The DP World Tour (European Tour) broke even in 2023 thanks to £19.6m (R452m) in funding from the PGA Tour, designed to cover any deficit under the terms of the “strategic alliance” between the two tours, according to a SportBusiness.com exclusive.
The “underpin funding” from the PGA Tour cleared the operational loss as the European Tour invested heavily in its tournament purse amid competition from the breakaway LIV Golf tour and was also hit by inflation and post-Covid supply chain increases.
Last year was the first in which the European Tour benefited from direct support from the PGA Tour to offset its losses. The financial agreement is in place for five years, from 2023 to 2027, and is a component of the second of two strategic alliance deals.
The level of PGA Tour funding is not capped and is determined by the European Tour’s Ebitda (earnings before interest, taxes, depreciation, and amortisation). It is received as cash.
Upon announcing the expanded strategic alliance in June 2022 and running to 2035, it was stated that the PGA Tour would provide “operational support and additional investment to the DP World Tour”. This allowed the DP World Tour to promise to “guarantee growth in annual prize funds to its membership for the next five years”, although the level of PGA Tour support was never divulged.
The deal stopped short of a merger between the two tours.
HAVE YOU ALSO READ?: Former Tennis SA CEO named GM of Stinger GC golf team
Wrapped up in the second alliance agreement is the sale of an additional 25% stake in European Tour Productions, the tour’s production and media rights sales arm, to the PGA Tour. This will take the PGA Tour’s stake to 40% with the additional shareholding of non-dividend-bearing shares exchanged in return for the uncapped underpin funding.
The first alliance agreement – unveiled in November 2020 – focused on global scheduling and playing opportunities for the respective membership, and had involved the sale of the initial 15% stake in ETP for $85m (R1.5bn). This was payable in instalments with dividend rights accruing at time of cash exchange.
An operational loss is unusual for the European Tour during a year in which the Ryder Cup is held in Europe. By comparison, the tour returned operating profits of £11.3m (R260m) and £16.4m (R378m) in 2018 and 2014, respectively.
The European Tour has faced economic headwinds and the threat of losing more star players to LIV. Last year, DP World Tour prize money rose to $144.2m (R2.54bn) – up from $93.8m (R1.65bn) in 2021 – and an ‘Earnings Assurance Programme’ was introduced to guarantee $150,000 (R2.64m) to players who compete in 15 or more events.
According to the European Tour’s 2023 accounts, the budget for the Ryder Cup in Rome “experienced significant macro-economic pressures, driven by post-Covid supply chain challenges and the disruption caused by the war in Ukraine, with inflation running at +22% compared to Paris 2018”.
Additionally, the “complexity” of hosting the tournament in a country “not accustomed to delivering large-scale green field events” contributed to a 35% jump in operating costs compared to the last Ryder Cup on European soil.
Operating costs also ballooned across the tour schedule, which comprised 39 tournaments in 27 countries.
The Ryder Cup itself still remains comfortably profitable.
The tour is thought to be bullish about the health of its accounts, pointing to the revenue uplift, the commercial gains and the flexibility – thanks to the PGA Tour support – to invest in greater prize funds and quality of tournaments to prevent a further exodus of its players to LIV.
