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Last week, the PGA Tour rolled-out its new financial bonus incentive plan to professional golfers in hopes of getting players to stop jumping to their well-financed rival, LIV Golf.
The dollar figures initially tossed around by the press sounded quite impressive for several of the top names on the PGA Tour. Established golf stars like Tiger Woods, Rory McIlroy, Jordan Spieth, Justin Thomas and a few others were notified last week about their share in this new player retention plan. It will be significant.
Officially called the Player Equity Program (PEP), I think it should be referred to as the “Thank You, Phil Mickelson (TYPM)” bonus plan.
Phil’s move to LIV Golf cemented golf’s first big competition
Phil Mickelson was, by far, the most significant PGA golf star to accept a deal to join LIV Golf in 2022. Without his departure, there is little doubt the PGA Tour would have developed this brand new bonus system to create more loyalty within the more established pro golf tour.
Six-time major golf champion Phil Mickelson accepted a reported $200 million signing bonus from the Saudi-backed LIV Golf in 2022 and quickly gave the new golf league worldwide credibility.
Major golf champions such as Dustin Johnson, Bryson DeChambeau, Sergio Garcia, Louis Oosthuizen, Brooks Koepka, and Patrick Reed also signed-up. Each of those players received significant signing bonuses from LIV Golf in order to leave the PGA Tour.
Tiger Woods was reportedly offered more than $700 million by LIV Golf, but he turned it down. In recent weeks, the media reported (falsely) that Rory McIlroy had been offered up to $800 million to leave the PGA Tour and sign with LIV Golf.
Both Rory and Greg Norman (President of LIV Golf) say that no offer was ever extended.
In modern day golf, the names Tiger Woods and Phil Mickelson are as iconic in the past two decades as Jack Nicklaus and Arnold Palmer were from 1960 to 1980.
Phil Mickelson earned a lot of money (nearly $95 million) over his thirty years on the PGA Tour. With 45 career victories, he is tied for 8th place all-time. His six major championships (three Green Jackets at The Masters plus two PGA Championship titles and one win at The Open) put him in 12th place on the list of major champions.
When he came onto the golf scene in the 1990’s, Lefty’s “go-for-broke” style on the golf course immediately reminded fans of a young Arnold Palmer. His eager/aggressive play probably cost Phil Mickelson one or two major titles as well. He has finished second in the US Open a record six times.
Phil Mickelson’s popularity with fans made him an effective television pitchman for a variety of products as he earned more money from corporate sponsorships than on the golf course.
After turning age 50 a few years ago, Mickelson won his first two senior events on the PGA Champions Tour. However, Phil just didn’t seem ready to give-up playing golf on the younger players’ tour just yet.
As he has been prone to do during his lengthy career, Phil Mickelson surprised the golf world in 2021 as he captured his most recent major title by winning the PGA Championship a few weeks before turning age 51. He became the oldest golfer to ever win a major golf championship.
Over the ensuing year, Phil Mickelson made some negative comments about the PGA Tour and, surprisingly, the not-yet-operational Saudi-backed LIV Golf. In a nutshell, Phil has expressed concern that the PGA Tour was sitting on a growing pile of money related to resale of televised highlights of the players during tournaments.
In early 2022 (before LIV Golf had played its first tournament in June), Phil Mickelson had expressed some personal concerns about Saudi Arabian government backing LIV Golf. However, he vigorously supported some competition for the PGA Tour as he felt like they had been less-than-forthcoming about their internal finances.
At the time Mickelson accepted the $200 million offer from LIV Golf in the spring of 2022, he was nearly 52 years old. The interest on $200 million at 5% brings $10 million per year for eternity.
To put that into perspective, Phil Mickelson would have needed to win every single event on the PGA Champions Tour each year to approach $10 million in earnings.
Assuming one needs (or cares for) the money, the financial decision was a no-brainer for a golfer over the age of 50 whose earnings potential on the PGA Tour was diminishing.
LIV Golf paid bonuses to Phil Mickelson and others well over $1 billion in 2022 to sign several top players for its new league.
PGA Tour is feeling the loss of star golfers
As a stand-alone entity, LIV Golf has been a money loser of epic proportions.
