Shifting alliances in the golf industry: The PGA Tour, the European Tour, and the Saudi Public Investment Fund (A)

Description

This case describes the genesis of the competitive battle and settlement between the PGA TOUR and European Tour, the two main professional golf circuits in the world. Then, it describes the irruption of LIV Golf, a Saudi-backed golf league, which changed the status quo in the industry. The structure of the case is as follows: In part A of the case (March 2020-July 2021), we describe the struggles of the PGA TOUR and the European Tour during the COVID-19 pandemic, how the PGA TOUR leveraged on European Tour's financial need to secure the most favorable terms in the alliance, and the proposal of the Saudi Public Investment Fund to partner with the European Tour. In part B of the case (September 2021-July 2022), we describe European Tour's refusal of the Saudi proposal and the emergence of LIV Golf. In part C of the case (August 2022-June 2023), we describe a dramatic turn of events, whereby the PGA TOUR, which had repudiated the Saudis, reaches an agreement that results in the creation of a "NewCo" that unites PGA TOUR, European Tour, and the Saudi Public Investment Fund.

Learning Objective

The corresponding teaching note provides details about how to lead the case discussion. This is a decision-making case. First, students are asked to put themselves in the position of PGA Tour's and European Tour commissioners and assess the pros and cons of allying with their main competitor. They are also asked to assess the viability of an alternative proposal: a multi-billion offer to partner with a wealthy actor that suffers from a tarnished reputation. Second, students are asked to decide when and how to present such proposal to the Board of Directors, as well as to reflect on how that Board of Directors should decide in the best interest of its stakeholders. Third, students are asked to reflect upon an unexpected turn of events, whereby the CEO and Board of Directors of the PGA TOUR, to the surprise of all its stakeholders, decide to join forces with the actor they had been disowning for moral reasons the last two years. This is one of the first cases to describe the corporate risks of being associated with sportswashing. Sportswashing describes the phenomenon whereby corporations with tarnished reputation (e.g., high polluters) or governments with human rights issues try to ally with sports organizations to improve their reputation. This phenomenon has received extensive newspaper coverage since the late 2010s: (1) the presence of sponsors with shady reputation injecting money into mainstream sports such as Formula 1 (Richards, 2020) ; (2) states with poor human-rights records buying out well-established clubs, as Saudi Arabia with Newcastle (Taylor, 2020) ; (3) the creation of breakout leagues financed by states with dubious reputation that challenge the viability of legit, established leagues (Masunaga, 2023) . This case is designed for Executive Education, MBA., MM., or M.Sc. courses in Strategic Management. It could also be used in Sports Management courses.

Related Documents

• Shifting alliances in the golf industry: The PGA Tour, the European Tour, and the Saudi Public Investment Fund (B)
• Shifting alliances in the golf industry: The PGA Tour, the European Tour, and the Saudi Public Investment Fund (C)
• Shifting alliances in the golf industry: The PGA Tour, the European Tour, and the Saudi Public Investment Fund (A, B and C) - Teaching note

Keywords

Corporate governance sports Strategic alliances