The question has been asked repeatedly since the announcement of the Strategic Sports Group’s investment in the PGA Tour: How is the consortium going to achieve a return on its potential $3 billion stake?
The question was posed to commissioner Jay Monahan at his annual address to the media last week before the Players Championship at TPC Sawgrass. His reply was, predictably and understandingly, vague. After all, the group isn’t two months into its existence.
“The more that we can do to increase fandom, to bring our product forward in a way that is consistent with the way fans want to consume product and a better job and the more steps we can take to dimensionalize our great athletes, those are all steps that we can take to grow fandom,” Monahan said. “And when you grow fandom, ultimately that drives your commercial success. It does come back down, and it’s true for any sport, you’re only as strong as your fan base and you’re only as strong as your ability to grow that fan base.”
Not a very concrete answer, and not at all what the gathered scribes wanted to hear, but that was generally true of the entire nearly one-hour session. Monahan’s hands are tied when dealing with specifics on anything having to do with PGA Tour governance.
What are some of the opportunities the tour might consider?
When speaking about fandom, onsite analytics, which is all the rage among sports team owners and leagues, will figure prominently. Sports executives around the world are looking for data insight that will enable them to maximize revenue from tickets, food-and-beverage and merchandise sales. New companies bringing such offerings to market will get a quick hearing in Ponte Vedra Beach.
In a similar vein, PGA Tour Enterprises, the new for-profit venture, might look outside the box and consider technology opportunities, particularly regarding artificial intelligence. In board member Mary Meeker, one of the leading technology investors in America, PGA Tour Enterprises is well positioned to get a first look at new technologies that could affect various aspects of the business, from digital technology to agronomy.
Tour denizens are going to have to get used to people whom they don’t recognize asking hard questions about how the business is run.
Closer to home in golf, there are myriad opportunities.
High on the list will be the Ryder Cup.
The PGA Tour's players make the Ryder Cup what it is, but the tour is not a significant player in what has become one of the greatest sporting spectacles in the world. The tour has long coveted a greater piece of the Ryder Cup, which is co-owned by the PGA of America and the DP World Tour. The PGA Tour benefits from its 15 percent ownership of European Tour Productions, which teams with IMG Media to produce and distribute the Ryder Cup when it is played in Europe every fourth year. The PGA Tour gets a minority percentage of the Ryder Cup contract from the PGA of America in exchange for the media rights of tour players.
When the Ryder Cup is played in America, the match generates hundreds of millions for the PGA of America. Participating PGA Tour players get $200,000 grants for charitable donations as a part of their team membership, but the PGA Tour does not directly participate in any of this revenue outside of the TV rights.
Monahan has a great relationship with PGA of America CEO Seth Waugh. Together, they may be able to craft some arrangement whereby PGA Tour Enterprises becomes a partner in the Ryder Cup to the benefit of the membership of the PGA of America.
It is believed this opportunity is a priority for Joe Ogilvie, the former PGA Tour player who recently was named to the board of PGA Tour Enterprises. It is also believed preliminary discussions may well have taken place.
PGA Tour Superstores is an interesting possibility. New PGA Tour Enterprises board member Arthur Blank, the founder of Home Depot and owner of the NFL’s Atlanta Falcons, owns the retail operation, which operates nearly 60 stores in America. Blank would have to recuse himself if discussions got serious, but he also may be more interested in taking the business public. If a PGA Tour deal takes place, it could lead to global golf retail consolidation; PGA Tour Enterprises could acquire and rebrand Golf Town, Canada’s dominant golf retailer, and American Golf, the leading off-course retailer in the United Kingdom.
If not golf retail, what about retail club fitting? Club Champion, the successful 120-store retail club-fitting leader with a growing international presence, might check a few boxes. The private-equity group Levine Leichtman Capital Partners has owned Club Champion since 2019, and the investors likely will seek an exit after five years. You can expect Levine Leichtman bankers to reach out to PGA Tour Enterprises, if they haven’t already.
The PGA Tour Enterprises board will have to consider what’s happening in the off-course world. Chip Brewer, the CEO of Topgolf Callaway Brands, and his board are dug in with their plan to roll out Topgolf entertainment venues on a profitable basis, so I don’t think they are sellers. More likely, PGA Tour Enterprises will want to invest in or acquire one of the other burgeoning off-course startups: Tiger Woods’ Popstroke, Five Iron Golf (which counts Callaway as an investor), and Puttery, a Drive Shack-owned entity that includes Rory McIlroy as an investor.
How about golf courses? Selling prices are high in the post-COVID era, so the PGA Tour is more likely to be a seller than a buyer. Sales of non-core golf course properties could generate some early returns for the new PGA Tour Enterprises group.
Golf Channel? Five years ago, maybe. Today, Golf Channel really does not exist as a business entity. What once was Golf Channel has been gutted and fully integrated into NBC Sports. It would be hard to separate the two and carve out what was once Golf Channel. Furthermore, linear television, where NBC and Golf Channel generate the vast majority of revenue, is in secular decline.
A more likely scenario is the tour using its magnificent new PGA Tour Studios facility to compel all of its network and digital partners to relocate personnel to Ponte Vedra Beach, and to pay for the privilege.
Down the road, if it is successful, there is TMRW Sports’ TGL, Woods and McIlroy’s made-for-TV production entity, in which the PGA Tour already is an investor. Further investment will require an operating history, which does not exist because the scheduled 2024 debut was delayed one year.
PGA Tour events clearly are on the list. This is a high priority for the tour’s Championship Management division. The takeover of the PGA National tour event, known this year as the Cognizant Classic at the Palm Beaches, was just the start. The tour sent a message with this takeover to the tour operators’ community: We know how to operate events, and we have an appetite for growth here.
Finally, because the SSG is essentially private-equity capital, there is going to be a never-ending search for “efficiencies.” That word generally means cost reduction, particularly as it relates to headcount. Tour denizens are going to have to get used to people whom they don’t recognize asking hard questions about how the business is run. It comes with the territory.
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scott michaux, ggp