LIV Golf’s $5 Billion Path to Bankruptcy

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1:29Bloomberg Audio Studios. Podcasts. Radio. News. Liv had one of the biggest financiers in the world, and then almost out of the blue, suddenly it didn't. It would be hard to imagine back in 2021 when Liv Golf launched that the star-studded multi-billion dollar league would end up filing for bankruptcy. as it did this week. This is a golf league that was spending lavishly thanks to the Saudi Public Investment Fund and was doing so for over four years. Sean Zock, senior writer at Golf.com, was at Liv's first event in 2022. It will forever be remembered as a week that stopped the golf world in its tracks.

2:14You have Greg Norman and Phil Mickelson and Dustin Johnson and these heavy hitters in the golf world. It was brash and bold. And ultimately, that week ended with the governor of the Saudi PIF, Yasser Al-Ramayan, taking the mic and saying, I have so much money. I have so much power now. If anybody shoots a perfect round of golf, if anyone shoots 54, that would be 18 under on 18 holes. I'm going to pay that person$54 million. dollars. And while all that money attracted attention and controversy, Liv was not able to convert that into viewership. When you start talking about money that starts with a capital B and basically gets to the point of we're spending a billion a year and we're not making a whole lot coming back in.

3:05It starts to be obviously unsustainable, but in hindsight, it's just irrational. After$5 billion, the Saudi money spigot is shut off. Liv's Chapter 11 filing shows the organization now owes millions of dollars apiece to some of its golfers. And its plan is to use the bankruptcy process to restructure Liv into a Liv 2.0, an organization owned by the athletes themselves who have to decide whether they'll sign on to keep the tour alive. This is the first week in which we really realize what that all looks like. And so the next three or four weeks are crucial for Live Golf's management. I'm David Gurra, and this is The Big Take from Bloomberg News.

3:53Today on the show, how a Saudi-funded competitor to the PGA Tour burned through$5 billion, and where Live Golf goes from here.

4:06Take me back to 2021 when this league was founded. What sparked its creation? What was it trying to offer that was different from what the PGA offers? If you look at the PGA Tour five years ago, it was very traditional. It was a nonprofit, and it was not that exciting. But one week a year, there's team golf. It's at the Ryder Cup. It's at the President's Cup. And so those events have been so popular with fans, have been so just boisterous and fun. And it felt like such a hard pivot from the golf, the staid traditionalist sport that we've known, that maybe Liv could tap into something. Maybe its founders could create a team corner of the game that would be even more exciting than the golf that we knew.

4:53How was it received from the get-go? Well, it depends on who you ask, because it became very political at some point. The status quo, the PGA Tour, decried it immediately. And the funding was coming from a sovereign wealth fund of a country with a repressive human rights reputation. It was immediately discussed in many ways as an entity that was sports washing its reputation, which is just to say investing immensely in corners of the sports world that could tell people, hey, the Saudis are doing things differently. How was the game itself different from the PGA's format? It was a limited field.

5:36It was going to start with four player teams, 12 teams. Everyone was going to get guaranteed money and everyone was going to play at the exact same time. Now, one of the weird things in golf is that you have guys teeing off at seven in the morning, competing with guys who tee off at three in the afternoon. The weather changes, the course itself changes, grass grows during that time. and what Liv was offering was everyone starting at the exact same time at different points on the same course. It's called a shotgun start. It narrowed the TV window by about 50 to 60 percent so that was more enticing in theory for a TV broadcast and it was planning to go all over the world and it was going to tally up scores for players on a team and offer up five million every week just to the team competition.

6:30They also brought concerts to golf tournaments. Every single place they went, they brought a headlining concert and sometimes two. So say I'm a professional golfer. I'm on the PGA Tour. Liv comes to me and gives me their pitch. What was the pitch in the early 2020s? The pitch was, we only need you for 14 weeks of the year. Pro golfers at this point are often playing 25 to 30 times a year. Some will even play 35 to 36 times a year. That's over half the calendar. And those are full weeks away from your family traveling the world. Liv was promising, guys, we're going to go around the world, but we need you for 14 weeks, 14 weeks only.

7:14And we're going to make that an amenable schedule, right? The biggest tournaments in the world, the four majors, we're going to try to play the week before them at a course nearby those majors. We're going to offer you signing bonuses. Liv was offering to pay for private jets during its first few months of existence. It was paying for caddy hotel fees. It was eventually paying for litigation fees that arrived months later. And so what Liv really offered was a bit of a new scary path for people to go down, but that path had basically like bumpers of a bowling alley up against it that were just funded by an immense amount of money.

7:56How big was the gap between what a pro golfer could make on the PGA Tour and what he could make with Liv? The money part of it all is really everything. Essentially, at the beginning of Liv Golf, there was Scotty Scheffler taking off on the PGA Tour and playing the best golf we've ever seen since Tiger Woods. And Scotty Scheffler was making$30 million a year, but the best player on Liv was making tens of million dollars more money than Scotty. You could clear 40 to 45 million dollars if you had an incredible season playing Live Golf. It had truly pushed a bunch of golfers into the top list of paid athletes that could never have dreamed of being there until Live began.

