As lawmakers move to thwart PGA-LIV Golf deal, experts flag brand risks of Saudi investment

However, US lawmakers have thrown a wrench in the plan; the Senate said Monday that it’s opening an inquiry into the deal. It will require both organizations to provide a slew of documents about the arrangement.

Senator Richard Blumenthal (D-CT), who serves as chairman of the chamber’s Permanent Subcommittee on Investigations, said in a statement that the arrangement, which also involves the Saudi Arabian Public Investment Fund (PIF), “raises concerns about the Saudi government’s role in influencing this effort and the risks posed by a foreign government entity assuming control over a cherished American institution.”

In particular, Blumenthal called out the country’s “deeply disturbing human rights record at home and abroad.” Though the country’s human rights abuses have been the subject of international scrutiny for decades, diplomatic tensions between the US and Saudi have intensified in recent years following the murder of Washington Post journalist Jamal Khashoggi at the hands of Saudi officials in 2018.

Despite widespread criticism of the kingdom’s human rights record, Saudi Arabia has in recent years poured millions of dollars into efforts to diversify its economy, focusing in particular on tourism, culture and entertainment.

Sporting has been at the heart of this strategy. The country’s $700bn PIF and state-owned oil company Saudi Aramco are poised to acquire a majority stake in a handful of Saudi-based professional soccer clubs this year, and the crown already owns Newcastle United – an arrangement that cost it more than $405m in 2021.

In December of last year, Saudi club Al Nassr reached an agreement to sign Cristiano Ronaldo, upping interest in Saudi soccer across the globe. A deal to bring Real Madrid striker Karim Benzema to the kingdom‘s Al-Ittihad club came last Tuesday, though the kingdom found just two days later that its billion-euro offer was not enough to woo its top target, Argentinian superstar Lionel Messi.

The question of consumer concern

While Saudi Arabia’s history of human rights abuses is raising red flags among policymakers in Washington who want to stem the country’s expansion into US sports, experts believe that consumers will be less critical.

“I don't think there's actually a lot of consumer care about the issue. Saudi human rights abuses are probably below the line in terms of being on the radar of most consumers,” says Dr Michael Lewis, a professor of marketing at Emory University whose work focuses on the intersection of sports marketing and sports analytics.

Media coverage is, of course, a key factor that will determine whether the PGA Tour and its partners – which include big names like Adobe, Mastercard, Michelob Ultra and United Airlines – carry on unfazed or become the subject of intense consumer backlash à la Bud Light over its partnership with trans influencer Dylan Mulvaney. “The calculation almost has to be: where does the media go with this story? How much of this is a story that becomes something that the New York Times likes to focus on or The Wall Street Journal likes to focus on?,” says Lewis. “Suddenly, this [could] become a major point of emphasis for consumers.”

For now, it would seem, golf fans won’t make a big fuss over the PGA-LIV deal – in the same way that soccer fans have kept following their favorite players and clubs, even as they’ve been snapped up by Saudi. Lewis anticipates that the temperature will only rise among consumers if “a ‘Jamal Khashoggi event’ happens or the Saudis end up embroiled in battle between two political sides.”

Other experts agree with this assessment. “Though most golf fans have disdain for the Saudis, are those feelings strong enough to cause them to abandon watching the sport in the wake of the PGA-LIV merger? The reality, however unfortunate, is that consumers don't necessarily act on their beliefs,” says Seth Gruen, co-founder of Branded, a marketing and communications agency specializing in sports marketing. The PGA’s US Open championship, which begins Thursday, may be an indicator of how much, if at all, the deal will impact fan engagement and viewership, he suggests.

Assessing the reputational risk for brands

Despite relatively low levels of consumer blowback thus far, the PGA Tour and its sponsors are surely on alert. “They're very high-profile brands that have a lot invested – so they're always going to want to be a little bit careful,” says Lewis.

Any brand that considers accepting Saudi investment – and that brand’s various partners – will be “concerned about risk,” Lewis says. Part of their evaluation, he suggests, involves asking, “‘If we invest in something that is associated with the Saudis and if the public heat on Saudi Arabia turns up, [what does that mean for our brand]?’”

Of course, he acknowledges that much of the potential risks and brand safety threats can’t be easily quantified. It often involves “more judgment calls than numeric [or quantitative decisions].”

Even when brands do attempt to quantify their reputational risk – as Nike did ahead of launching its controversial 2018 ‘Dream Crazy’ campaign featuring Colin Kaepernik – the results often don’t tell the whole story, according to experts. “Brands … have to be more human- and brand-focused,” says Melissa Robertson, chief executive officer at Dark Horses, an ad agency focused on sports, health and wellness that was acquired by Omnicom’s TBWA in April. “Only then can you become more insulated from the risks.”

Ultimately, Robertson says, this is the kind of calculus that sports leagues and clubs – and their attendant brand partners – should be doing when considering Saudi investment. “Live sport remains one of the few remaining shared cultural experiences, so it’s no wonder that brands of all shapes and sizes remain keen to align themselves with the excitement, and credibility that comes from being a prominent part of the action. But there’s a simple mantra that we give any of our clients: you need to stand for something, not next to something. It can’t just be a media exercise.”

This isn’t to say that brands should never work with potentially controversial partners, Robertson suggests. Rather, they have a duty to make their purpose in the partnership known. “When brands [accept a partnership], they are, to an extent, signing up to the values of that organization,” she says. “But brands have every right to challenge rights holders. They shouldn’t just sign up to it and blindly play by the established rules of engagement. It’s a brand’s responsibility to determine and take control of their own narrative.”

For example, she points to TikTok’s partnership with the UEFA European Women's Championship last year, in which the video-sharing platform was “very clear that they exist as a brand to entertain people” but also wanted to support a new platform with the tagline ‘Where All Fans Play,’ signaling a commitment to inclusivity.

TikTok ultimately chose not to participate in the FIFA 2022 World Cup in Qatar – presumably over the country’s anti-LGBTQ+ policies, which caused a media frenzy and saw a variety of top sponsors pull out of the tournament. But Robertson says that had TikTok chosen to be involved, it could have used the opportunity “as a platform for both tolerance and the joy they know soccer brings many people around the world.”

In a similar way, brand partners of the PGA Tour “will have to decide what their story is, what they stand for and whether they can use it as a positive platform for their message, irrespective of who is co-funding the tour,” Robertson says. In this way, she argues, evaluating the brand risks and moral quandaries of such a partnership need not be a zero-sum game.

Going even further, she suggests that investment from countries with anti-democratic views or troubled human rights histories could potentially create momentum for positive change in those places. While she’s careful to caveat that she’s “wary of in any way excusing Saudi Arabia” and acknowledges the controversy of deals like the PGA-LIV merger, she says we might consider simply asking: “Could it be a good thing in the long run?”

Unlike a country like Russia, Robertson says, Saudi isn’t attempting to change sporting at a fundamental level. “They just want to be a part of it,” she says. “It’s clear that they, and any number of other repressive regimes, aren’t going to suddenly change who they are or what they believe overnight; but in taking part outside of their own country, they are having to be more culturally sensitive, more open, more tolerant. And this, in time, might lead to more systemic cultural and attitudinal shifts.”

Money matters

Of course, even if sports leagues and teams – and their respective sponsors and partners – are wary of potential reputational damage, there’s a bigger factor at play: money. And a whole lot of it.

“It gets [hard] for brands when decision-making involves the complexity and moral quandary of where the money comes from,” says Robertson. “But let’s be realistic: after years of profligate spending – believed to be as much as $1.5bn in the last few years alone – Saudi is a big player on the global sports stage. From Ronaldo, to Newcastle to this latest LIV-PGA saga, Saudi money exists everywhere. It’s almost impossible to avoid. Unsurprisingly, individuals, clubs and organizations will take the money if it benefits them.”

In the PGA-LIV deal, it was of course money that moved the needle. When the PGA Tour initially refused Saudi funding, LIV Golf upped the ante by poaching some of the circuit’s biggest stars, including Phil Mickelson and Brooks Koepka, sometimes offering contracts of upwards of $100m. The strategy ultimately broke the PGA Tour’s will to resist.

“The Saudis have unlimited funding and can unfortunately outspend nearly every sports property in the world,” says Branded’s Gruen.

The approach of shouldering out the competition by putting the most dollars on the table is likely to continue to prove effective for Saudi Arabia, Gruen says. He suggests that attractive investment options for the kingdom, like Europe’s top soccer stars, should put England’s Premier League, Spain’s La Liga and Germany’s Bundesliga on high alert.

Saudi's strategy starts with sports

Investment from the Saudi royal family and the country’s PIF is already moving beyond international sports and into other areas. Investments of nearly $500m each in Walt Disney and Marriott International in 2020 indicate that the country is eyeing tourism and entertainment opportunities.

Robertson predicts that “anything that can replicate the mass interest, cultural influence and soft power dynamic that sport provides” is a potential investment target for the kingdom. Fashion, music and film will top the list, she predicts.

But for Saudi, whose oil-obsessed economy is in desperate need of diversification as the world shifts away from fossil fuels, sporting still appears to be the magic ticket. Beyond the obvious economic incentives, there are a couple drivers behind the trend. One is simple: influence.

“Sports ownership is … very ego-driven – there doesn’t seem to be anything that rich people like more than owning a professional sports franchise” Lewis says. “Think about the role that sports plays in our culture and in cultures across the globe – sports are incredibly important to people. They’re something that really holds communities together. So if you're the owner of a team, you're not just a rich person – you're now an important person. You know, George Steinbrenner, [the former principal owner and managing partner of the New York Yankees] was an important person in New York, not just a rich guy. This general quest for import is probably something that's going on with the Saudis.”

Another factor is the rapidly-changing tide of technology – and how it’s shaping sports consumption and fandom globally. As Lewis puts it: “We are clearly on a path towards consolidation, where sports leagues are probably going to come together and have more of an international focus. The idea of the regional sports league is probably on borrowed time, because now I can be a kid in Los Angeles and my favorite soccer team can be in Madrid. [We’re seeing this] even in American college football with the growth of the Big Ten Conference and the Southeastern Conference. The Saudis might be looking at this and going, ‘Hey, these golfers are international stars. The PGA is largely focused on America. America has 330 million people. So maybe there's 50 million or 30 million people that care even a little bit about golf. We take this worldwide and … potentially you're adding a zero to that number of fans.’”

In Lewis’ estimation, this is just the beginning of Saudi Arabia’s foray into sports across the globe. Over the coming decade, he says, “You’ll probably see the same thing with soccer and with basketball” on larger scales.

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