LIV Golf's Commercial Model Like 'F1'?…Contract Hints from Court Point to 'Team'

Some Contract Clauses Revealed in PGA Suspension Arbitration
LIV: "In the Future, Revenue Will Be Generated Not by Individuals but by 'Team Sponsors'"
US Court: "PGA's Claims Are Unimaginable... Too Restrictive"

The player introduction page on the LIV Golf Invitational Series website introduces players by 'team' rather than individually. The structure is similar to that of Formula 1 (F1).

[Asia Economy Reporter Jang Hee-jun] The LIV Golf Invitational Series, sponsored by Saudi Arabia's sovereign wealth fund (PIF), is expected to bring changes even to the fundamental aspect of golf tournaments: sponsorship. Instead of sponsorship contracts based on individual players' performance and popularity, team-based sponsorships are likely to be introduced.

Recently, a U.S. federal court dismissed a preliminary injunction filed by three players?Taylor Gooch and Hudson Swafford (both from the U.S.) and Matt Jones (Australia)?requesting the suspension of disciplinary actions by the PGA Tour. After these players declared their move to LIV Golf, the PGA Tour imposed suspensions on them and notified that they could not participate in the PGA Tour playoffs.

LIV Contract Structure Revealed in Trial, Will Sponsorships Also Change?

According to Golf.com on the 12th, information emerged during the court hearing that allowed inferences about how LIV Golf's contracts with players are structured.

Judge Beth Labson Freeman, who presided over the injunction hearing to halt the PGA Tour's disciplinary actions, stated during questioning, "From what I understand, LIV Golf's contract structure confines players in ways unimaginable in the PGA Tour," adding, "It is extremely restrictive."

Among the contract clauses pointed out by Judge Freeman, there are distinctions between what players are allowed and not allowed to wear during LIV Golf-related events. The latter includes apparel and equipment bearing players' personal sponsor logos.

Currently, most players who have moved to LIV Golf still display their personal sponsors' logos on bags, hats, and shirts. However, once team uniforms and the LIV teams?essentially a franchise concept?are established, changes to these individual sponsorship contracts are expected.

"In the Future Sports Industry, Increasing Franchise Value Equals Revenue"

Robert Walters, the legal representative for LIV Golf, explained, "LIV Golf plans to form about ten teams, each wearing team uniforms," adding, "In the future sports industry, revenue will come not from cash flow but from increasing franchise value."

During further questioning, LIV Golf declined to elaborate on this concept, but if team-based sponsorships and uniforms are introduced, it is expected to significantly impact players' individual sponsorship contracts and promotions.

Many PGA Tour players have sponsorship contracts directly linked to world rankings or the number of tournaments played, which translate into performance bonuses based on tournament wins and media exposure. However, if LIV Golf mandates team-based sponsorships, the sponsorship value for individual players could sharply decline.

'Sponsorship Contracts Vary Greatly by Player'?Which Is Better?

At the end of last month, Martin Kaymer is taking a shot at the LIV Golf Invitational Series 3rd tournament held at Trump National Golf Club in Bedminster, New Jersey, USA. Image source=EPA Yonhap News

Sponsorship amounts vary widely by player. Well-known players like Tiger Woods earn astronomical revenues, but rookies just starting out have different circumstances. For top-ranked players like Woods, the value of the most visible "front hat space" during media exposure is reportedly up to $5 million.

In a situation where LIV Live attracts hundreds of thousands of viewers, players who planned to generate income through personal sponsorships may find LIV Golf's team sponsorship concept unwelcome news.

However, team sponsorship could also present new sponsorship opportunities. Lower-ranked players, who had less individual promotional impact, might be valued higher than with personal sponsors.

'F1-Style' Team Sports Brought to the Field... Concerns Over Internal Conflicts

The 'team sponsorship' concept in LIV Golf's future plans is quite familiar. Instead of national flags, players wear team emblems and uniforms bearing team sponsors' logos, similar to the Formula One (F1) model. LIV Golf has previously cited F1's corporate and team sponsorship structure as an example of how 'team golf' could evolve.

This direction was evident during the June season opener broadcast. The left side of the broadcast screen featured a real-time leaderboard, and instead of national flags, team logos appeared next to players' names?very similar to F1 broadcasts. The new format combining individual and team competitions also evokes F1.

If LIV Golf's team sponsorship model proves successful, players are expected to sign contracts for specific equipment on a team basis.

However, some express concerns that this approach could create hierarchical structures within teams or internal conflicts. Since equipment and supplies would be contracted uniformly, some players might be dissatisfied if their individual preferences are not accommodated.

'LIV Stirring Controversy'?Will Player Transfers Continue Amid Pushback?

World No. 2 Cameron Smith is giving an interview after winning The Open last month. Recently, rumors about his transfer to the LIV Golf Invitational Series have attracted attention in the golf world. Photo by Getty Images

Despite criticism that LIV Golf serves as a 'image recovery tool' for Saudi Arabia following the assassination controversy involving dissident journalists, it continues to aggressively court famous players backed by massive financial resources.

For example, Bloomberg recently compared the earnings of 11 golfers who left the PGA Tour to join LIV Golf. Carlos Ortiz (Mexico), who earned an average of $48,450 (about 63.32 million KRW) per PGA event, made $1,712,500 (about 2.24 billion KRW) per event in LIV Golf?a difference of 35 times. Taylor Gooch, who filed the injunction to halt PGA disciplinary actions, saw his earnings increase nearly 15-fold from $76,276 to $1,134,333.

There is also strong pushback against the oil money. LIV Golf has been excluded from the Official World Golf Ranking (OWGR) system changes effective next week, imposed by existing tour organizations. This severely limits options for LIV Golf players who aimed to maintain a top-50 world ranking and compete in major tournaments despite their huge contracts.

Nonetheless, players are expected to continue moving toward LIV Golf. Cameron Smith (Australia), the Open Championship winner, gave ambiguous answers when asked about joining LIV Golf at a press conference before the first FedEx Cup playoff event. If the world No. 2 transfers, it is expected to cause unprecedented repercussions in the golf world. Cameron Young (USA), a strong candidate for Rookie of the Year this season, is also rumored to join LIV Golf after the season ends.