I agree with everything you said up to this. The product doesn't really exist unless you believe preference for watching men play instead of women is not a thing. Call it whatever you want, but men don't seem to have any interest in watching women's sports most of the time.. heck even women don't seem interested that much otherwise they'd probably be just as big as men's sports.
I'm very skeptical there is going to be much punitive action taken. Some minor token fines or suspensions... maybe, but this is a business and the best thing for the business is getting past this.
I feel like the PGA will to need do something to smooth things over with the guys who didn't jump, otherwise the LIV guys get to have their cake (however much of it the Saudis served is another question) and eat it to. But I agree with you that it's probably going to be closer to the wrist-slap end of the spectrum vs. something extremely harsh.
We'll see. The current Tour players need to approve whatever they end up doing, so I don't think it'll be a token penalty and on we go.
They'll probably take it on a case by case basis. DJ, Cam and the players who just quietly left and went about their business will probably face an easier climb back than say Phil, Reed, Sergio and the guys who were more openly vocal and hostile towards the Tour.
But Rory is already on board, and if he is on board, then who is going to hold the PGA's feet to the fire if not him? What I mean is that Rory seems pissed but he also seems resigned to the fact that the Saudis have so much money that fighting them isn't really in the long term interest of golf, and therefore, he's going to go along. This is not a criticism of him, but I think an empirical fact at this point. Like Sally Jenkins said, the Saudis just bought themselves a seat on the PGA board and will forever be involved so long as they care to be, and the PGA bent over for that money.
Rory is, reluctantly, on board with the PIF investment. They have not figured out the plan for the LIV players coming back. That is still TBD.
Bloomberg is reporting that the transaction is already being viewed as a red flag by the DOJ/FTC.
https://www.bloomberg.com/news/articles/2023-06-07/pga-tour-merger-with-liv-golf-may-face-us-antitrust-hurdles#xj4y7vzkg
"No antitrust lawyers were involved in the PGA-LIV discussions, which focused on how to innovate the sport and bring the game to younger audiences, according to another person familiar with the talks.
The leagues don’t expect the deal, described as a joint-venture, to require a traditional merger review, said that person, who spoke anonymously to describe confidential negotiations. The three tours have a written agreement, with some aspects still being determined, the person said."
Plenty of joint-ventures require merger filings. And if it's structured in some way that it won't require an HSR, presumably antitrust attorneys would be involved in structuring such a transaction. Also one would still expect that the agencies to investigate the total elimination of competition between the two parties as a result of the transaction so it doesn't really pass the smell test that no antitrust lawyers were involved (not to mention that Wachtell has some very sophisticated antitrust lawyers).
https://www.bloomberg.com/news/articles/2023-06-07/pga-tour-merger-with-liv-golf-may-face-us-antitrust-hurdles#xj4y7vzkg
"No antitrust lawyers were involved in the PGA-LIV discussions, which focused on how to innovate the sport and bring the game to younger audiences, according to another person familiar with the talks.
The leagues don’t expect the deal, described as a joint-venture, to require a traditional merger review, said that person, who spoke anonymously to describe confidential negotiations. The three tours have a written agreement, with some aspects still being determined, the person said."
Plenty of joint-ventures require merger filings. And if it's structured in some way that it won't require an HSR, presumably antitrust attorneys would be involved in structuring such a transaction. Also one would still expect that the agencies to investigate the total elimination of competition between the two parties as a result of the transaction so it doesn't really pass the smell test that no antitrust lawyers were involved (not to mention that Wachtell has some very sophisticated antitrust lawyers).
The DOJ is investigating the player stuff so I doubt they immediately impose fines/suspensions which would invite further scrutiny.
Right, and I believe that the LIV players will be welcomed back, at least onto the tour, with minor disruption. They may have to forfeit their right to the outstanding financial commitments made by LIV, they will not have to disgorge any money already earned. They may be fined, but those fines will be substantially less than the money they already pocketed for joining LIV. Their resumption of PGA golf may be slightly delayed. Those are the types of things I think will happen, in the interest of moving forward, in unity. It will not smooth over the anger of those who were used by the PGA and stayed loyal, but I would bet a whole lot of money that 1 year removed from whatever so-called "penalties" the LIV players receive, everyone will be singing from the same sheet of music. That includes Rory.
