LIV Tour with Jared Doerfloer

Jared Doerfler, the author of a newsletter called Perfect Putt that covers the intersection of golf and business, recently joined me on?Upticks ?for the?second time this year . With golf moving from the sports page to the front page, I think many listeners and readers will be interested to hear his thoughts on the launch of the LIV tour and how it impacts the sport. A summary of our conversation is below.

Jake:?To start us off, Jared, can you give the backstory to the LIV tour?

Jared:?The LIV tour is financially backed by Saudi Arabia’s Public Investment Fund and is led by former pro golfer Greg Norman, who some may recall also tried to start a breakaway tour from the PGA Tour in the 1990s.

So you have these two parties—Norman and the Saudi government—who have the same goal, but different motivations. Norman dislikes the PGA Tour and is being paid to lead the LIV Tour. Meanwhile, the Saudi government is interested in using sports to help rebrand its reputation.

Jake:?Yes, I’ve seen this called “sportswashing.” It seems to me the Saudi government is approaching this mostly as a marketing opportunity, rather than a business opportunity.

Jared:?I think that’s really well said. Sportswashing has been going on for a really long time. The 1936 Olympics were in Nazi Germany, for example. So none of this is new.

Jake:?Some really big names have signed on to play with LIV Golf, including Phil Mickelson, Dustin Johnson, Kevin Na and Patrick Reed. These are guys who made a nice living on the PGA Tour, but left anyway. What do you think of the LIV lineup and how do these defections hurt the PGA Tour?

Jared:?I thought the lineup for the first LIV tour event was pretty good, but I’m not sure those defections you mention hurt the PGA Tour in the long term. It hurts in the short term, because players like Phil Mickelson and Dustin Johnson help set tickets. But with Mickelson being in his 50s, I’m not sure any of the players who went to the LIV tour could threaten the PGA’s long-term health.

That’s not to say the PGA Tour is out of the woods. LIV Golf is signing some young and up-and-coming players, including James Piot, a recent Michigan State grad, who many golf fans haven’t yet heard of. If any of these players develop into stars, that could hurt the PGA Tour.

I understand why a player like Piot would sign with LIV Golf. There are few guarantees in professional golf, but the LIV tour is offering guaranteed money to both stars and younger players simply for playing in events. It’s easy to understand the temptation, considering the PGA Tour doesn’t offer guaranteed money like that.

Jake:?Yes, that’s a key point. These players are receiving guaranteed money for participating in LIV’s tournaments, and some received signing bonuses upon joining LIV Golf.

In addition to the guaranteed money, LIV tournaments are only 54 holes, rather than 72, as is customary on the PGA Tour. And LIV plans to host fewer events each year than the PGA Tour. What do you make of players saying they’re choosing LIV because they want more balance in their lives?

Jared:?I personally think it’s a bit of a crutch to say that. If these LIV players find more balance, it’s because they won’t be allowed to play in PGA Tour events and will have a lot more money in the bank. PGA Tour players are required to play 15 events a year, but the LIV tour is only hosting eight events this year (though it could have as many as 15 next year). And of course all the LIV players are hoping and assuming they can still play in golf’s four major tournaments, which are not hosted by the PGA Tour.

LIV players will still play a decent amount of golf and some of it will take place outside of North America, as LIV Golf aims to host tournaments all over the world.

Jake:?I’ve liked reading quotes from players who are planning to stay on the PGA Tour, like Rory Mcllroy, Jon Rahm and Justin Thomas. They’ve said they’re sad players are leaving, but they’re not judging those who leave. And they’ve said the PGA Tour has been the right place for them. What are your thoughts on the players who have stuck with the PGA Tour?

Jared:?I tend to agree with what those three players have said. Rahm said between the three-round tournaments and the shotgun starts, LIV Golf is just not for him. He basically stated it’s not golf in the pure form so many of us love.

And it’s interesting to note Rahm is good friends with Phil Mickelson; they recently played a practice round together. For the most part, it seems like players on both sides of the fence are trying to look at this as a business decision and not take the choices of others personally. With that being said, many seem particularly disappointed in Mickelson. He’s been such a towering figure in the game.

Jake:?Do you think this tarnishes Phil’s reputation? He’s kind of tried to play both sides, noting he has a lifetime exemption on the PGA Tour while signing a large contract with LIV Golf.

Jared:?I’m not sure he cares. While Phil has made a lot of money, he has also allegedly lost a lot of money through gambling and bad investments. I think he simply needs the money and that’s why he signed on with LIV Golf. Some other players like Dustin Johnson and Bryson DeChambeau have won majors, but they don’t have legacies to uphold in the same way Phil does.

