Saudi Arabia: The Privatisation Of Saudi Arabia's Football Clubs: An Update

Last Updated: 23 August 2018
Article by Steven Bainbridge and Andrew Moroney
Most Read Contributor in Saudi Arabia, September 2018

Progress towards privatising the top 14 professional football clubs in the Kingdom of Saudi Arabia (“KSA”) continues apace in light of a string of recent developments.

Background

Presently KSA sporting clubs, including clubs competing in the Saudi Professional League (“SPL”), are government-owned. This status quo stems from an historic objective to centralise the growth and development of socially-desirable sporting initiatives across KSA sports, including those which may not enjoy the commercial appeal and sustainability of football.

The push towards privatisation of SPL clubs started in earnest in April 2016 with the unveiling of the Saudi Vision 2030 plan (“Vision 2030”), which aims to diversify KSA's economy and reduce its dependence on oil revenues. Vision 2030 crystallised the government's long-standing position, advanced most recently by His Royal Highness Prince Mohammad bin Salman that the privatisation of certain state-owned assets can and should play a significant role in economic and social development. The plan expressly promotes social goals including increasing physical and sporting activities, as well as the creation of new public-private partnerships (“PPPs”) to establish dedicated sporting facilities and programmes, a general reduction in costs and increased efficiency.

The unveiling of Vision 2030 prompted a number of developments. In May 2016, the General Presidency of Youth Welfare was rebranded as the General Authority for Sports (“GAS”) and given greater responsibilities for developing sports clubs and facilities. This was followed in June 2016 by the launch of the National Transformation Program 2020, a framework for the implementation of Vision 2030. Shortly thereafter in July 2016, the GAS and the Ministry of Commence and Investment launched a campaign to increase awareness amongst KSA football clubs and other interested parties regarding, inter alia, the need to register trademarks and otherwise protect their IP.

In November 2016, the Council of Ministers approved the Council for Economic Development Affairs' (“CEDA”) recommendations to:

  1. privatise SPL clubs as new corporate entities;
  2. give the GAS responsibility for granting licences to such entities;
  3. create a Sports Development Fund to finance new stadiums and facilities for clubs; and
  4. create a supervisory committee (headed by the Chairman of the GAS and with representatives of the SPL and Saudi Arabian Football Federation (“SAFF”)) to oversee the transfer of operational and financial control from government hands to the private sector.

Specific goals for the privatisation process were also set, including elevating the quality and status of the SPL and positioning it to diversify revenues and make a greater contribution to the national economy. All of these steps indicate that a serious review of factors relevant to the privatisation process has been undertaken, underlining the KSA government's commitment to the project.

Recent Developments

A number of recent developments impact, either directly or indirectly, upon the plans to privatise SPL clubs and the potential of a privatised KSA football industry:

  • In February 2017, Jadwa Investment, one of KSA's largest privately-owned investment banks, was appointed to advise on the privatisation of up to five SPL clubs, following a competitive tender exercise;
  • In January 2018, the KSA government lifted the ban on women attending football games and in doing so opened up a large and hitherto un-tapped commercial market for the SPL;
  • In February 2018, SAFF announced a new 10 year broadcasting deal with Saudi Telecommunications Company (“STC”, which is 70% owned by the KSA Public Investment Fund) from season 2018/19 worth $1.76 billion. This deal is reportedly an increase of 61% from the previous deal with MBC and ensures that all SPL games are free-to-air across the MENA region; and
  • In April 2018, CEDA approved a 'Privatisation Program' for the creation of, inter alia, the legal and regulatory basis for the privatisation process. The Privatisation Program document confirms that the privatisation of SPL clubs is a core component of the initial tranche of projects due to be finalised by 2020.

These recent developments demonstrate a number of important points. Firstly, that the KSA government remains committed to keeping up the momentum towards the privatisation of SPL clubs. Secondly, that the privatisation of SPL clubs has become a bellwether project to showcase KSA's progressive economic and social reforms, with the expectation that the SPL will become a powerful marketing tool for KSA to attract international brands and investors. And thirdly, that the KSA government is committed to grow and develop the KSA football industry in general.

The Structural Potential of KSA Football

Football is the preeminent sport in Saudi Arabia. The national team is one of the most successful in Asia, winning the AFC Asian Cup three times (and reaching the final on three further occasions) since 1984, as well as qualifying for the FIFA World Cup on five occasions, including Russia 2018. Domestically, Al-Hilal FC and Al-Nassr FC are considered to be the amongst the leading football clubs in Asia, having won numerous Asian Club Championship, AFC Champions League and Arab Club Championship titles.

