- Ronaldo’s two-and-a-half-year contract, reportedly worth up to 200 million euros ($212 million) per year including commercial agreements, will make the 37-year-old the highest-paid footballer in history, and the highest-paid athlete in the world.
- The Portuguese forward’s move comes as Saudi Arabia reportedly readies a potential joint bid to stage the 2030 World Cup.
- And it follows the Saudi Public Investment Fund’s buyout of historic Premier League club Newcastle United in late 2021.
Soccer superstar Cristiano Ronaldo’s move to Saudi club Al-Nassr, and the kingdom’s growing investments in the sport, could have ripple effects across Europe and the U.S., experts have told CNBC.
Ronaldo’s two-and-a-half-year contract, reportedly worth up to 200 million euros ($212 million) per year including commercial agreements, will make the 37-year-old the highest-paid footballer in history, and the highest-paid athlete in the world.
For context, Ronaldo’s individual annual earnings will exceed the total staff wage bill for roughly half of the clubs in the English Premier League. The former Real Madrid, Manchester United and Juventus star earlier this week contended that the “unique contract” was befitting of his status as a “unique player.”
Ronaldo had his contract with Manchester United terminated 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 reportedly readies a potential joint bid to stage 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 the Saudi PIF had committed more than $2 billion to sponsorship deals over the first eight months of 2022, most of which was directed toward domestic soccer competitions.
Author and soccer finance expert Kieran Maguire told CNBC on Thursday that rather than an effort to rival the major European leagues, Al-Nassr’s signing of Ronaldo was a “marketing exercise” that enables the kingdom to diversify its commercial appeal beyond natural resources, given the size of the player’s individual profile.
“If you take a look at the social media following that somebody of Cristiano Ronaldo’s status brings, it’s far greater than that of an individual football club,” Maguire said.
“Saudi Arabia has a young population, so he will attract that generation. There’s economic benefits, there’s political and societal benefits, and the financial cost is a complete irrelevance.”
Manchester United and Liverpool in Saudi crosshairs?
The Saudi PIF’s takeover of Newcastle United was met with criticism across the soccer world — deemed an effort to launder the country’s reputation against the backdrop of a poor human rights record.
A group called NUFC Fans Against Sportswashing sprung up in protest at the takeover, but having watched their club endure a prolonged spell of mediocrity, many Newcastle fans cheered the investment in the hope of becoming a competitive force in England and beyond.
Just 15 months on from the completion of the deal, 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 sportswashing in their various sporting pursuits, and the Newcastle takeover consortium led by British businesswoman Amanda Staveley insists the PIF is independent from the Saudi government.
However, PIF forms the bedrock of the Saudi economic project and its Vision 2030 program. Statements lauding the PIF’s progress from King Salman bin Abdulaziz and Crown Prince Mohammed bin Salman appear in its annual financial statements.
The 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 comment.
Ownership controversies have also surrounded Premier League champions Manchester City, (owned by the Abu Dhabi United Group) and French champions Paris Saint-Germain (owned by Qatar Sports Investments).
Having observed other state-sponsored takeovers over the past decade, along with the success of the contentious FIFA World Cup in Qatar in December, Maguire suggested that Saudi Arabia could look to expand its soccer portfolio in one of two ways.
“PIF could go down a similar route to the UAE in 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 suggested.
Aside from its flagship club Manchester City, the ADUG’s City Football Group now owns nine other clubs across four continents with consistent branding and availability of resources.
“From a financial point of view, that’s actually turning out to be quite successful because you can have continuity in terms of culture and philosophy at clubs, you can transfer players around to help their development, and then you can start to sell them at higher prices, so it’s actually proven to be, these days, a pretty smart model,” Maguire added.
Alternatively, given the number of high net worth individuals in Saudi Arabia likely to be interested in building on the Newcastle United acquisition, he suggested other high-profile clubs could come into Riyadh’s sights.
Both Liverpool and Manchester United, arguably the two biggest clubs in England in terms of global profile, have publicly declared that they are open to investment, and possibly even a full sale.
“[The Saudis] have seen the positive response from Newcastle fans — there are two clubs which are publicly up for some form of investment in Liverpool and Manchester United and no disrespect to Newcastle United, they’re 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 for a club of that stature, but the non-financial return on investment as we’ve seen at both the Etihad (home of Manchester City) and PSG is a positive one.”
Individual star signings model could threaten MLS
Credit ratings agency DBRS Morningstar suggested that Ronaldo’s move to the Saudi Pro League, and the country’s apparent intentions, could imperil the credit risk profiles of European and North American clubs.
“In Europe, as player costs at football clubs are tied to their revenues, increasing individual salaries driven by foreign demand could decrease squad quality over time. This could have a longer-term impact on on-pitch results, brand values, and viewership for teams that are unable to grow revenue and reinvest in their squads,” said DBRS Morningstar Senior Vice President for Sports Finance Michael Goldberg.
Saudi investment has disrupted professional golf in the form of LIV Golf, a breakaway competition from the traditional PGA Tour that utilized Riyadh’s deep pockets to draw some of the game’s biggest names.
However, Goldberg suggested that attracting a handful of superstars in the twilight of their careers to a team sports league would not be sufficient for Saudi Arabia to attract a critical mass of fan interest, since the quality of play would still be considerably lower than in top European leagues.
The Saudi model poses more of a threat to the U.S., he noted, since Major League Soccer (MLS) has a long-running strategy of attracting aging star players to build interest and viewership. To this end, each club is permitted to sign three players whose compensation package is excluded from the team’s salary cap.
For example, Italian winger Lorenzo Insigne left Serie A team Napoli to join Toronto FC in 2022 and became the highest-paid player in MLS history with a reported annual salary of $12.4 million. This pales in comparison with the mammoth contract signed by Ronaldo.
“The SPL can far outpay MLS clubs and could threaten a key aspect of MLS’ business model. While the overall quality of play in the MLS has been increasing rapidly through investment in player development, coaching, and designated players, the quality gap between it and the SPL is much narrower than that of the SPL relative to the European leagues,” Goldberg said.
As such, DBRS Morningstar believes the SPL’s financial might and willingness to target star players from European leagues, who may otherwise consider the MLS, could negatively impact North American clubs’ credit profiles.
Goldberg anticipates that Saudi investment will pose a greater immediate risk to individual sports like golf, tennis, mixed martial arts (MMA), and racing.
European wage inflation
European clubs have continually increased transfer fees and player salaries in recent decades in order to attract and retain top talent and stay competitive.
Goldberg suggested that Saudi investment in individual players could propel player salaries higher, but European soccer body UEFA recently introduced rules stipulating that no club can spend more than 90% of its yearly revenues on wages, transfers, and agent fees in 2023. This limit will further reduce to 70% in 2025.
“As such, if revenues do not continue to grow, European clubs’ wage bills will be capped. Under this scenario, increased individual player salaries could lead to reduced squad quality over time and a competitive disadvantage versus teams outside Europe,” Goldberg said.
“Any negative impact on on-pitch results, brand values, and viewership would also affect European football clubs’ credit profiles, and clubs that could not grow revenue and reinvest in their squads would be most exposed.”
Source: Business - cnbc.com