Jake:?What are your thoughts on some of the younger guys like James Piot who have decided to play with LIV Golf? And does the PGA Tour need to make changes? I know it can be a stressful life for players on the PGA’s developmental tours, like the Korn Ferry Tour.

Jared:?I can’t blame the younger guys. It’s a lot of guaranteed money to turn down, as one agent for players recently told me. They can set themselves up financially in the long term and still potentially play on the PGA Tour later in life.

And while I personally am a PGA Tour supporter, I think the Tour needs to make some big changes to solidify its pipeline of young players.

Jake:?It seems to me the LIV tour is disrupting the PGA Tour in the same way Robinhood disrupted the finance industry. It used to cost money to make a stock market trade, whether you were a wealth advisor or retail investor. But because Robinhood brought free trading to the masses, many custodians, including the one we work with, no longer charge fees. Robinhood has had some issues, but I credit them for their positive disruptions to the industry. Maybe one day we will look back and think that LIV was the disrupter professional golf needed.

What do you think the PGA Tour can do to solidify its pipeline of young players? I saw recently that Korn Ferry tournaments are expected to have $1 million purses, but I’m not sure if that’s enough.

Jared:?I would like to see the PGA Tour give status to the top collegiate players as they leave school, rather than making it as difficult to earn status as it is today. Right now, the top five collegiate players get status on the Korn Ferry Tour, where the average yearly earnings are $60,000 a year. Meanwhile, on the PGA Tour, the average player earns $1.2 million a year. And of course anyone who follows sports knows about how little the top collegiate golfers earn coming out of school compared to players in the NBA or NFL.

The PGA needs to protect and enhance this player pipeline. They need to offer some sort of financial guarantee for players, even if they miss the weekend cut. Lots of players end up losing money if they miss the cut, leading to debt and them reconsidering if they should pursue a professional golf career. The cream rises to the top, and there are opportunities to give everyone a fair shot.

Jake:?I agree it’s key to protect this pipeline by making it easier for young golfers to focus on golf and proving themselves. And the LIV tour may not even be the last one to challenge the PGA. A new tour could start out of China, for example, someday.

Jared:?And there have been rumors that LIV Golf may pursue its own developmental tour. So far, it appears the Saudis have invested $2-3 billion in LIV. Their purses are significantly larger than those on the PGA Tour, with even the last place player earning $120,000—far more than he would have for finishing last in a PGA Tour event, or about the same as he would have earned for?winning?a Korn Ferry Tour event. So again, it’s tough to fault some of these younger players who seek financial security for taking guaranteed money on the LIV tour.

Jake:?Much of the controversy around the LIV tour has been because it’s backed by the Saudi Arabian government and there are so many concerns with its human rights record. What’s your take on the moral element at play? What if a country like Switzerland were hosting this?

Jared:?It’s worth noting this is a government sponsoring the LIV tour, not just a billionaire who happens to be from a problematic country. LIV reminded its players that Saudi Arabia is an ally of the US government—though that doesn’t mean they’re a good actor in our complicated world.

So I’m not sure what to make of it from a moral standpoint, to be honest. It’s a complex situation. I’m not sure what I would do if I were in the shoes of one of these players. But I’m not a professional golfer, and at the end of the day, I’m a supporter of the PGA Tour. I hope it sees this as a wake up call to change.

Jake:?Do you think players who join LIV Golf will lose their endorsements? I know many of Phil’s longtime sponsors have parted ways with him, at least temporarily.

Jared:?I’m not sure. I saw the Jordan brand is continuing to endorse Pat Perez, despite his departure for LIV Golf. Meanwhile, Grame McDowell and Dustin Johnson?have lost sponsors .

But back to Phil, the main difference between him and the other players is how he handled the situation. He tried to play both sides and of course he had those?controversial comments ?about Saudi Arabia. I heard from a source that KPMG no longer sponsors him because his comments upset people in Saudi Arabia, which is interesting.

Jake:?That is interesting. To wrap up our show: Is this good for golf?

Jared:?This situation has highlighted a lot of negatives in the golf world, but I think it could lead to the PGA Tour becoming a better product. And I personally will be shocked if LIV Golf is around in a decade.

Jake:?I agree. It feels like arena football to me, though it has a lot more money behind it.

Jared:?Agreed. I just am not a fan of the shotgun start and 54 hole tournaments. I think the PGA Tour does its tournaments right. It now just needs to do a better job of protecting its pipeline of players. And I would like to see caddies on the PGA Tour treated better. With all of that said, at the end of the day, I think golf will be just fine.

Jake:?Jared, thanks so much for joining me to talk about the game we both love. I hope our listeners and readers who are golf fans enjoyed our conversation. If you would like to talk about golf, business or personal finance, please don’t hesitate to contact?Falcon Wealth Advisors ?today. You can reach me directly at?[email protected] .

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