Greg Norman on Saturday throughout LIV Golf’s occasion in Mexico.
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An economist, professor and best-selling creator says LIV Golf will not survive “more than a couple years.”
Steve Levitt’s opinion comes after he talked with Greg Norman, LIV’s CEO, on his podcast, People I (Mostly) Admire, the place Levitt and Norman mentioned a number of subjects centered on the Saudi-backed sequence, together with the way it may very well be worthwhile. In a abstract after the interview, although, Levitt mentioned that, whereas the competitors has been good for the established PGA Tour, LIV would ultimately fail, as he didn’t imagine in LIV’s workforce mannequin.
For readability, right here is Levitt’s full takeaway (and you may listen to the podcast here):
“Is Greg Norman’s story plausible? Is LIV Golf making the world a greater place? Will the franchise mannequin unlock huge worth, making the upfront funding worthwhile? On the query of LIV Golf making the world a greater place, my very own private opinion is that sure, competitors is nice. It spurs innovation. And, finally, I think it will be a profit to golf followers. Because not solely is LIV Golf making an attempt out all types of latest issues, however the PGA Tour is innovating additionally, like with the brand new Monday evening workforce matches, slated to begin in 2024.
“On the question of LIV Golf’s economic viability, well, there I’m a little more skeptical. I just don’t see the franchise model working, at least in its current form. In that case, I don’t think LIV will survive more than a couple years. But I’m also the one who said Amazon would never make a profit and that electric vehicles, they’d never be viable, and that Bitcoin, when its price reached 10, it was definitely a bubble. Even after the crash in 2022, the price of Bitcoin is 2,000 times higher today than when I confidently declared it a bubble. So my opinion is probably worth, well, nothing.”
That could also be true. Still, Levitt can be a certified speaker on economics — the economist is the co-author of Freakonomics, and is the William B. Ogden Distinguished Service Professor of Economics on the University of Chicago — and about 12 minutes into the podcast, he requested Norman about LIV’s “pathway to profitability.”
To observe, LIV has been bankrolled by the Saudi Arabian sovereign wealth fund. But because the sequence begins its second season, additionally it is seeking to construct assist round its 12 franchises, which, in flip, might be offered to sponsors.
On the podcast, Norman targeted on that concept, although he was additionally pressed on how workforce curiosity may very well be developed in a conventional particular person sport.
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“Steven, let me help you unpack this, right?” Norman mentioned on the podcast. “So we have now 12 principal gamers. Those 12 principal gamers personal 25 % of that franchise. The league owns 75 % of it. Now that principal participant is liable for his personal P&L over his workforce. No completely different than any NFL workforce, proper? They’re liable for their very own P&L — revenue and loss. So he has to herald people to assist him handle his workforce. They may come from the brokers or companies that represented them over a time frame, or they may very well be exterior, third-party people, or he may go supply these people to return in to work on that. So they’re going to herald sponsorship to the workforce.
“I can tell you the excitement of my principal players of the league has been elevated exponentially because now they see long-term value of understanding how to build out this franchise value.”
A couple of minutes afterward the podcast, Levitt then requested Norman why he thought LIV’s workforce format would work when it comes to curiosity, noting that previous makes an attempt to show particular person sports activities into workforce sports activities haven’t been profitable. For readability once more, right here is their change:
“A skeptic would say past attempts to turn individual sports into team sports have not been very successful,” Levitt started. “I mean, I’m just thinking about the World Team Tennis league, which has been around since the 1970s, but I don’t think has been very high-profile. And I think about college golf, which as a team sport garners almost no attention. Why do you think that LIV’s team version will break free of this difficulty that has hindered individual sports being viewed as team sports?”
“I think the investment dollars that are sitting there that’s been allocated to LIV Golf investments; the investments we’re making in golf on a global basis,” Norman mentioned. “An interesting fact, Steven: The aging demographic of the people who watch the PGA Tour is very high. It’s 67 years old, 66-and-a-half, 67 years old.” (Editor’s observe: Norman did not say the place he acquired this data.)
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“Wow. So I’m on the young side of the PGA Tour watchers,” Levitt mentioned.
“So you’re on the young side,” Norman mentioned. “And do you know what LIV did? Because of its format, because of its fan excitement, 60 percent of people who watched us in 2022 were under 45.” (Editor’s observe: Norman did not say the place he acquired this data.)
“Hmm,” Levitt mentioned. “That’s interesting, yeah.”
“So we understand the opportunity,” Norman mentioned, “and we completely understand the total neglect, the monopolist, like the PGA Tour harboring their same tiny little box that they lived in for whatever they wanted to do and keep control of that, they just didn’t have the foresight to go out there and look where this unlocked value really sat. Am I happy for my players? Hundred percent, 1,000 percent. But I’m happier for the fans out there.”
Levitt then went into centering groups round international locations. In a have a look at LIV’s groups throughout final weekend’s occasion, 5 of the 12 — the American-based 4Aces, HyFlyers and Smash, the South African-based Stinger and the Australian-based Ripper — had gamers all from the identical nation.
“OK, so I got to say, I’m still skeptical of the team side,” he mentioned. “And in particular, one of the things that surprises me is that every example I can think of where individual sports generated team-based excitement were tied to national boundaries. So you got the Olympics, the Ryder Cup in golf, the Davis Cup and the Billie Jean King Cup in tennis. I would’ve expected that you would’ve organized your LIV franchises around geography. I could imagine Americans being really excited to see who makes the American No. 1 team versus who’s relegated to the No. 2 team or the No. 3 team, and Americans being furious when the South Africans or the Swedes beat out the American team. But you didn’t do that.”
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“We do have international teams,” Norman mentioned. “We have a South African workforce. Some are all over. I think that’s the fantastic thing about our foresight, of our mannequin, that we’re capturing this fan base, this fandom we’re creating world wide. It’s not simply particularly in a single nation. The NFL is restricted to principally the area of the United States, proper? We needed to broaden it out. Golf is a worldwide sport, has been for a century, and it’ll proceed to be that manner. The Asian Tour was a sleeping large. So one in every of my first initiatives as I got here in is we invested $300 million into the Asian Tour to get up this sleeping large of this unimaginable pool of expertise that’s sitting there. This unimaginable pool of company {dollars} sitting there ready.
“But still it surprises me, given that perspective, I’m just surprised that you didn’t more self-consciously build the franchises around geography to play up on this element,” Levitt mentioned. “Now, certainly, there are teams — the South African team. But most of the teams — I’m just looking right now at the list — are mixed, they’re all sorts of mixed up and don’t have any really clear geography.”
“OK,” Norman mentioned, and the dialog modified.
Editor’s observe: To take heed to the entire podcast, please click here.
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