PGA Tour Tournament Officials See Trouble Ahead As Costs Spiral

Events will have to fund the Tour's higher purses in 2025; one tournament director told Sports Illustrated that sponsors are 'saying they won't do it.'

The PGA Tour finds itself in the throes of a harrowing time in its history, dealing with the realities of a rival that has driven the cost of business to levels that go beyond what it can handle.

And while the Tour is in the midst of negotiations with the DP World Tour, Public Investment Fund of Saudi Arabia as part of a framework agreement—as well as potential other private equity firms that could potentially invest billions in a new for-profit entity—the decades-old nonprofit PGA Tour Inc. is having to make some tough decisions about how to fund purses.

That’s because the money that comes into the new venture can’t go to the old one.

"They have made it clear that none of the money will flow to the tournaments," is how one tournament official, who wished not to be identified, described the situation.

That puts the Tour in the position of courting billions while skimping to pay millions.

All of this is being discussed this week at annual meetings involving PGA Tour tournaments in Palm Springs, Calif.

And tournaments are well aware of what is being asked: that starting in 2025, they contribute a bigger portion to PGA Tour purses than they currently do.

Starting in 2025, PGA Tour events will have to cover higher purses and in doing so may face sponsor backlash and be forced to donate less money to local charities :: Keyur Khamar/PGA Tour via Getty Images

As Sports Business Journal first reported last month, a new funding model has been proposed that would see the non-profit tournaments provide an additional fee that would go to tournament purses.

And it has not been received well.

In interviews with several tournament directors and officials, Sports Illustrated found that "tournaments are not happy at all," said one tournament director. "They are asking each tournament for a large fee and a revenue share."

The fees would be based on the type of event, whether it is an opposite event, a regular Tour event, a signature event or a playoff event.

And at a time when tournaments are already stretched to pay the bills and give their proceeds to charity, they fear this will further cut into their abilities to run the tournaments properly.

"I’m not expecting any good news out of this," another tournament official said about this week’s meetings.

According to the Sports Business Journal story, the Tour is working on a three-year plan that would determine a fee for each event, with 50% of that fee due in the first year with the idea that the full amount would be due in 2027.

Since the LIV Golf League emerged in 2022 and began attracting players with guaranteed contracts and huge purses with no-cut events, the Tour has been put in a no-win financial fight.

To push back, the PGA Tour unveiled a Player Impact Program that will see $300 million in bonuses paid out over a four-year period as well as the introduction of a series of elevated tournaments to be called signature events in 2024.

There are eight such tournaments, all paying $20 million purses—except for the Sentry which will be $15 million. The first two FedEx Cup playoff events have also increased to $20 million. That means that 10 tournaments in a two-year span will have seen their purses rise by roughly $8 to $12 million per year.

Built into the original television rights deal that was signed in 2020 before the emergence of LIV Golf, tournaments were already contracted to raise their purses by some $400,000—depending on the event—per year.

And tournament sponsors are not happy. “Many of them are just saying they won’t do it, they’ve had enough," a tournament director said.

Hence, the Tour going to 501(c)(3) non-profit organizations to ask for help in funding the purses.

The PGA Tour, a 501(c)(6) nonprofit entity, has a unique arrangement with the television networks who broadcast and stream events, with title sponsors who help fund them and with the local host organizations that run them.

Basically, each title sponsor pays a sponsorship fee that typically equates to roughly 150% of the purse or more. For example, if a tournament has a $20 million purse, its outlay could be as much as $30 million, with part of it covering the purse, some of it going to the local host organization and the rest to the Tour. Some of that price might go toward activating the event, such as entertaining.

The rest of the purse comes from the Tour from its television rights fees. Each local host organization is given what’s called an “entitlement fee" from the title sponsor to help run its event.

But from there, every tournament is on its own. It raises funds through pro-ams, sponsorships, ticket sales, merchandise and concessions. It pays for all the infrastructure on site, course rental fees, food for players and volunteers, staging—everything associated with the event.

Each event also has a small full-time staff that must be paid. After paying all of its expenses, each tournament then donates its proceeds to charities, sometimes to the tune of multi-millions, depending on the event.

The PGA Tour lauds its charitable giving, but the real work is done on the local level. And now that is being threatened, tournament officials say.

"We have only so many pro-am spots we can sell, only so much we can charge for them," said one tournament official. “We can only build hospitality venues so high."

While the Tour is not telling tournaments to give less to charity, in essence, that is what will happen. Unless tournaments are able to raise revenue even more. And that task will be made more difficult by other asks from the Tour.

For example, tournaments will be required to provide more private restroom areas on both the front and back nines at each tournament site, among other things. Courtesy cars, while already common are most tournaments, will now be required for players. More nutritional food items and access for player coaches and trainers is also expected.

"We supply all of our financial information to the Tour," said another tournament official. "They know all of our expenditures and revenues. So they have access to what we are doing and can say they want a certain amount of it. It’s like maybe they can use that against us."

So what if a Tour event doesn’t comply? Each event has a contract with the Tour, which can simply choose to not renew it when it runs out. In its place, the Tour can install another organizing group that will comply, or use the Tour’s own for-profit arm—Championship Management—to run the event.

Already, Championship Management handles tournaments such as the Players Championship, Tour Championship, the Sentry and the FedEx St. Jude as well as several on the PGA Tour Champions. That is a money-making vehicle for the Tour.

"It’s a win-win situation for them," said one tournament director.

And as the PGA Tour potentially enters into a new era with a for-profit arm, it is leading to some uneasy times among those who have for years made the Tour run at the local level.