KSA football clubs tend to rely on a combination of traditional revenue streams (broadcast, commercial and match-day) and contributions from wealthy groups and individuals affiliated, formally or informally, with clubs. The hope is that privatisation will significantly increase traditional revenue streams without impacting investment from wealthy groups and individuals. As touched upon further below, this may require some delicate handling to ensure that the best aspects of modern corporate governance and management structures do not alienate existing financial backers.

Football is the largest spectator sport in KSA and the SPL boasts an impressive average stadium capacity of 33,273 (falling just short of the English Premier League's 37,644). Given that the average SPL attendance in the 2017/18 season was only 5,726, there is spare capacity into which the SPL fan base can grow. As alluded to above, fan engagement with SPL and attendances are expected to receive a significant boost from the progressive societal reforms taking place in KSA generally.

Fan engagement is also expected to receive a boost due to the new broadcast deal with STC, which ensures that all SPL games will be free-to-air across the MENA region. International broadcast penetration of the SPL has also hitherto been limited, with only about 5% of MBC Pro Sports (the outgoing SPL broadcast rights-holder) subscriptions coming from outside Saudi Arabia. The new rights deal should ensure that SPL viewership increases many-fold.

In addition, KSA has one of the most digitally engaged populations in the world. Mobile phone penetration is extremely high (estimated at 180 subscriptions per 100 residents), it has the highest per capita rate of YouTube use of any country in the world (according to a 2015 BBC study) and its residents use social media for an average of five hours per day (according to a 2016 YouGov study). Potential football fans are therefore increasingly accessible and SPL clubs are increasingly looking to engage with their already very large digital fan-bases.

Potential Challenges

After positive reports in early 2017, specific details about the procedural steps for transforming clubs into corporate entities and subsequently formalising the process of private investment, including timelines, applicable regulations and execution documentation have still not been confirmed as of the date of this article's publication. For example, it is not yet known whether a specific corporate entity will be required to hold the assets, or what form and scope a designated long-term regulator may take and what its part in the privatisation process will be. Anecdotal reports suggest that for the purposes of investment, every club will have two components: assets and real estate; and that a given privatisation need not necessarily include an obligation to purchase the club's real estate. This would provide some welcome flexibility to investors in considering various business plans and strategies to optimise growth and development in years to come.

Comment

Subject to effective implementation and the absence of significant market distortion factors, the privatisation of sports clubs can be beneficial in terms of providing both access to capital for short-term investment in stadia, training facilities and playing squads, and also in establishing the necessary business framework to nurture talent and encourage the best practices in club management. Indeed the prospect of attracting owners who are incentivised to bring the best and brightest management teams to drive commercial success could bode well in terms of growing match-day revenues with stadium development and an increased ability to compete for domestic and foreign players.

Given the issues outlined above, the 2020 target date for all SPL clubs to be privatised does seem ambitious, as some commentators have noted; however the KSA government is clearly committed to the project. Indeed, it has become a central pillar in the delivery plan for Vision 2030 and the political capital staked on the project being a success should help drive it forward.

As touched upon in this article, a number of unknowns remain. For example, the size of the Sports Development Fund earmarked for assisting with this process and the precise details of planned allocations are not officially available at present but the establishment of the fund does suggest an understanding and appreciation that there will be certain costs involved in helping even the top clubs achieve immediate sustainability.

Further afield, the privatisation of SPL clubs has prompted reports that Saudi investors are considering investment into British clubs in order to link them with newly privatised SPL clubs. Ironically, and subject to particular investment dynamics, this could mean that the sovereign wealth fund created by the wider KSA privatisation program may indirectly lead to Saudi investment in European clubs, which we are already starting to see (e.g., Sheffield United), in much the same way that middle-eastern investors have acquired Premier League and Ligue 1 clubs.

It is likely that the SPL would benefit significantly from such tie-ups, as they would bring to the table a wealth of on-field and off-field technical expertise, as well as opportunities to share playing talent and synchronise commercial objectives. In addition to the ancillary benefits of such direct foreign investment, Saudi interests have also been linked with proposals to reconceive the Club World Cup. With greater influence in top leagues and competitions abroad and a roadmap to stabilize and grow the domestic league, the future for the KSA football industry has never looked brighter.

NB: This article was first published on 15 June 2018 on lawinsport.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions