مشاركات عشوائية

Saudi Arabia's love of football could have ripple effects

featured image

Portuguese soccer star Cristiano Ronaldo poses for a photo with the shirt after signing with Saudi Arabia’s Al-Nassr soccer club in Riyadh, Saudi Arabia, December 30, 2022.

Al Nassr Football Club/Handout/Anadolu Agency via Getty Images

Soccer superstar Cristiano Ronaldo switch to Saudi club Al-Nasserand the kingdom’s growing investments in sports could have ripple effects across Europe and the United States, experts have told CNBC.

Ronaldo’s two-and-a-half-year contract, worth an estimated 200 million euros ($212 million) a year, including trade deals, will make the 37-year-old the highest-paid footballer in history and best paid. world athlete.

For context, Ronaldo’s individual annual earnings will exceed the total staff wage bill for around half of English Premier League clubs. The former Real Madrid, Manchester United and Juventus star earlier this week claimed the ‘single contract’ suited his ‘one-player’ status.

Ronaldo had his contract with Manchester United terminated in November after giving an explosive interview criticizing the club and its manager, Erik ten Hag.

The Portuguese striker’s move comes as Saudi Arabia reportedly read a possible joint bid to host the 2030 World Cup, and follows the Acquisition by the Saudi Public Investment Fund of historic Premier League club Newcastle United end of 2021.

The Financial Times reported in October that the Saudi PIF had committed more than $2 billion in sponsorship deals in the first eight months of 2022, most of which was for domestic football competitions.

Qatar's hope of getting the

Author and football finance expert Kieran Maguire told CNBC on Thursday that rather than an effort to compete with Europe’s big leagues, Al-Nasr’s signing of Ronaldo was a “marketing exercise” that allows the realm to diversify its commercial appeal beyond natural resources, given the size of the individual player profile.

“If you take a look at social media after someone of Cristiano Ronaldo’s status brings, that’s way bigger than that of an individual football club,” Maguire said.

“Saudi Arabia has a young population, so it will attract this generation. There are economic benefits, there are political and social benefits, and the financial cost is completely irrelevant.”

Manchester United and Liverpool in the Saudi crosshairs?

The Saudi PIF takeover of Newcastle United has been criticized in the footballing world – seen as an effort to underestimate the country’s reputation. in the context of a poor human rights record.

A group called NUFC Fans Against Sportswashing sprung up to protest the takeover, but after watching their club endure a prolonged period of mediocrity, many Newcastle fans cheered the investment in hopes of becoming a competitive force in England and beyond.

Just 15 months after the deal was completed, the club sit third in the Premier League table, sandwiched between perennial giants Manchester City and Manchester United.

Saudi officials have consistently denied allegations of sports washing in their various sporting activities, and the takeover of the Newcastle consortium led by British businesswoman Amanda Staveley insists the PIF is independent of the Saudi government.

Yet the PIF forms the bedrock of the Saudi economic project and its Vision 2030 program. Statements praising the progress of the PIF from King Salman bin Abdulaziz and Crown Prince Mohammed bin Salman appear in its annual accounts.

PIF owns 80% of the club, with the remaining 20% ​​split between Staveley’s PCP Capital Partners and RB Sports & Media. The PIF has been contacted for comments.

Ownership controversies have also surrounded Premier League champions Manchester City (part of the Abu Dhabi United group) and French champions Paris Saint-Germain (part of Qatar Sports Investments).

After watching other state-sponsored takeovers over the past decade, as well as the success of the controversial FIFA World Cup in Qatar in December, Maguire suggested that Saudi Arabia could consider expand their football portfolio in one of two ways.

“PIF could take a similar route to the UAE by having the City Football Group and going for a multi-club ownership model, where effectively you have a mothership and you have a lot of satellites,” he said. suggested.

Besides its flagship club Manchester City, ADUG’s City Football Group now boasts nine other clubs across four continents with consistent branding and resource availability.