8:40Sean, you're describing what sounds like funny money from PIF, from the public investment fund that Saudi Arabia has. How much did all this cost over the past half decade or so? Yeah, it was funny money. Ultimately, the PIF was sending Liv on about a quarterly basis, installments of$100 to$200 million at a time. And so that really adds up over the course of four to five years to very easily eclipse$5 billion and be on its way to$6 billion. That's money that'll stop you in your tracks. So Liv is poaching players from the PGA Tour. How did the PGA respond to that? The PGA Tour responded as if they had entered a war that they had not asked for.

9:28The Tour eventually suspends players immediately, takes Liv to court in numerous cases, suits and countersuits, and really tries to shore up a new format so that it could play defense with its own tournaments, right? So that it could lock into place the top players that we have now. And so I think back to middle of August 2022, we've had a couple months of live golf on the scene, trying to sign players, trying to get assurances. And Tiger Woods organizes a meeting of roughly 20 of the best players who were still committed to the PGA Tour. And in that meeting, they came up with this new format calling them signature events.

10:18They were going to be$20 million purses, so they're trying to match Liv's funding. Ultimately, it created the PGA Tour that we are still seeing today, which is 35 events across the calendar year. But there's about 15 of them that are elevated above everything else. Coming up, why Liv declared bankruptcy and whether it can survive it.

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12:21You have LiveGolf with plenty of big names, big money playing more widely in the world, yet it never seemed to get traction with viewers. Why was that the case? a lot of the audience for professional golf exists in america and a lot of the audience of a professional golf in america is 50 and older 55 and older 65 and older they are used to turning on one of two channels every single sunday it's nbc or cbs and suddenly live shows up and its first event is streamed on youtube.com eventually it cracks a deal with the cw after a couple years it's finally on fox but it's being broadcast on fox business and it's being played at two in the morning because it's in australia or it's on fs1 or fs2 it's in a very limited capacity on national network television, but also their broadcast was wonky.

13:25It was goofy. It was team golf. And it looks like an F1 racing leaderboard on the side where you've got players moving up and down. And in my opinion, Liv's broadcasters were doing some heavy lifting to really make their golf seem like the greatest golf on earth. And I just think golf fans know the game. They don't need you to hit them over the head. It was probably just 15 to 20 percent too wacky. And sure enough, one of the only things that matters with the sustainability of a pro sports league is how many people you can get to watch it. And the PGA Tour was outpacing Liv's ratings by a factor of 10, 11, 12, 13.

14:11You can't compete like that. Now, the Saudi fund said in April it would fund LiveGolf only for the remainder of the 2026 season. At the time, it said, quote, the substantial investment required by LiveGolf over a longer term is no longer consistent with the current phase of PIF's investment strategy. This decision has been made in light of PIF's investment priorities and current macro dynamics. Sean, what do we know about this decision? You can take a very literal approach and say, you are losing a billion dollars a year in this investment. It is not worth it. But at the same point, war had broken out in the Middle East, war that is still ongoing.

14:52And the availability of fuel was getting pushed in different directions. The PIF's ability to make money on its exports was getting impacted by that. The amount of money it had devoted to other The projects that it is doing both in and outside Saudi Arabia, those costs were going up and getting shelved. And it decides this no longer aligns with how we need to spend our money. So here we are, Liv filing for Chapter 11 bankruptcy protection. And I'm curious what that means. Does this league go away as a result of that? That's the question everyone's trying to answer right now, because ever since PIF decided to pull its funding, it really has felt like an undead golf league.

15:36It still has legs. It still has Jon Rahm showing up, but it feels like a zombie. Liv has not paid numerous vendors that have now taken Liv Golf to court for unpaid services from early parts of the year. It started to really show, oh wow, the faucet of money has actually been turned off here. And so where does it go from here? Chapter 11 is a restructuring mechanism and live let go of roughly 90 % of its employees. It has been pared down to its absolute minimums. As of earlier this week, it had just$15 million in cash that it could access. So, you know, we're talking about a place that has spent maybe$6 billion being down to 15 million.

16:23It's basically zero, right? And so they have reached an agreement with a credit firm based out of London called BC Partners. And that credit firm has basically said, if Liv can get very specific golfers to commit and enough golfers to commit, we will make you guys a deal. So long as these milestones and assurances are hit, then they will play ball on what is being called Liv 2.0. The PIF actually had to provide another loan of around$50 million this week. And so the next three or four weeks are crucial for Liv Golf's management. But it does feel like numerous Liv players are ready to just wipe the slate clean.

17:13I just want to ask you about the legacy of this experiment. How did it change the PGA? How did it change professional golf? What are we seeing today that wouldn't exist without the advent of Live? It has upped the purses for the best male golfers in the world by an incredible degree, basically by about 100%. And anyone who's getting 100 % raise is going to be really stoked about it. So on the most basic level, it has forced sponsors, broadcast partners, it's forced pretty much everybody to put more money in pro golfers' pockets. It has forced the PGA Tour into changing its product as well. They took on investment from a number of really notable sports investors and owners across the landscape.

18:03John Henry, Mark Antanasio, Steve Cohen. That group of billionaire sports owners has bought up about 14 % of the PGA Tour. It has turned a lot of the PGA Tours business into a for-profit company. And so it is now figured out what it wants to be in the future, which is a tinier schedule, which is a lot like Live. Bigger tournaments at top courses with a lot of money, which is a lot like Live. I think golf will be better off. I think the future PGA Tour schedule will be more engaging to fans. I think it will be better for the PGA Tour that it got pulled through the mud to get to this point. But we went through the mud.

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