Watson welcomed talk of Tiger Woods captaining the PGA team and Greg Norman leading the LIV outfit, but said the two warring tours first needed to make peace.
And he's confident that will happen after the game's superstars enjoyed somewhat of a ceasefire at Augusta National this week.
"It's got to happen at some point. Now when is the question. You can only go for so long," Watson said after missing the Masters cut on Saturday.
"Somebody is going to have to take a step back and try to figure it out."
Watson is adamant LIV Golf's existence is good for the game, saying the PGA Tour should accept that competition is healthy.
"If somebody came in next to me with a candy shop, I'd think 'that's great, man. That's great'," he said.
"This is how you get people downtown. This is how you grow a downtown in Pensacola.
"And if their candy shop is better than mine, then great. That's good for them. Hopefully they will keep adding jobs and keep adding people. It's great.
"But we're at a point right now, it's competition, right? You've got a coffee shop here and you've got a coffee shop over here and they're battling.
"The almighty dollar is there. They're not really upset about the people, they're upset about their income. Let's be honest."
Watson believes golf is as much about entertainment as sport nowadays and says a PGA Tour versus LIV Golf clash like the Ryder Cup can happen down the track when the two parties reach a compromise.
"Once that all gets settled and we kind of shake hands and hug it out, then yes, that could be talked about," he said.
"But, again, that hurts the almighty dollar and the Ryder Cup, the Presidents Cup, and so it will be a while before that can happen.
"But, yes, there's people who want to back it already ... it will just be another match. There's people who will back that. There's a lot of people who will sponsor that.
"Yes, obviously there is a place for that."
Watson will be one of the big drawcards at LIV Golf Adelaide from April 21-23 and says he's excited to be heading down under for the first time 2011.
Tickets have already sold out with some 65,000 fans set to flock to the Grange Golf.
"It should be a wild crowd. It's definitely going to be the biggest ruckus we have," Watson said.
"Nobody's bad-mouthing us down there, so looking forward it.
"Outside of the US, we've had nothing but love. It's been amazing."
Watson also revealed there'd been talk within the Saudi-backed league of staging two more LIV tournaments in Australia.
"When people want us there (in Australia), then, yeah, we obviously want to be there as many times as we can to make them happy," he said.
"This is what sports is about. It's entertaining.
"The whole golf industry is exhibition. This is exhibition. It is the Masters but it is exhibition.
"We're entertainers, right? That's what we're doing. Everybody's watching these shots, everybody's wanting shots to be pulled off, wanting Tiger to birdie the last hole to guarantee he makes the cut.
"We're all wanting this."