Newcastle United will be 'upgraded' after Saudi takeover, says finance minister

“From a financial point of view it’s actually proving to be quite successful because you can have continuity in terms of culture and ethos at clubs, you can transfer players to help their development and then you can start to sell at higher price levels.” price, so it turned out to be, these days, a pretty smart model,” Maguire added.

Alternatively, given the number of wealthy people in Saudi Arabia likely to be interested in acquiring Newcastle United, he suggested other top clubs could come into Riyadh’s sights.

Liverpool and Manchester United, arguably the two biggest clubs in England in terms of global profile, have have publicly stated that they are open to investmentand maybe even a complete sale.

“[The Saudis] have seen the positive response from Newcastle fans – there are two clubs that are publicly ready to invest in Liverpool and Manchester United and no disrespect to Newcastle United they are much bigger fish,” he said .

“Sports investment is attractive. You won’t necessarily get a substantial return on your investment financially, given the high prices they are likely to have to go and pay a club of this stature, but the return on investment does not financial as we’ve seen at both the Etihad (home of Manchester City) and PSG is positive.

Individual star signing pattern could threaten MLS

Ratings agency DBRS Morningstar has suggested that Ronaldo’s move to the Saudi Pro League and the country’s apparent intentions could jeopardize the credit risk profiles of European and North American clubs.

“In Europe, as the costs of players in football clubs are linked to their income, the increase in individual salaries driven by foreign demand could decrease the quality of the team over time. This could have an impact at longer-term impact on the field results, brand values ​​and viewership of teams who are unable to grow revenue and reinvest in their teams,” said Michael Goldberg, DBRS Morningstar Senior Vice President for sports funding.

Saudi investment has disrupted professional golf in the form of LIV Golf, a breakaway competition from the traditional PGA Tour that has used Riyadh’s deep pockets to attract some of the game’s biggest names.

However, Goldberg suggested that luring a handful of superstars in the twilight of their careers into a team sports league would not be enough for Saudi Arabia to attract a critical mass of fan interest, as the quality of the game would still be significantly lower than that of the top European leagues.

The Saudi model poses more of a threat to the United States, he noted, as Major League Soccer (MLS) has a long-term strategy of attracting aging star players to generate interest and viewership. . To this end, each club is allowed to sign three players whose aggregate remuneration is excluded from the team’s salary cap.

FIFA President: Football can bring change

For example, Italian winger Lorenzo Insigne left Serie A side Napoli to join Toronto FC in 2022 and became the highest-paid player in MLS history with an annual salary of $12.4 million. dollars. It has nothing to do with the gigantic contract signed by Ronaldo.

“The SPL can vastly overtake MLS clubs and could threaten a key aspect of the MLS business model. While the overall quality of play in MLS has increased rapidly through investment in player development, training and designated players, the quality gap between it and the SPL is much narrower than that of the SPL compared to European leagues,” Goldberg said.

As such, DBRS Morningstar believes the financial strength of the SPL and its willingness to target star players from European leagues, who might otherwise consider MLS, could negatively impact the credit profiles of North American clubs.

Goldberg predicts the Saudi investment will pose greater immediate risk to individual sports such as golf, tennis, mixed martial arts (MMA) and racing.

European wage inflation

European clubs have continuously increased transfer fees and player salaries over the past decades in order to attract and retain top talent and remain competitive.

Goldberg has suggested that Saudi investment in individual players could propel player salaries upwards, but European soccer body UEFA recently introduced rules stating that no club can spend more than 90 % of its annual income in salaries, transfers and agent fees in 2023. This limit will decrease further to 70% in 2025.

“So if revenues don’t continue to rise, European club wage bills will be capped. In this scenario, increasing salaries for individual players could lead to a reduction in squad quality over time and a competitive advantage over teams outside of Europe,” Goldberg said.

“Any negative impact on on-pitch results, brand values ​​and viewership would also affect the credit profiles of European football clubs, and clubs that are unable to increase revenue and reinvest in their teams would be most at risk. .”

Post a Comment