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Why did the Saudi sovereign fund buy football clubs? | Sports | Al Jazeera

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Why did the Saudi sovereign fund buy football clubs? | Sports | Al Jazeera

Some of football’s biggest names will be playing in Saudi Arabia next season.

Portuguese superstar Cristiano Ronaldo joined Riyadh Victory in December, while French duo Karim Benzema and N’Golo Kante left Real Madrid and Chelsea respectively for Saudi champions Ittiha this month. Germany. More stars are expected ahead of the start of the Saudi Professional League (SPL) in August.

But arguably as important as the blockbuster transfers was the announcement this week that the Saudi sovereign fund, overseen by Crown Prince Mohammed bin Salman, would buy four of Saudi Arabia’s domestic football clubs: Riyadh-based Riyadh Crescent and Riyadh Victory, as well as Jeddah National and Jeddah United based in Jeddah.

The transfer of ownership to the Public Investment Fund (PIF) marks the start of a process of privatizing clubs, which have traditionally been controlled by the sports ministry and relied on the state for financial support.

Simon Chadwick, professor of sports and geopolitical economics at SKEMA Business School, said, “In the past, there has been a large state involvement in football clubs, most notably in debt write-offs, even as recently as 2022.” He added, “Now, they’re trying to culturally shift these organizations from being state-dependent to more purposeful strategic and commercial organizations.”

According to the state-run Saudi Press Agency (SPA), the process aims to encourage the development of the sport by attracting more investment, including eventually involving the private sector in clubs.

The Saudi Press Agency reported that the plan revolves around three main areas: creating an attractive investment environment; improving the club’s governance to become more professional and financially sustainable, and improving competitiveness by upgrading infrastructure.

The report also noted that PFIs have in the past controlled entities before taking them private, though not always fully.

In the future, Saudi clubs could attract outside buyers, like clubs in the Premier League, Chadwick said, adding that “Saudi Arabia would like to generate interest from US private equity or investment elsewhere in the world.” Internal investment funds – in order for clubs to be more attractive, they need to turn them into more viable business propositions.”

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Riyadh’s triumphant Ronaldo celebrates scoring for his team (Reuters)

While the level of spending on foreign players is unprecedented, the idea is not new, with privatization also on the table when Pat Jensen was chief executive of the Riyadh-based club Al Shabab in 2017-2018. agenda.

“We were prepared as part of the trial run,” Jensen said, adding, “It’s not that we’re not a professional team, it’s more about how you do business off the field.”

Jansen said becoming a private entity would bring the team in line with the biggest clubs in the world, adding, “It will mean they will function better over the long term rather than just thinking about it year to year, Because it’s easy to spend government money and there’s no accountability.”

growth in all areas

The idea of ​​privatization is not only to be more responsible with money, but to create financial structures that will make clubs and leagues stronger overall.

The initial target was for SPL’s revenue to grow from about $120 million currently to $480 million a year by 2030, and the SPA said it expected the league’s value to grow from $800 million to about $2.14 billion over the same period.

Last year, Ronaldo’s arrival helped the league sign dozens of overseas broadcast agreements.

“If you measure it in terms of commercial rights, these players have a lot of impact,” Jensen said, adding, “They put homeless people on seats, they sell merchandise, they get media attention, and they sell media rights. , thereby attracting sponsorship.”

Signing some of the world‘s most famous players is a big step in the government’s ambitious plan to make the league one of the world‘s top 10.

“With the right strategy, I think it will happen,” Jansen said, adding, “However, it won’t be easy and one of the biggest hurdles along the way is that, in football, the hardest One of the things is change.”

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Achieving change can be difficult, with most European clubs growing organically more than a century ago and in Asia, South Korea created the continent’s first professional league in 1983.

Governments still play an important role, directly or indirectly, in providing stability, and privatizations in Asia have been mixed, with successes in Japan and Thailand, but in Malaysia most clubs have traditionally been run by state governments, with long-term plans Privatization has been slow, partly because of the outbreak of the COVID-19 pandemic, in the Middle East, where national ties (directly or indirectly) to the sport have historically been strong, and in Iran, moves have been made to move giant Tehran club Persepolis and Estegral from the sports department, but this has been repeatedly postponed.

“There is a lack of knowledge and experience in commercialization and privatization in Asia,” Chadwick said, pointing to China’s current woes, despite clubs spending hundreds of millions of dollars on big-name foreign players and coaches over the past decade.

“Officials simply don’t have the expertise to deal with the issues they’re facing.”

The discrepancy between vision and reality has always been a feature of Asian football, but Chadwick pointed to the success of last year’s World Cup in Qatar as a model and inspiration for Saudi Arabia, the first ever held in the Middle East.

Chadwick said, “The World Cup in Qatar showed that the Gulf countries can bridge this gap and successfully achieve their desired goals. Saudi Arabia will draw inspiration from this and believe that it can succeed where other Asian countries have failed.”

Argentina star Lionel Messi hugs Qatar Emir Tamim bin Hamad Al Thani after the World Cup final in Qatar (Al Jazeera)

The actual situation

The Riyadh-based Al Shabaab club is not among the four teams acquired by the Saudi sovereign fund, and the competitiveness of the six-time champions remains to be seen.

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“I’m disappointed because last season Al Ahly was in the second division and we finished fourth in Asia and played well,” said Al-Shabab fan Abdulaziz Khosawi. And added, “Maybe they want two teams from Riyadh and two teams from Jeddah, so, we’ll have to see what happens, but these are big changes for the league.”

But others in the capital are happier, says Ayman Khatami, a Saudi Crescent FC fan and social media influencer. and compete to be one of the best leagues in the world.”

“Saudi Crescent FC is a championship club that will grow stronger and be able to win titles that have never been won before.”

With better players, better stadiums also need to be built, observers say, and the hosting of the Asian Cup in 2027 is expected to help in that regard, with Ronaldo himself having mentioned that progress should not be about players alone.

“The league is very good, but I think we have many, many opportunities to continue to grow,” Ronaldo said in an interview with the Saudi League, adding, “They need to further improve the infrastructure and in my opinion, if they continue to be here Do what they want to do and in the next five years I think the Saudi league can be a top five league in the world.”

There is still a long way to go to get there, but at least Saudi Arabia is getting the attention of football as a whole, Chadwick said. “It will be interesting to see what happens in the next five or 10 years,” he said. And added, “The state is still there and watching closely, while trying to encourage a more entrepreneurial and innovative culture, but it’s not free market football, it’s not centrally planned football, it’s the Saudi Arabian model.”

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