Share the publication “Is the DP World Tour going into the wall, financially exhausted?”
The publication of the European Tour Group’s accounts for 2023 shed light on the very worrying financial state in which the DP World tour would now be at the mercy of its American ally. A PGA Tour whose influence continues to grow as the circuit now led by Guy Kinnings sinks.
The 2023 financial results of the PGA European Tour published last week unfortunately leave little room for doubt. The losses suffered last year plunge the DP World Tour into a very critical situation.
This document highlights several elements that could lead the European circuit to its downfall!
The first point noted by analysts concerns tournament prizes: of the 171 million euros paid in 2023 to players, 23.4 million were provided by the PGA Tour in order to cover the deficits.
The PGA Tour is now in a position of strength vis-à-vis its strategic ally since the latter owes it a loan of 63 million euros, an increase of 21.5 million compared to 2022.
The 2021 strategic alliance which allowed the PGA Tour to acquire 15% of European Tour Production is only hanging by a thread, especially since the payment of the January 2023 deadline has not been made.
Another worrying subject specific to 2023, the revenue from the Ryder Cup in Rome on the Marco Simone course did not reach the expected amount.
Finally, while several media rights contracts and several important partnerships are set to expire at the end of 2024, the subject of the progress of ongoing renegotiations apparently did not come up at the last board meeting!
Losses piling up
A simple graph highlights that the DP World Tour only makes money in years when Europe hosts the Ryder Cup. In 10 years, only once has a positive result been recorded when the Europe-United States match was played on American soil, it was in 2021 at Whistling Straits.
But two years later and despite an increasing turnover, the positive result of the Ryder Cup in Rome was not enough to cover the losses of the DP World Tour!
In the report we can also read that the strategic alliance signed with the PGA Tour in 2021 consists mainly of financial support for the American circuit. In 2023 this injected 23 million euros which were used to cover the operating loss, linked to the increase in Prize Money.
In 2023 the allocation reached 171 million euros (+9 million compared to 2022).
Since the DP World Tour is living beyond its means, the PGA Tour is ready to help it but here there is no question of capitalization. You will have to repay.
The less efficient Ryder Cup
Unfortunately the main source of money coming in from the DP World Tour seems to be drying up. Indeed, if the turnover of the 2023 Ryder Cup is up 40% compared to the previous edition organized in Europe (at the Golf National in 2018), profits have decreased by 40% with a shortfall estimated at 14 .5 million euros! So we went from a margin of 20% in Paris to 9% in Italy.
The document issued by the board of directors states that the Ryder Cup hosting budget has come under significant macroeconomic pressure, linked to post-COVID challenges and disruption caused by the war in Ukraine. Organizational costs have increased by +22% compared to Paris 2018.
Sous perfusion
To fill the holes in the fund, there is no other solution than to call on your strategic ally. The debts are accumulating and at the end of 2023 the loan, the conditions of which we do not know, will amount to 63 million euros! If the PGA Tour demands repayment of the loan it could lead to the loss of its partner.
More concretely, this financial dependence gives the PGA TOUR a stranglehold on the DP World Tour, particularly in the perspective of a complete merger which will only take place if 75% of the members of the European circuit vote in its favor.
Another question mark concerns the settlement of the 15% of PGA European Tour Productions acquired by the PGA Tour in January 2021. This represents 78 million euros and 30 million was paid on the same day as the Alliance’s announcement. . A year later a second payment (of 12.5 million euros)
There were then 4 payments of $13.75 million to be made in 2023 but the deadlines of January 2023 and January 2024 appear to have been suspended.
Once again, no mention was made of these non-payments in the financial statements of the DP World Tour.
Rolex, Skysports… contracts that are coming to an end
Finally, the table which lists the various partners and sponsors whose contracts expire in the coming months is enough to panic anyone who reads it.
This point was also mentioned when agreeing on a strategic alliance.
“We found that the main sources of risk are 1) short-term contractual expiration of guaranteed revenues in media and sponsorship; and 2) the relatively low basis of the DPWT events themselves. Regarding the former, virtually no sponsorship or media revenue is guaranteed after 2026, and most contracted revenue disappears by the end of 2024.”
The document lists the main contracts whose renewal is planned from the end of 2024, namely:
The 3-year contracts for Skysports, which broadcasts the DPWT in the United Kingdom, Ireland, Italy and Austria, 10-year contracts for Golf Channel, for the USA and Canada, and ViaSat for the Nordic countries (Sweden, Finland, Norway and Denmark) are primarily concerned.
This represents 42 million euros for Skysports, 31 for Golf Channel and 12.9 for ViaSat.
There is also the lucrative contract with Rolex worth 26 million euros which will end in a few weeks.
With the exodus each season of its 10 best elements on the PGA Tour, we suspect that the appeal aroused by the DP World Tour when renegotiating contracts with historic broadcasters has diminished.
