Portuguese soccer star Cristiano Ronaldo poses for a photo in a jersey after signing with Al-Nassr Football Club of Saudi Arabia in Riyadh, Saudi Arabia on December 30, 2022.
Al Nassr Football Club / Handout/Anadolu Agency via Getty Images
Soccer star Cristiano Ronaldo’s move to Saudi club Al-Nassr, and the government’s growing investment in the sport, could have ripple effects across Europe and the US, experts told CNBC.
Ronaldo’s two-and-a-half-year contract, which is reportedly worth up to 200 million euros ($212 million) a year including trade deals, will see the 37-year-old become the highest paid soccer player in history, and the highest paid. athlete in the world.
Depending on the situation, Ronaldo’s annual salary will exceed the average salary of the staff for almost half of the clubs in the English Premier League. The former Real Madrid, Manchester United and Juventus star earlier this week argued that the “exceptional contract” deserved his status as a “special player”.
Ronaldo terminated his contract with Manchester United in November after he gave an explosive interview criticizing the club and its manager, Erik ten Hag.
The Portuguese forward’s move comes as Saudi Arabia is reportedly set to make a joint bid to host the 2030 World Cup, and follows the Saudi Public Investment Fund’s purchase of the historic Premier League club Newcastle United at the end of 2021.
The Financial Times reported in October that the Saudi PIF had committed more than $2 billion in sponsorship deals during the first eight months of 2022, most of which were aimed at domestic football tournaments.
Football writer and financial expert Kieran Maguire told CNBC on Thursday that unlike attempts to compete with Europe’s top clubs, Ronaldo’s signing of Al-Nassr was “a move to market” that enables the government to diversify its commercial appeal over natural resources, mostly at the individual level of the player.
“If you look at social media after someone of Cristiano Ronaldo’s stature brings it, it’s much bigger than a football club,” Maguire said.
“Saudi Arabia has a young population, so it will attract that generation. There are economic benefits, there are political and social benefits, and the financial cost is completely negligible.”
Manchester United and Liverpool in Saudi crosshairs?
The Saudi PIF’s takeover of Newcastle United was met with criticism across the football world – seen as an attempt to tarnish the country’s reputation against a history of poor human rights record. To see also : ‘News out of the United States is horrible’: G-7 ally Biden feels intimidated at reversing US abortion rights.
A group called NUFC Fans Against Sportswashing emerged in protest during the win, but after watching their club endure a long spell of relegation, many Newcastle fans welcomed the investment in hope to be a competitive force in England and beyond.
Just 15 months since the deal was completed, the club sits third in the Premier League table, sandwiched between perennial giants Manchester City and Manchester United.
Saudi officials have consistently denied allegations of match-fixing in their various sports activities, and the Newcastle organization led by British entrepreneur Amanda Staveley insists that the PIF is independent from the Saudi government.
However, the PIF forms the basis of the Saudi economic plan and its Vision 2030 program. Statements praising the progress of the PIF from King Salman bin Abdulaziz and Prince Mohammed bin Salman appear in its annual financial statements and a year.
PIF owns 80% of the club, with the remaining 20% split between Staveley’s PCP Capital Partners and RB Sports & The media. There was a PIF for feedback.
Ownership disputes have also surrounded Premier League champions Manchester City (owned by Abu Dhabi United Group) and French champions Paris Saint-Germain (owned by Qatar Sports Investments).
After seeing other state-sponsored events in the past decade, as well as the success of the controversial FIFA World Cup in Qatar in December, Maguire suggested that Saudi Arabia could look to expand its football games in one of two ways.
“The PIF can go down the same path to the UAE by having a City Football Club and looking for a multi-club ownership model, where you effectively have a parent company and have satellites. many,” he suggested.
In addition to its flagship club Manchester City, ADUG’s City Football Group currently has nine other clubs on four continents with consistent names and equipment presence.
“From a financial point of view, this is really successful because you can have a culture and philosophy development in the clubs, you can transfer players around to help their development, and then you can start selling them at higher prices, so it’s proven that these days it’s a very good example,” Maguire added.
In addition, given the number of high-profile Saudi Arabian players who may be interested in buying Newcastle United, he suggested that other top clubs could come to Riyadh. .
Both Liverpool and Manchester United, arguably England’s two biggest clubs in world terms, have publicly announced that they are open to investment, and perhaps even an outright sale.
“[The Saudis] have seen a good response from Newcastle fans – there are two clubs willing to invest in Liverpool and Manchester United and no disrespect to Newcastle United, they are bigger fish ,” he said.
“Sports investments are attractive. You don’t need to get a lot of profit on your financial investment, considering the high prices they would have to pay for a team of that level, but a non-financial profit to invest like us. I saw at the Etihad (home of Manchester City) and PSG is good.”
Individual star signings model could threaten MLS
Credit rating agency DBRS Morningstar has suggested that Ronaldo’s move to the Saudi Pro League, and the country’s apparent ambitions, could put the credit rating of European and North American clubs at risk. This may interest you : The situation in Burkina Faso – United States Department of State.
“In Europe, when the costs of players in football clubs are linked to their salaries, the increase in individual salaries driven by foreign demand can reduce the value of the team over time. This can have a long-term impact on the outcome of the game, the quality of the network and the perception of people. teams that are unable to grow revenue and reinvest in their teams,” said DBRS Morningstar’s Senior Vice President for Finance of Sports Michael Goldberg.
Saudi investment has disrupted professional golf in the form of LIV Golf, a legacy tournament 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 attracting a few star players in the twilight of their careers in the league would not be enough for Saudi Arabia to attract significant fan interest, as the quality of the game is still coming down much more than up. European League.
The Saudi model poses more of a threat to the US, he noted, as Major League Soccer (MLS) has a long-term strategy of attracting aging star players to build interest and visibility. To this end, each team is allowed to sign three players whose compensation package is not included in the team’s salary cap.
For example, Italian winger Lorenzo Insigne left Serie A club Napoli to join Toronto FC in 2022 and became the highest-paid player in MLS history with an annual salary of $12.4 million. This pales in comparison to the huge contract signed by Ronaldo.
“The SPL could cost MLS teams away and could threaten an important part of the MLS business model. Although the overall quality of the game in MLS is increasing rapidly by investing in player development, coaching and selected players, the quality gap between it. and the SPL is much narrower than the SPL associated with the European leagues, “said Goldberg.
Therefore, DBRS Morningstar believes that the SPL’s financial strength and willingness to target European star players, which would otherwise take over MLS, could negatively impact the credit ratings of North American clubs.
Goldberg expects Saudi investment to pose a major threat to individual sports such as golf, tennis, mixed martial arts (MMA) and athletics.
European wage inflation
European clubs have been increasing transfer fees and player salaries in recent decades in order to attract and retain top talent and remain competitive. Read also : United States editorial summary: Saturday, August 20, 2022.
Goldberg suggested that Saudi investment in individual players could boost player wages, but European football’s governing body UEFA recently introduced rules that say no club can spend more than 90% of its revenue. of the year and salaries, transfers and agent fees by 2023. reduced to 70% by 2025.
“Therefore, if wages do not continue to grow, the wage bills of European clubs will be covered. Under this scenario, an increase in the wages of individual players may lead to a decrease in the value of the team over time. It’s a challenge to compete against teams outside of Europe,” Goldberg said.
“Any negative impact on match results, net worth and visibility could affect the creditworthiness of European football clubs, with clubs unable to grow revenue and reinvest in their club. they will be greatly exposed.”
