By Sheila Dang
(Reuters) - The stunning announcement on Tuesday of a merger between the PGA Tour, DP World Tour and Saudi-backed LIV Golf could generate higher viewership, and loftier costs, for advertisers and sponsors to reach golf audiences, marketing experts said.
The move ends a bitter legal battle between the organizations that has split the golf world and its top players.
"It's good for the game," said Neal Pilson, founder of Pilson Communications and former president of CBS Sports, calling the merger "among the top two or three surprises I've experienced."
Sponsors and advertisers "will have the ability to benefit from increased viewership given the worldwide publicity this settlement will create," he said.
Golf's popularity has been surging in the United States, where last year it was a $102 billion industry, up 20% from 2016, according to the National Golf Foundation.
The organizations said on Tuesday they will work to allow a process for LIV Golf players to reapply for membership on the PGA Tour and DP World Tour.
The potential for top players to compete on other tour events will help boost ratings, experts said.
The final round of the 2023 Masters Tournament drew an average of 12 million viewers on CBS.
It is unclear how broadcasting rights for the TV networks that sell commercial time during golf events could change in the long term. The CW network, which airs LIV Golf in the U.S., said there is no change to the event schedule in 2023, while NBC Sports, which airs some PGA Tour events, said it was still learning about the announcement.
The CW network is owned by Nexstar Media Group and NBC Sports is a division of NBCUniversal which is owned by Comcast (NASDAQ:CMCSA).
The deal could also mean higher costs for television commercials and sponsorship deals because the new entity will be "the only game in town" for golf events, said Michael Goldman, a sports marketing and management professor at the University of San Francisco.
While many details of the new commercial entity are yet to be determined, it could result in a global set of sponsors across the organization, in addition to another roster of sponsors each for the PGA Tour, DP World Tour and LIV Golf, said Patrick Rishe, director of the sports business program at Washington University in St. Louis.
Ultimately, the merger is likely to create more marketing opportunities for brands, Pilson said.
Brands will also have to weigh the potential risks of association with Saudi Arabia, whose Public Investment Fund bankrolls the LIV Golf series and will be the exclusive investor in the new entity.
Critics have accused LIV Golf of being a vehicle for the Saudi Arabian government to improve its international reputation amid alleged human rights violations, including the killing of Washington Post journalist Jamal Khashoggi in 2018. Saudi Arabia has denied the allegation.
One important step is for sponsors to understand how their target audience views a political or social issue, Goldman said, adding they could discover fans just want to see a round of golf.
"We know from research that fans and consumers often look past these issues," he said. "Sometimes it's not as important in consumer decision-making as we think it is."