Strategic Alliance Equals World Tour or Takeover?

Having had a couple of weeks to think about the implications of the announced “strategic alliance” between the PGA Tour and the European Tour a few speculations are in order. There was nothing inappropriate in the announcement’s timing on Black Friday but that may be the reason it received relatively little comment in the media. On the day when many of us were wondering why we ate so much the day before or were busy taking advantage of the official start of the Christmas buying season the importance of this nebulously defined alliance has been under analyzed.

It is logical to ask is this alliance the first step on the road to the well-funded PGA Tour buying the European Tour?

Keith Pelley the European Tour’s CEO has denied it is, but a merger or purchase cannot be ruled out and at the same time it would make sense the alliance is the initial move in the formation of a world tour.

The sudden announcement of a PGAT-ET alliance seemed to have been the result of an offer to the European Tour, details unknown, by the private equity firm Raine Group owners of the Premier Golf League. The well-funded PGL is planning events exclusively for top ranked professionals though there is no schedule nor have any players committed to play, a decision that would require them to relinquish their PGA Tour status.

In addition to the expected comments from both the PGA Tour and European Tour how the new arrangement will benefit fans and players, Pelley said the PGA Tour now moves from being a competitor to a partner. One interpretation is we are hearing a clear signal the PGAT-ET world tour, which would be a direct competitor to the Premier Golf League, is on the way.

The alliance announcement also said the PGA Tour has purchased a minority position in European Tour Productions which handles the European Tour’s media production. In addition, PGA Tour Commissioner Jay Monahan was given a seat on the other tour’s board of directors giving the cash rich PGAT an inside track to purchase the much smaller Euro circuit.

Why the European Tour is looking for a strategic alliance or partnership or purchaser is speculation, but there is no doubt at least as far as the Euros are concerned the PGA Tour is preferable to risking a linkup with an unknown, unproven organization such as the PGL. The PGA Tour also owns the PGA Tour Champions, the Korn Ferry Tour and three international tours in Canada, China and Latin America.

Pelley emphatically stressed the European Tour did not have money problems however the Covid-19 pandemic severely cut revenues and drew down reserves. According to a copyrighted article by Iain Carter on BBC.com the Tour did get a £30 million ($40.3 million) bank loan this past summer.

The other ingredient in the pot is the Ryder Cup, a money machine run by the European Tour and the PGA of America. The PGA Tour has no stake in golf’s most profitable event, and it is inconceivable this was not part of Monahan’s thinking while signing the paperwork for the PGAT-ET alliance. This quite simply could be an end run by the PGA Tour around the PGA of America to gain a share of Ryder Cup profits.

As our lives, businesses and indeed professional golf get back to something resembling things pre-pandemic we will see PGAT-ET cosponsored events in the near future and don’t be surprised is the two circuits come up with a worldwide schedule for elite-player events.

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