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.

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.

Moreover, the league is nowhere near having signed all of the elite players who Saudi advisers said were required for success. In one presentation slide, as McKinsey projected one of its more optimistic financial forecasts, the participation of Tiger Woods, Phil Mickelson and Rory McIlroy — who have combined to win 25 major championships — was included under the headline “What you need to believe.”

Of those stars, only Mr. Mickelson joined LIV, with a deal that is reportedly worth at least $200 million.

Mr. Woods, with his ability to attract fans and sponsors, was seen as essential. Even though the league offered Mr. Woods a long-term plan that could have made him “in the neighborhood” of $700 million to $800 million, according to Greg Norman, LIV’s chief executive, the league has found Mr. Woods to be one of its greatest public antagonists.

“I don’t know what their end game is,” Mr. Woods said of LIV last month in the Bahamas, where he was hosting a tournament on the PGA Tour schedule. Mr. Woods acknowledged that the PGA Tour “can’t compete dollar for dollar” with the Saudis, but he said that “an endless pit of money” was not a surefire means to “create legacies.”

On the day Mr. Woods spoke, LIV announced details for several of the 14 tournaments it expects to be the proving grounds for $405 million in prize money next year, in addition to the guaranteed payouts it has promised players. It has said it will release its full schedule “in the coming weeks.”

The season will unfold as LIV’s business evolves toward its planned franchise model. Although professional golf has some signature team events like the Ryder Cup, the PGA Tour generally relies on players competing for themselves. LIV, whose music-blasting gatherings feel little like traditional tournaments, is betting that fans will prefer to watch a dozen four-player teams competing against each other.

“LIV has repeatedly made clear that our stakeholders take a long-term approach to our business model,” Jonathan Grella, a spokesman for LIV, said in a statement. “Despite the many obstacles put in our path by the PGA Tour, we’re delighted with the success of our beta test year. And we’re confident that over the next few seasons, the remaining pieces of our business model will come to fruition as planned. Our business plan is built upon a path to profitability. We have a nice, long runway and we’re taking off.”

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.

Of the top 12 players on a roster in the McKinsey report, LIV has attracted four: Sergio Garcia, Dustin Johnson, Mr. Mickelson and Henrik Stenson.

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.

The Project Wedge analysis was conducted for Saudi’s sovereign wealth fund, which is led day to day by its governor, Yasir al-Rumayyan. Mr. al-Rumayyan, a longtime golf enthusiast, is also chairman of the Saudi Arabian Golf Federation. In 2019, he hosted a “Golf Means Business” tournament at the crown prince’s annual investment conference in Riyadh. The PGA Tour describes Mr. al-Rumayyan in court documents as a micromanager whose “daily involvement and influence bears on everything from LIV’s global strategy to the tiniest detail.”

One document obtained by The Times shows that LIV organizers considered assembling an all-star board of business, sports, legal and political titans. But nine of the people who were identified as possible board members, including Ginni Rometty, the former IBM chief executive, and Randall Stephenson, the former AT&T chairman, said they had never been approached about joining.

“I didn’t know I was on the list, and I have never been approached,” Mr. Stephenson, who is a member of the PGA Tour’s board, said in an interview. If asked, he said, he would decline. “It would be a quick conversation,” he said.

Most others listed in the document, including the basketball legend Michael Jordan; former Secretary of State Condoleezza Rice; and Mark Parker, the executive chairman of Nike, did not respond to requests for comment. McKinsey did not appear to prepare the document, which carries the logo of Golf Saudi, which Mr. al-Rumayyan leads.

Mr. Grella, the LIV spokesman, did not answer inquiries about the current composition of a board, which a player handbook said would initially have up to 10 members, including Mr. al-Rumayyan and Mr. Norman.

Despite its struggles, LIV is making plans for tournament venues years into the future and is trying to sign more stars. Mr. Norman said in November that a television deal was “a priority,” and as the new season nears, golf fans and executives alike have debated what boost the new league might get if one of its players captured a major championship in 2023.

That, Mr. Norman has suggested, would be proof of “how we work within the ecosystem.”

It would also be a sign that an outright ban of LIV players from the sport’s biggest stages, one of the gravest hazards that McKinsey flagged, had so far been avoided.

Kevin Draper and Justin Scheck contributed reporting.