April 14, 2012
A Middle Eastern soccer-focused buying spree is changing the European football landscape even if the jury is still out on whether money can buy success on the pitch.
Spearheaded by gas-rich Qatar, Middle Eastern states, royals and wealthy businessmen have in recent years acquired soccer clubs and top European league broadcast rights as part of a multi-layered strategy designed to boost international images, strengthen national pride and identity, create business opportunities and generate tourism.
In financial terms and purchasing power, Middle Eastern cash has by and large bolstered teams it has acquired in Britain, France, Spain and Germany by fuelling expensive transfers and enabling clubs to upgrade their facilities even if it has yet to produce trophies. Critics charge, however, that money is insufficient to buy success and note that some clubs have suffered the downside of failed and politically troubled Middle Eastern acquisitions.
The Middle East’s lists of acquisitions is impressive even if Gulf buyers have at times signalled their refusal to buy at any price and found out the hard way that money can’t buy everything. Qatar has so far failed to secure a prize catch, Manchester United, reportedly because of a discrepancy of several hundred million dollars between the asking price and the Gulf state’s bid; Dubai International Capital’s efforts several years ago to gain control of Liverpool FC failed too as did Qatar’s attempt last year to gain control of AS Roma; and a bid by Qatar’s sovereign wealth fund, the Qatar Investment Fund, to acquire the media agency that controls the broadcasting rights to world soccer body FIFA’s World Cup lost out to a London-based private equity firm, Bridgepoint Capital
Nevertheless, the region’s soccer-related European holdings, sponsorships and acquisition target list reads like a who’s who. The spree was kicked off by Emirates Airlines as far back as 2004 with its 15-year sponsorship of Arsenal FC valued at GBP 100 million and the renaming of its stadium as Emirates Stadium. The agreement was at the time the largest ever British sponsorship deal. Other Emirates European sponsorships followed including AC Milan, Real Madrid, Paris Saint Germain, Hamburger SV and Olympiacos FC as well as FIFA. To its credit, Emirates proved among the sponsors to be the most vocal in its criticism of the soccer body’s handling of the worst corruption crisis in its 108-year old history.
Fans enthusiastically greeted the, the Middle East’s first acquisition of a European club, by wearing in 2008 Arab headdress and waving British pound notes with the picture of the queen replaced by a Gulf sheikh at the team’s first post-acquisition match. Little wonder given that the new owners within 24 hours of their takeover had put GBP 100 million on the table for player acquisition and clinched Real Madrid’s Brazilian forward Robinho for a British record £32.5m when he had seemed destined for Chelsea. A stream of high profile acquisitions followed. Performance has improved radically with Manchester City winning in 2011 its first FA Cup in 42 years and qualifying for the first time for the UEFA Champions League. Manchester City has since concluded a controversial, ten-year, GBP 400 million sponsorship deal with Abu Dhabi carrier Etihad that sparked renew discussion about financial fair play given that it could give the Manchester Club an unfair advantage.
The acquisition of Manchester City followed in 2011 by that of Spanish La Liga soccer club Getafe CF by Dubai-based company Royal Emirates Group owned by Dubai royal Sheikh Butti Bin Suhail Al Maktoum for an estimated $100 million and of financially troubled second division German soccer club TSV 1860 Munich by a 34-year old Abu Dhabi-based Jordanian businessman, Hasan Abdullah Ismaik, were exceptions rather than the rule of the UAE’s sports strategy. Unlike rival Qatar, the UAE despite its acquisitions seems more narrowly focussed on the commercial aspects of sports with sponsorships, the hosting of international tournaments and finance.
In an illustration of the UAE’s focus, Dubai’s United Investment Bank last year launched the region’s first alternative investment soccer fund modelled on similar controversial European funds amid rising fan opposition in Turkey, Spain and Portugal. The Royal Football Fund aims to hedge bets in football player markets by acquiring the economic rights of young players in Latin America, Africa and Europe. An estimated 20 per cent of the fund will be invested in listed soccer clubs and television rights for friendly games and tournaments.
Fans fear that the association with investment funds undermines a club’s ability to generate funds of its own and often favours vested interests. Besiktas fan opposition to third party acquisition of three Portuguese players — Hugo Almeida, Simao Sabrosa and Manuel Fernandez — was for example fuelled by unsubstantiated suspicions that the fund involved was a front for club president Yildirim Demiroren, a wealthy businessman who has lent Besiktas just under $100 million.
Not that Qatar has been oblivious to the commercial and reputational benefits of sponsorship – think Qatar Foundation’s 2010 $225 million sponsorship of Barcelona FC and the 2011 naming of Qatar Airways as the Tour de France’s official airline – and tournament hosting – its controversial success in winning the right to host the 2022 World Cup.
Brasher than the UAE, certainly after the financial crisis in Dubai in 2008 that has left the emirate laden with debt, Qatar has emerged as the Middle East’s buyer per excellence with not only a willingness to wield more cash but also with more associated assets to leverage such as its Al Jazeera television network. Qatar Sports Investments last year matched Abu Dhabi’s purchase of Manchester City with its acquisition of a 70 per cent stake in Paris Saint-Germain, which hasn’t won a match in the past month, as well as of Malaga FC by Qatari royal Sheikh Abdullah Bin Nasser Al Thani.
Qatar’s strategy, in contrast to that of the UAE, appears to be anchored in a more fundamental policy that aims to make sports a pillar of national identity and has had greater success in commercially leveraging its assets. Al Jazeera, for one, is taking aim at Europe’s pay-TV market, using sport to build a global media brand. The broadcaster is racing to launch a new French channel in early June in time for the European soccer championships after spending some 300 million euros on broadcast rights to France’s soccer league, the Champions League and Europa League, as well as some top-flight games from Germany and Italy.
The broadcaster is also reported to be willing to pay big money in a bid for UK rights to the English Premier League now mostly held by News Corp affiliate BSkyB. Al Jazeera’s European campaign builds on its success as the most popular sports network in the Middle East and Africa, with two free and 15 pay channels, plus an English version with a dozen commentators and producers. To compete however with the likes of Sky and France’s Canal+, Al Jazeera will have to build a distribution platform of its own, involving deals with cable, telecommunications, and satellite operators.
Al Jazeera also recently acquired rights to the Champions League and the UEFA EURO 2012 and 2016, as well as some top German and Italian matches and looking at challenging this spring Rupert Murdoch’s BskyB for British rights to the English Premier League, at approximately $3 billion the world’s most expensive soccer league broadcast rights. Al Jazeera could also bid for German Bundesliga rights. Al Jazeera acquired the rights under its new French company beIN SPORT together with TF1 and M6. IPTV operator Free has agreed to provide Al Jazeera a French platform, but the broadcaster has yet to sign similar agreements elsewhere in Europe as well as in the United States.
Spain and Germany have emerged as the greatest beneficiaries of the commercial offsets that energy-rich Gulf states hope to reap from their massive investments in professional sports. Sheikh Abdullah won a contract in May 2011 to develop the $550 million Marbella yacht port project a year after his acquisition of Malaga. Royal Emirates Group is looking at investing in tourism and solar-energy projects, including a spa resort based on a former Arab settlement near Granada, Wadi Ash. Granada was Muslim-controlled when Spain was ruled by Muslims from 711 until the inquisition in 1492. German companies are big winners in the massive $65 billion business to prepare Qatar for the World Cup. Qatar has allocated on average 40 per cent of its annual budget to infrastructure, including nine stadiums, for the next five years and German companies have or expect a significant chunk of the associated business.
