Privatisation of football clubs in Saudi Arabia
Sports and Event Management Focus
This article explores Saudi Arabia’s foray into the football world and its efforts to establish itself as a footballing powerhouse.
Law Update: Issue 362 - Sports and Event Management
Bandar Al HamidaniPartner,Corporate Commercial
Al Johara Al RashedTrainee Lawyer,Corporate Commercial
Cristiano Ronaldo, Karim Benzema, Neymar, N’Golo Kante, Jordan Henderson, Steven Gerrard, and Roberto Firmino—the Saudi Professional League (“SPL”) is rocking the football world by signing big names to meet the ambitious targets that have been set in pursuit of achieving the objectives of Saudi sports as part of the Kingdom’s 2030 vision.
In recent years, Saudi Arabia has emerged as a significant player in the global football landscape, making headlines with its ambitious approach to attracting top-tier, world-renowned talent. The oil-rich nation, known for its extravagant projects and investments, has now set its sights on the world of football by signing big names that are reshaping the perception of the sport within its borders. This article explores Saudi Arabia’s foray into the football world and its efforts to establish itself as a footballing powerhouse.
On 5 July 2023, Saudi Arabia launched an investment and privatisation strategy for sports clubs under the leadership of the Saudi Crown Prince and Prime Minister Mohammed Bin Salman to increase the commercial income of the SPL from $450 million Saudi Riyals in 2022 to more than $1.8 billion Saudi Riyals annually, as well as the market value of the SPL from $3 billion Saudi Riyals to more than $8 billion Saudi Riyals by 2030.
As part of its aim to reach the top 10 leagues in the world, four of the largest SPL clubs, Al-Hilal FC, Al-Nassr FC, Al-Ittihad Club, and Al-Ahli Saudi FC, will be converted into companies in the first stage, with each company being owned by a percentage of 75% by the Public Investment Fund (“ PIF”) and the other 25% by the non-profit foundations of each club, provided that these foundations will include their current General Assembly members and some other new members. In addition, significant changes have been made to other football clubs, including:
Al-Suqoor FC will also be transformed into a company and owned by NEOM, the futuristic city that will feature the most enormous green hydrogen plant aiming to diversify the economy and develop public-service sectors;
Al-Qadsiah FC will be owned by Aramco;
Al-Ula Club will be owned by the Royal Commission for AlUla; and
Al-Diraiyah Club will be owned by Diriyah Gate Development Authority.
Prince Abdulaziz Turki AlFaisal, the Minister of Sports, recently revealed the establishment of an investment fund for each of the 8 club companies whose ownership has been transferred, whereby the value of the club will be deposited in the PIF in exchange for transferring its ownership, with the aim of achieving sustainable returns for the benefit of the club company.
Similarly, the PIF’s football revolution saw it acquire an 80% share in storied English Premier League club Newcastle United FC. The takeover negotiations began in April 2020 and ended successfully in October 2021. The $416 million acquisition was largely celebrated as Saudi Arabia's boldest financial decision and a major example of the Kingdom’s intent. This off-field success has also translated into on-field success, with the Newcastle United qualifying for the UEFA Champions League for the first time in almost 20 years, after finishing in a much coveted top-4 position in the 2022/23 season of the Premier League.
The privatisation of football clubs here is facilitated by the PIF, offers a range of potential benefits that can significantly impact the growth and development of the nation’s football ecosystem, including the following:
Increased Investment: Football clubs with private ownership earn more money through inflows and investments. The flow of cash can be utilised to upgrade the teams' facilities for training, youth development programs, and fan engagement activities, which will ultimately improve their overall ability and competitiveness.
Strategic Planning: Longer-term strategic thinking is encouraged by private ownership. Clubs can now make plans for long-term success and expansion, which may include setting up academies, developing local talent, and encouraging a strong sense of club identity.
Competitiveness: Club competition may become more intense as a result of privatisation. Clubs are motivated to perform well and achieve popularity due to the fact that private investors want to see a return on their investments.
Economic Impact: The local economy can benefit from a thriving football ecosystem powered by privatised clubs. Revenue increases from tourism, merchandise, broadcasting rights, marketing rights, and ticket sales can lead to economic expansion and job opportunities across a range of industries.
International Recognition: Privatised clubs can elevate the international reputation of Saudi football. Successful performances on the global stage, coupled with top-tier signings, can bring positive attention to the nation's footballing prowess and contribute to a positive national image.
Aligning with Vision 2030: The privatisation of football clubs aligns with Saudi Arabia’s broader Vision 2030 goals of economic diversification and development. By integrating football into the overall national vision, the county can enhance its cultural influence and economic diversification strategies.
Ultimately, a critical turning point in Saudi Arabia's sporting history has been reached with the privatisation of its clubs (in addition to its acquisition of Newcastle United). Whilst a period of ongoing development still exists, the potential advantages of improved management, investment, and competitiveness will surely influence Saudi sports' future, guiding them towards greater quality and recognition on a worldwide scale.
For further information,please contact Bandar Al Humaidani and AlJohara Al Rashed.
Published in October 2023
