The New York Times published a report by journalists Alan Blinder and Sarah Hertz in which they said that advisers working for the sovereign wealth fund in Saudi Arabia considered a bold idea in early 2021: the desert kingdom wanted a world leader in the world is becoming professional golf courses for men.
If the idea seems unfamiliar, the records show that the criteria for success border on fantasy. The new Saudi golf league will have to sign all of the world’s top 12 golfers, attract sponsorship for an unproven product and terrestrial TV deals for a low-visibility sport – all without much retribution against the big loser PGA Tour if GolfLive succeeds .
The proposal, codenamed “Project Wedge,” took shape as Saudi officials worked to repair the kingdom’s reputation abroad, which had sunk after the 2018 assassination of Washington Post columnist Jamal Khashoggi by Saudi agents . The plan was the basis for what became Life Golf, a series whose debut this year sparked accusations that Saudi Arabia, with its deep pockets, the clubs of former President Donald J. Trump and some big names tried to whitewash golfers. Some golfers have publicly downplayed the seriousness of the Saudi abuses, as has Trump.
League promoters say they are trying to revive the sport and build a profitable league. But hundreds of pages of classified documents obtained by The New York Times show that Saudi officials have been told they face serious challenges. They are breaking into a sport with a dwindling and aging fan base – albeit one that includes many wealthy and influential members – and even if they succeed, the profits will be relatively meager for one of the world’s richest sovereign wealth funds. Experts say it shows that Saudi Arabia, with investments in golf of at least $2 billion, has aspirations that go beyond money.
“The margins may be thin, but it doesn’t really matter,” says Simon Chadwick, professor of sports and geopolitical economics at Skema Business School in Paris. or a sporting power, but legitimacy in the eyes of decision makers and governments in the world.” the whole world”.
The documents provide the most complete picture to date of the financial assumptions underlying LifeGolf. One of the most important was prepared by consultants at McKinsey & Company, which has been advising the kingdom’s leaders since the 1970s. McKinsey, which has worked to raise the profile of authoritarian governments around the world, was key to Vision 2030, Crown Prince Mohammed bin Salman’s plan to diversify the kingdom’s economy and turn it into a powerful global investor. Global sports have become a pillar of that plan, with Saudi officials even discussing the possibility of one day hosting the World Cup.
McKinsey, which declined to comment, analyzed the finances of the potential golf league but made clear in its report that it did not consider whether it was a strategically viable idea. McKinsey added that many of Saudi Arabia’s rosy assumptions were “taken for granted and not challenged in our assessment.”
Indeed, Leaf Golf appears far from achieving the goals outlined in the Project Wedge documents. After a first season that cost more than $750 million, the league has not announced any major broadcast or sponsorship deals. Instead, his hopes for a truce with the PGA Tour collapsed in a heated court battle.
Moreover, the league is nowhere close to agreeing to all the elite players that the Saudi advisers said are needed to succeed. In one slide, as predicted by McKinsey and one of its most optimistic financial forecasts, the participation of Tiger Woods, Phil Mickelson and Rory McIlroy – who together won 25 major championships – is included under the heading “What you have to believe”.
Of these stars, only Mickelson joined Life Golf with a deal worth at least $200 million.
Woods, with his ability to attract fans and sponsors, was seen as essential. Although the league offered Woods a long-term plan that could have netted him “about” $700 million to $800 million, according to Leaf CEO Greg Norman, the league found Woods to be one of its biggest public detractors.
“I don’t know what the point of their game is,” Woods said last month of Leaf in the Bahamas, where he was hosting a tournament on the PGA Tour schedule. Woods conceded the PGA Tour “can’t compete on dollars” with the Saudis, but said an “endless money hole” was not a surefire way to create a legacy.
Shortly after Woods’ speech, Leaf released details of several of the 14 tournaments he expects to be the basis for proving $405 million in prize money next year, in addition to the guaranteed payments promised to players. She said she would announce her full schedule “in the coming weeks.”
The season will unfold as Liv’s business evolves toward its planned franchise model. Although professional golf has some signature team events such as the Ryder Cup, the PGA Tour generally relies on players competing for themselves. The Leaf League, whose music-filled events resemble traditional tournaments, is betting fans will love watching dozens of four-player teams compete against each other.
“Live has repeatedly made it clear that our stakeholders take a long-term approach to our business model,” Jonathan Grella, a Liv spokesman, said in a statement. “Despite the many obstacles that the PGA Tour has put in our way, we are pleased with the success of our beta test year. We are confident that the remaining parts of our business model will materialize as planned over the next few seasons will come. Our business plan is built on a path to profitability. We have a nice long runway and we’re going up.”
Prince Mohammed, the kingdom’s 37-year-old de facto ruler, is often drawn to flashy projects, and has repeatedly said he sets sky-high goals in the hope of motivating officials to achieve a fraction of them. In its analysis, McKinsey calls league golf “a high-risk, high-reward endeavor”.
The advisers laid out three possible outcomes for a franchise-driven league: collapse as a start, achieve “coexistence” with the PGA Tour or, more ambitiously, seize the mantle of dominance.
In the most successful scenario, McKinsey expects revenues of at least $1.4 billion per year in 2028, with an EBIT of $320m or more. (Federal records show that the PGA Tour, a tax-exempt nonprofit organization, reported revenue of about $1.5 billion and net income of nearly $73 million for 2019.)
By contrast, a league stuck in startup mode – defined as having attracted less than half of the world’s top 12 players – suffers from a “lack of fan enthusiasm”, falters from limited sponsorship and ‘ facing an intense reaction from the golf community. ” – is expected to lose $355 million before interest and taxes in 2028.
At the moment, Lev’s stance was sharply tilted in this way. His tournaments have not drawn large crowds, and broadcasts are largely confined to YouTube. The PGA Tour has suspended players who defected, and it is not yet clear whether the organizers of the major four men’s tournaments will allow Liv players to participate don’t take