Fans have so far been willing to accept cultural changes that accompany the Arab acquisitions such as Sheikh Abdullah’s replacement of bookmaker William Hill Plc as Malaga’s jersey sponsor because gambling is banned under Islamic law with United Nations culture agency UNESCO and Royal Emirates plans to set up a pavilion about Arabic culture at Getafe’s stadium. Nonetheless, Real Madrid’s recent decision to remove a Christian cross from its official logo in what it described as the cost of doing business in a globalized world has sparked ire, particularly among anti-Muslim right-wingers. The removal came as Real Madrid embarked on the construction of a $1 billion sport tourist resort in the United Arab Emirates scheduled to open in 2015.
Critics argue further despite Manchester City’s successes that Arab oil money is unlikely to quickly produce trophy winners. “If a club spends a lot of money quickly, it takes time for the team to settle down. There’s no easy way of winning the Premier League. You have to deserve it,” legendary former Manchester United goal scorer and Manchester United board member Sir Robert ‘Bobby’ Charlton told The Daily Mirror last year.
Sir Charlton contrasted efforts to fast track success on the back of Arab financial muscle with Manchester United manger Sir Alexander Chapman “Alex” Ferguson’s strategy of nurturing players from a young age. He said Manchester United had several promising young players. “Alex keeps them right until the exact moment he thinks that they’re ready for it, and then he’ll put them in. We’ve had more than our fair share of good young players and we’ve invested in a lot of young players too.” Sir Charlton went on to argue that “you get a bit of an affiliation with a football club when this sort of thing is taking place, and not just piling loads and loads of money in,” a reference not only to Arab investments in Europe but also to the failure of the Middle East’s authoritarian regimes to develop soccer talent at a young age.
Some European clubs have learnt that deep pockets do not necessarily mean long-term commitment. Barely three months after acquiring Portsmouth FC, Emirati Sheikh Sulaiman Al Fahim sold the bulk of his stake to Saudi property tycoon Ali Al-Faraj amid reports that his flagship Hydra Village project in Abu Dhabi was floundering. Mr. Al-Faraj too had no intention of staying involved for long. Soon after the takeover, he announced that he was selling the club. But with no buyer on the horizon, Portsmouth FC went into receivership.
Geneva’s Swiss Super League club Servette FC and Austria’s Admira Wacker haven’t fared much better. Servette is on the brink of collapse after Iranian businessman Majid Pishyar who acquired it in 2008, filed for bankruptcy earlier this year. Mr. Pishyar, who managed the club on a shoe string, tried unsuccessfully to attract government funding by last year appointing Robert Hensler, a former top civil servant for the canton of Geneva, as vice-president. His earlier efforts to salvage Admira, his first European acquisition, failed too. Servette’s problems come on the heels of the bankruptcy in January of Neuchatel’s Super League team Xamax whose Chechen owner was arrested on charges of fraud and financial mismanagement.
Similarly, there is risk inherent in association with Middle Eastern autocrats. That risk is particularly acute at a time that autocracy is being challenged by a wave of popular revolts sweeping the Middle East and North Africa.
Nevertheless, for some European soccer clubs seduced by the lure of petro dollars, nothing is a bridge too far. Take the career of Al-Saad Gadaffi, the wanted son of the deposed mercurial Libyan dictator Moammar Qaddafi who engineered his country’s 7.5 per cent stake in Juventus FC.
Al-Saad signed ten years ago with Maltese team Birkirkara F.C., but never showed up. Three years later, he joined Italy’s Perugia instead, but was suspended after only one game for failing a drug test. The incident earned him the reputation of being Italian Series A’s worst ever player.
Al-Saad’s dismal performance didn’t stop him from enlisting in 2005 with Italy’s Udinese where he was relegated to the role of bench-warmer except for a 10-minute appearance in an unimportant late season match. That didn’t deter Samdoria president Riccardo Garrone, head of oil company Erg, from inviting him to train with his team in the dashed hope that it would open the door to Libyan oil contracts.
Read all posts by James M. Dorsey