Hundreds of millions of dollars are being burned annually. It is clearly not a viable financial model, but the Saudi-backed Public Investment Fund doesn’t seem to mind one bit. The pride of being involved in sports on the world stage must provide Saudi Arabia with more satisfaction than a particular return on its golf investment.
The for-profit PGA Tour, though, has been feeling the sting of losing some top players to its wealthy new rival. The lingering loss of Tiger Woods due to injuries hasn’t helped matters, either.
In 2024, the PGA Tour’s television ratings are taking a big hit. In the first few months of this year, there have been 22% fewer television viewers than for those same tournaments in 2023. The final round of The Masters (won by Scottie Scheffler) was down 20% from a year ago, too.
The PGA Tour just opened its wallet to players with the new “TYPM” bonus plan
In order to fend-off more poaching by LIV Golf, the PGA Tour announced more details about its new $750 million Player Equity Program (PEP). The plan will encourage the PGA Tour’s top stars along with rising stars to stick around for several years in order to collect their full share of the bonus pool.
Working much the same as some corporate bonus plans, the golfers will become eligible to receive 50% of their approved bonus level by staying with the PGA Tour for the next four years. In six years, the vested amount grows to 75%. After eight years, the player is eligible to collect his full share of the bonus. The player can cash-out or continue to hold the investment if the PGA Tour value is rising.
Each PGA Tour star player, though, will have a different bonus value based on their popularity and success on the golf course. That means that golfers like Tiger Woods, Rory McIlroy, Jordan Speith, and Justin Thomas (among others) will earn a much larger bonus payout than some of the younger or less successful PGA Tour players.
In fact, a whopping 80% of the $750 million bonus program will be doled-out to just 36 of the top PGA Tour golfers based on their career performance. This is intended to deter LIV Golf from poaching even more of the PGA Tour’s remaining players.
The next level is a $75 million bonus pool to be allocated to the next 64 top players (based on a 3-year performance model).
A third tier of $30 million will be split among another 57 PGA Tour golfers who are maintaining their status on tour but haven’t been as successful as the other two tiers.
Finally, a $75 million bonus pool will be allocated to 36 retired (and still living) golfers who have been instrumental to building the PGA Tour. This would players of the stature of Jack Nicklaus, Gary Player, Lee Trevino, Tom Watson, Ben Crenshaw, and other beloved PGA Tour golfers.
All active players must continue to play in a required number of PGA events each year. The golf legends will continue to lend their name to various events to promote the golf tour.
Will it work?
Not likely.
The world #1 ranked golfer last year was Jon Rahm. LIV Golf handed him more than $300 million in bonus money in late 2023 as he moved to the new tour starting in 2024.
In addition to Jon Rahm and Phil Mickelson, LIV Golf has paid $100 million or more to lure former PGA stars such as Dustin Johnson, Bryson DeChambeau, Brooks Koepka, Australia’s Cam Smith, and Chile’s Joaquin Niemann. Those seven golfers have pocketed more than $1 billion from the Saudi Investment Fund (owners of LIV Golf) to join the new golf venture. Other major champions have signed deals valued anywhere from $10 million to $60 million in bonus money.
If the Saudi-backed LIV Golf group wants to buy another player like Scottie Scheffler, they will simply write another outsized check in order to get their man.
PGA players owe Phil Mickelson a big “Thank You”
If Phil Mickelson had told LIV Golf “No, thanks” just two years ago, there is a chance that LIV Golf may never have gotten off the ground. Being one of the world’s top names in the sport, Phil Mickelson immediately brought the media focus onto LIV Golf and opened the door for other PGA stars to feel safer about taking an offer to come aboard.
In the eyes of many PGA Tour fans, though, Phil Mickelson has flipped from hero to heel.
He broke a lot of hearts by taking the Saudi money and leading this wave of defections from the PGA Tour.
Phil Mickelson may now wear a black hat with some golf fans, but PGA Tour players are definitely making more money as a result of his actions.
The remaining PGA Tour players should thank Phil Mickelson for 2024’s higher weekly tournament payouts along with this brand new player bonus pool. Competition (whether fair or not) has done nothing but fatten the wallets of all men’s professional golfers.
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