There was always a hunch. That is when the time comes, LIV Golf will have to forego the upfront sum they offered to lure the players from the PGA Tour. Now, it’s all but confirmed. Eamon Lynch reported in Golfweek that LIV Golf has told its players ‘any contract renewals won’t repeat the huge upfront payments.’ Which means a contract negotiation is in the offing, and a potential for some discord inside the 54-hole upstart league. But before that, let’s first understand how it came to this. 

LIV’s financial book is in a mess

LIV Golf has been running at a loss, like most start-ups. But what makes it a different case scenario is the hype built around it and the jarring gap between reality and expectations. Per LIV’s 2023 financial report: 

• Legal expenses amounted to $ 15.7 M.
• Operating loss grew 39% from $244M to $ 394 M.
• Broadcasting rights contributed to only 8% of its total revenue. 

All of which required the PIF to inject more money into the league. For example, PIF had to invest $1B in total for its United Kingdom event. According to Money in Sport, which first reported this, “The level of new share issues in 2024 of over $400 million implies no improvement in LIV’s 2024 financial performance (ex-USA).”

However, PIF has recalibrated its overseas investment strategies. The Financial Times reported that the Saudi sovereign fund is more focused on domestic investment. PIF’s overseas investment took up around 30% of its allocated budget. 

“Now our target is to bring it down to a range between 18 to 20 per cent,” Yasir Al-Rumayyan, the PIF governor, was quoted as saying. According to fDi Intelligence, that’s primarily for three reasons. 

• Fiscal deficit: Dwindling oil prices have widened Saudi Arabia’s fiscal deficit, expected to be 2.3% of GDP from 1.6% in its 2024 budget estimate. 
• Declining FDI: In the third quarter of 2024, the FDI inflows stood at $4.27B, a 21% Y-O-Y decline. 
• Other priorities: Saudi Arabia is shifting its focus to upcoming mega events such as the Asian Winter Games (2029), Expo 2030, and the Soccer World Cup (2034)

So, PIF’s investment in LIV Golf is expected to come down in the future. An early indication of that comes in the form of the league hinting that the upfront money won’t be as much as it was before. But that shouldn’t have come as a surprise either. 

LIV Golf is yet to gain a foothold in the United States

LIV Golf has struggled to sell its key identity: team golf. Consequently, they haven’t been able to get viewers rooting to a particular team—the key problem for its franchise-based model. That’s evident from TV Ratings as well: 

A result of all these is directly evident from its revenue stream. Most leagues, such as the NFL, NBA, and MLB, earn a chunk of their revenue (around 50%) from selling broadcasting rights. However, as the above statistics show, for LIV Golf, that’s a measly 8%. 

Recently, LIV Golf inked a new broadcast deal with Fox Sports. The financial terms were not made publicly available. However, it’s been described as ‘modest’ by industry insiders. With not enough revenue and more belt-tightening from its financial backer, the league, now headed by Scott O’Neil, is in trouble. 

Contract negotiations might open a can of worms

A bunch of LIV’s top stars are up for contract renewal. For example: 

• Brooks Koepka: The Smash GC captain signed with the Saudi-backed league in 2022 for a reported fee of over $100M. Koepka’s contract is up for renewal next year, and he has refused to clarify on the air where he will be. “I’ve got a contract obligation out here to fulfill, and then we’ll see what happens,” was his response when asked about the matter. 
• Bryson DeChambeau: One of LIV Golf’s hottest prospects and a possible major winner, DeChambeau signed for the league in 2022 for a reported fee of $125M. His contract runs through till 2026. DeChambeau is also a staunch defender of the league, so it’s unlikely he will fold. But given his popularity, LIV might also be obliged to compensate with a hefty salary.
• Dustin Johnson: DJ’s contract–also of $125M, reportedly–is set to expire this year. He is also the 4Aces captain and a Masters champ. Will LIV let him go? Unlikely. Does the PGA Tour want him back desperately? No. All that puts Johnson in limbo. But it puts LIV Golf in a spot as well.

Depending on how the breakaway league treats its stars, the others will decide their future. For sure, there are youngsters like Tom McKibbin, David Puig, Joaquin Niemann, and others. A former youngster, Eugenio Chacarra, was let go after his contract expired. His comments haven’t reflected kindly on the league. 

So, golf fans and industry insiders alike will closely watch the contract negotiations this year and next. How LIV Golf navigates a situation like this will also determine its bargaining power with the PGA Tour in a potential deal. LIV Golf is in talks with the PGA Tour, through which both entities will come under a single umbrella organization–PGA Tour Enterprises. 

Among many other things, LIV Golf’s valuation has also been a sticking point. Currently, the players are its bargaining chip. A breakdown in player relations, and worse, players leaving the league, will significantly damage LIV’s power. Something Yasir Al-Rumayyan will definitely try to avoid.