Portuguese football star Cristiano Ronaldo poses for a photo in a jersey after signing for Saudi Arabia’s Al-Nassr football club in Riyadh, Saudi Arabia, December 30, 2022.
Al Nassr Football Club / Handouts / Anadolu Agency via Getty Images
Soccer superstar Cristiano Ronaldo’s move to Saudi Arabia’s Al-Nassr club and the dominion’s growing investment in the game could trigger a wave of repercussions across Europe and the USA, experts have told CNBC.
Ronaldo’s two-and-a-half-year contract, reportedly price as much as €200m ($212m) a 12 months including trade deals, will make the 37-year-old the highest-paid footballer in history and the highest-paid player in history. athlete on the earth.
For context, Ronaldo’s individual annual earnings will exceed the combined wage fund for roughly half of the clubs within the English Premier League. The previous Real Madrid, Manchester United and Juventus star earlier this week claimed the “exceptional contract” matched his status as an “exceptional player”.
Ronaldo terminated his contract with Manchester United in November after giving an explosive interview wherein he criticized the club and its manager, Erik ten Haga.
The Portuguese striker’s move comes as Saudi Arabia is reportedly preparing a potential joint bid to host the 2030 World Cup and follows the Saudi Public Investment Fund’s buyout of historic Premier League club Newcastle United in late 2021.
The Financial Times reported in October that Saudi PIF committed greater than $2 billion to sponsorship deals in the primary eight months of 2022, most of which was directed at domestic soccer competitions.
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Kieran Maguire, an writer and football finance expert, told CNBC on Thursday that Al-Nassr’s signing of Ronaldo was a “marketing exercise” that allows the dominion to diversify its business appeal beyond natural resources, given the scale of the person player profile.
“When you have a look at the social media that folks of Cristiano Ronaldo’s status follow, that is a lot greater than that of a single football club,” said Maguire.
“Saudi Arabia has a young population, so it can attract that generation. There are economic advantages, there are political and social advantages, and the financial cost is totally negligible.”
Manchester United and Liverpool in Saudi Arabia’s crosshairs?
The takeover of Newcastle United by the Saudi PIF has been criticized across the football world as an try to launder the country’s status against a backdrop of poor human rights records.
A gaggle called NUFC Fans Against Sportswashing was formed in protest of the takeover, but as they watched their club endure a prolonged period of mediocrity, many Newcastle fans rooted for the investment in hopes of it becoming a competitive force in England and beyond.
Just 15 months after finalizing the deal, the club sits third within the Premier League table, between perennial giants Manchester City and Manchester United.
Saudi officials have consistently denied allegations of sports laundering of their various sporting activities, and the Newcastle takeover consortium led by British businesswoman Amanda Staveley claims that PIF is independent of the Saudi government.
Nonetheless, the PIF is on the core of the Saudi economic project and the 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. PIF has been contacted for comment.
Ownership controversies also surround Premier League champions Manchester City (owned by Abu Dhabi United Group) and French champions Paris Saint-Germain (owned by Qatar Sports Investments).
Following other state-sponsored acquisitions over the past decade, in addition to the success of the controversial FIFA World Cup in Qatar in December, Maguire suggested that Saudi Arabia could expand its soccer portfolio in considered one of two ways.
“PIF could follow a similar path to the UAE by having City Football Group and switching to a multi-club ownership model where you really have a mothership and you’ve got multiple satellites,” he suggested.
Along with flagship club Manchester City, ADUG’s City Football Group now has nine other clubs across 4 continents with a consistent brand and resource availability.
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“From a financial perspective, it seems to be quite successful because you’ll be able to maintain continuity by way of culture and philosophy on the clubs, you’ll be able to move players to assist them develop and then you definately can start selling them at higher prices. price, so it has actually been proven to be quite a smart model,” added Maguire.
Alternatively, given the variety of wealthy people in Saudi Arabia who would likely be concerned with constructing on the Newcastle United takeover, he suggested Riyadh could be of interest to other high-profile clubs.
Each Liverpool and Manchester United, arguably the 2 biggest clubs in England by way of global profile, have publicly stated that they’re open to investment and possibly even a full sale.
“[The Saudis] I’ve seen a positive response from Newcastle fans – there are two clubs which can be publicly expressing their desire for some type of investment in Liverpool and Manchester United and with none respect for Newcastle United, they are much greater fish,” he said.
“Investing in sport is attractive. You will not necessarily get a significant return on investment financially given the high prices they’ll likely need to pay for a club of this caliber however the non-financial return on investment as we have seen at each Etihad (Manchester City’s home ground) and PSG is positive .
Individual celebrity signature model could threaten MLS
Rankings agency DBRS Morningstar has suggested that Ronaldo’s move to the Saudi Pro League and the country’s apparent intentions could threaten the credit risk profiles of European and North American clubs.
“In Europe, as the prices of players in football clubs are linked to their revenues, increasing individual wages resulting from foreign demand can reduce the standard of the team over time. This could have a long-term impact on on-field performance, brand equity and viewership for teams which can be unable to extend revenue and reinvest of their rosters,” said DBRS Morningstar Senior Vice President of Sports Finance, Michael Goldberg.
Saudi Arabia’s investment has disrupted skilled golf in the shape of LIV Golf, a breakaway from the normal PGA Tour competition that has taken advantage of Riyadh’s deep pockets to draw a few of the game’s biggest names.
Nonetheless, Goldberg suggested that attracting a handful of superstars within the twilight of their careers to a team sports league wouldn’t be enough for Saudi Arabia to draw a critical mass of fan interest, as the standard of play would still be much lower than in the highest European leagues.
He noted that the Saudi model poses a greater threat to the USA because Major League Soccer (MLS) has a long-term strategy of attracting aging stars to construct interest and viewership. For this purpose, each club may sign three players whose compensation package is excluded from the team’s salary pool.
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For instance, Italian winger Lorenzo Insigne left Serie A team Napoli to affix Toronto FC in 2022 and have become the highest-paid player in MLS history with an annual salary of $12.4 million. This pales as compared to the large contract signed by Ronaldo.
“The SPL has the potential to outperform MLS clubs and threaten a key aspect of the MLS business model. While the general quality of play in MLS is growing rapidly because of investment in player development, coaching and designated players, the qualitative gap between them and the SPL is way narrower than the SPL in relation to European leagues,” said Goldberg.
As such, DBRS Morningstar believes that the SPL’s financial strength and willingness to focus on star players from European leagues who might otherwise consider MLS could negatively impact the credit profiles of North American clubs.
Goldberg predicts that investments in Saudi Arabia will pose greater direct risk to particular sports equivalent to golf, tennis, mixed martial arts (MMA) and racing.
Wage inflation in Europe
In recent a long time, European clubs have steadily increased transfer fees and player salaries in an effort to attract and retain top talent and remain competitive.
Goldberg suggested that Saudi investment in individual players could boost player salaries, but Europe’s soccer body UEFA recently introduced rules stating that no club can spend greater than 90% of its annual revenue on wages, transfers and agent fees in 2023. further reduction to 70% in 2025.
“Subsequently, if revenues don’t proceed to grow, the salaries of European clubs can be capped. On this scenario, the increased salaries of individual players could result in a reduction in team quality and a competitive drawback in comparison with non-European teams over time,” said Goldberg.
“Any negative impact on on-field performance, brand equity and viewership would also affect the credit profiles of European football clubs, with clubs unable to extend revenue and reinvest of their squads can be most in danger.”