Project Wedge: Confidential Records Show a Saudi Golf Tour Built on Far-Fetched Assumptions

Early in 2021, consultants working for Saudi Arabia’s sovereign wealth fund studied an audacious idea: The desert kingdom wanted to become the world leader in the hidebound realm of men’s professional golf.

If the idea seemed unlikely, records show that the benchmarks for success bordered on the fantastical. A new Saudi league would need to sign each of the world’s top 12 golfers, attract sponsors to an unproven product and land television deals for a sport with declining viewership — all without significant retaliation from the PGA Tour it would be plundering.

The proposal, code-named Project Wedge, came together as Saudi officials worked to repair the kingdom’s reputation abroad, which hit a low after the 2018 assassination of the Washington Post columnist Jamal Khashoggi by Saudi agents. The plan was the foundation for what became LIV Golf, the series whose debut this year provoked accusations that Saudi Arabia was trying to sanitize its human rights record with its deep pockets, former President Donald J. Trump’s country clubs and a handful of big-name golfers. Some of those golfers have publicly played down Saudi abuses, as has Mr. Trump.

The league’s promoters say they are trying to revitalize the sport and build a profitable league. But hundreds of pages of confidential documents obtained by The New York Times show that Saudi officials were told that they faced steep challenges. They were breaking into a sport with a dwindling, aging fan base — if one with plenty of wealthy and influential members — and even if they succeeded, the profits would be a relative pittance for one of the world’s richest sovereign wealth funds. Experts say that these make clear that Saudi Arabia, with a golf investment of least $2 billion, has aspirations beyond the financial.

“The margins might be thin, but that doesn’t really matter,” said Simon Chadwick, a professor of sport and geopolitical economy at Skema Business School in Paris. “Because subsequently you’re establishing the legitimacy of Saudi Arabia — not just as an event host or a sporting powerhouse, but legitimate in the eyes of decision makers and governments around the world.”

The documents represent the most complete account to date of the financial assumptions underpinning LIV Golf. One of the most significant was prepared by consultants with McKinsey & Company, which has advised the kingdom’s leaders since the 1970s. McKinsey, which has worked to raise the stature of authoritarian governments around the world, was key to Vision 2030, Crown Prince Mohammed bin Salman’s plan to diversify the kingdom’s economy and turn it into a powerful global investor. Worldwide sports have become a pillar in that plan, with Saudi officials even discussing the possibility of someday hosting the World Cup. 

The wealth fund did not comment.

McKinsey, which declined to comment, analyzed the finances of a potential golf league, but pointedly said in its report that it was not examining whether it was a strategically viable idea. And many of Saudi Arabia’s rosy assumptions, McKinsey added, “have been taken for granted and not been challenged in our assessment.”

Indeed, LIV Golf appears far from meeting the goals that the Project Wedge documents laid out. After an inaugural season that cost in excess of $750 million, the league has not announced major broadcasting or sponsorship deals. And its hopes for a surrender by, or an armistice with, the PGA Tour have instead collapsed into an acrimonious court battle. (...)

Prince Mohammed, the kingdom’s 37-year-old de facto ruler, often gravitates toward splashy ventures and has repeatedly said that he sets sky-high targets in hopes of motivating officials to achieve a fraction of them. In its analysis, McKinsey called the golf league “a high-risk high-reward endeavor.”

The consultants detailed three possible outcomes for a franchise-driven league: languishing as a start-up; realizing a “coexistence” with the PGA Tour; or, most ambitiously, seizing the mantle of dominance.

In the most successful scenario, McKinsey predicted revenues of at least $1.4 billion a year in 2028, with earnings before interest and taxes of $320 million or more. (Federal records show that the PGA Tour, a tax-exempt nonprofit, logged about $1.5 billion in revenue and posted a net income of almost $73 million for 2019.)

By contrast, a league mired in start-up status — defined as attracting less than half of the world’s top 12 players, navigating a “lack of excitement from fans,” reeling from limited sponsorships and confronting “severe response from golf society” — stood to lose $355 million, before interest and taxes, in 2028.

For now, LIV’s standing tilts sharply that way. Its tournaments have not commanded large crowds, and its broadcasts are largely limited to YouTube. The PGA Tour suspended players who defected, and it is not yet clear whether the organizers of the four major men’s tournaments will allow LIV golfers to participate. (...)

McKinsey’s work on the golf project is part of a longstanding pattern of foreign consultants providing rationales for Gulf States’ multibillion-dollar projects, some of which become white elephants. When the crown prince announced plans to build a futuristic city called Neom, McKinsey was among the companies that helped envision proposals for robotic dinosaurs, flying taxis and a ski resort that officials say will host the Asian Winter Games in 2029.

by Alan Blinder and Sarah Hurtes, NY Times | Read more:
Image: John David Mercer/USA Today Sports, via Reuters

[ed. McKinsey. Always near the bottom of every sludgy deal. Pete Buttigieg's old employer.]