Edit: It's fucking depressing, but it's also not the least bit surprising.
Forgive the ignorance underlying the question, but what's stopping the PGA holdouts who find LIV and the PIF repulsive from forming a new non-profit PGA under another name? Is it simply inertia and not wanting to forgo the likely financial rewards of this deal? I ask because I'd like to think that's what I would want to do if I were similarly situated.
Funding
Edit: It took billions from the PIF to get LIV off the ground and they were running at significant losses. That didn't matter because the PIF's endless money was behind it. Any new league is not going to be able to bring that kind of money in to get started.
Why does anything need to be done about it? Are we saying the same thing about low attendance at minor league games? It's an inferior product that people don't want to watch. There are plenty of women sports that get higher levels of support (golf and tennis). Why can't the WNBA just be what it is?
There are not many people who live in southeast CT compared to the other WNBA markets, no?
Why is it so hard to just say it's about the money? Instead people just toss up a word soup of mental gymnastics which nobody believes for a second.
I doubt many people would turn down $100 million if it meant being linked to Saudi Arabia in some way, that is real generational wealth that if managed correctly would provide for your family forever.
I feel like all of the comparisons both with LIV and professional soccer players like Benzema and Ronaldo who are moving to Saudi Arabia, we need to stop comparing these many times over multi millionaires taking $100M to an average joe on the street. It's a lot more akin to "Would you take a 5 year contract that doubles your current net worth in Saudi Arabia funded by PIF to help whitewash their human rights issues?"
I personally don't have a lot of difficulty turning down that opportunity. I am pretty confident I would not turn down a $100M offer over the next 5 years from the Saudis.
I personally don't have a lot of difficulty turning down that opportunity. I am pretty confident I would not turn down a $100M offer over the next 5 years from the Saudis.
My sense is the players are not going to allow a token fine and penalty for the LIV guys. Rory said in his press conference that the players who went to LIV need to face real consequences and that it the LIV players facing these consequences was a prime talking point from Monahan at the players meeting yesterday.
As for making the stars who stayed loyal whole, I would guess there will be quiet payouts to Rory, Tiger, etc from the new for-profit company.
Anyways, here's a former Republican FTC commissioner's take:
View: https://twitter.com/ProfWrightGMU/status/1666458194242072582
View: https://twitter.com/ProfWrightGMU/status/1666459176350937098?s=20
View: https://twitter.com/ProfWrightGMU/status/1666458194242072582
View: https://twitter.com/ProfWrightGMU/status/1666459176350937098?s=20
I am with Mauf. I am not a fan of these "Look at me" lawyers who try to second guess things with incomplete information. And not a surprise that it's antitrust lawyers trying to make sure they aren't forgotten ::snark with truth::
I actually think that if you came up with an apt parable that was relatable to ordinary people (i.e. scaling down the $ and localizing the moral/political issues), you would find that most of them have a sense of right and wrong and they would not do it.
One of the reasons these things are so dismaying is that these are already wealthy people to begin with. These aren't poor desperate people who had $100 million dangled in front of them.
Has any information leaked on what the sizable investment by PIF is? Any guesses? Is it north of 2B, or am I not even in the right neighborhood with my first gut guess.
Nobody knows. Essentially they need to come up with a valuation for this new company, then once that is in place PIF decides how much they want to invest in it. The Saudi guy yesterday said they need a few weeks to complete the valuation.
I'm sure some of the players want there to be consequences, but... what is the argument for them (other than spite)? 'How dare you have taken money from the Saudis to form a competing league that we've now merged with and are taking money from' is a... weird argument to make (and if half the reason for doing this merger is to settle lawsuits, I suspect that trying to throw huge penalties for the LIV golfers won't exactly accomplish that).
Once you remove the 'Saudi $ is evil' part of the argument, you're basically left with a non-compete argument, so the PGA tour really wants to launch a battle over whether they can ban golfers from participating in other events, particularly when they're a monopoly that's trying to merge with their only competitor? Seems like a bad idea to me as a non-expert