Portuguese soccer star Cristiano Ronaldo poses for a photo with the jersey after he lost his shirt on April 30.
Al Nassr Football Club / Handout / Anadolu Agency via Getty Images
Soccer superstar Cristiano Ronaldo’s move to Saudi club Al-Nassr and the kingdom’s growing investment in the sport could have ramifications across Europe and the US, experts told CNBC.
Ronaldo’s two-and-a-half-year deal, reportedly worth up to €200 million ($212 million) a year including commercial deals, will make the 37-year-old the highest-paid footballer in history and the highest-paid sportsman in the world.
By way of comparison, Ronaldo’s individual annual income will exceed the total staff wage bill for around half of English Premier League clubs. The former Real Madrid, Manchester United and Juventus star claimed earlier this week that the “unique contract” reflected his status as a “unique player”.
Ronaldo had his contract with Manchester United terminated in November after giving an explosive interview criticizing the club and its manager Erik ten Hag.
The Portuguese striker’s move comes as Saudi Arabia is reportedly preparing a possible joint bid to host the 2030 World Cup and follows the Saudi Public Investment Fund’s takeover 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 in the first eight months of 2022, most of which went to domestic football competitions.
Author and football finance expert Kieran Maguire told CNBC on Thursday that Al-Nassr’s signing of Ronaldo was not an attempt to compete with Europe’s major leagues, but a “marketing exercise” allowing the kingdom to boost its commercial appeal over the natural ones Resources diversify beyond size of the player’s individual profile.
“If you look at the social media that someone with Cristiano Ronaldo status brings, it’s far bigger than that of a single football club,” Maguire said.
“Saudi Arabia has a young population, so it will attract that generation. There are economic benefits, there are political and societal benefits, and the financial cost is completely irrelevant.”
Manchester United and Liverpool in the Saudi crosshairs?
The Saudi PIF’s takeover of Newcastle United drew criticism from across the football world – it was seen as an attempt to whitewash the country’s reputation amid a poor human rights record.
A group called NUFC Fans Against Sportswashing emerged to protest the takeover, but many Newcastle fans cheered the investment in hopes of becoming a competitive force in England and beyond after witnessing their club end a prolonged period of mediocrity had to endure.
Just 15 months after the deal was completed, the club sit third in the Premier League table, wedged between long-time favorites Manchester City and Manchester United.
Saudi officials have consistently denied allegations of sports washing at their various sporting activities, and the Newcastle takeover consortium, led by British businesswoman Amanda Staveley, insists the PIF is independent of the Saudi government.
However, PIF forms the bedrock of the Saudi economic project and its Vision 2030 program. Statements praising the progress of King Salman bin Abdulaziz and Crown Prince Mohammed bin Salman’s PIF appear in its financial statements.
The PIF owns 80% of the club, with the remaining 20% shared between Staveley’s PCP Capital Partners and RB Sports & Media. The PIF has been contacted for comment.
Ownership controversies also arose over Premier League champions Manchester City (owned by Abu Dhabi United Group) and French champions Paris Saint-Germain (owned by Qatar Sports Investments).
After observing other state-sponsored takeovers over the past decade alongside the success of the controversial FIFA World Cup in Qatar over the past decade, Maguire suggested Saudi Arabia could look to expand its football portfolio in two ways.
“PIF could go down a similar path to UAE in having City Football Group and aiming for a multi-club ownership model where you effectively have one mothership and many satellites,” he suggested.
In addition to its flagship club, Manchester City, ADUG’s City Football Group now owns nine other clubs across four continents with consistent branding and resource availability.
“From a financial point of view that’s actually proving to be quite successful because you can have continuity at clubs in terms of culture and philosophy, you can transfer players to help their development and then you can start selling them at higher prices , so it actually turned out to be a pretty smart model these days,” Maguire added.
Alternatively, given the number of wealthy individuals in Saudi Arabia who are likely to be interested in building on the Newcastle United takeover, he suggested other top-flight clubs could be targeted by Riyadh.
Both Liverpool and Manchester United, arguably the two biggest clubs in England in terms of global profile, have publicly stated they are open to investment and possibly even an outright sale.
“[The Saudis] I’ve seen the positive response from Newcastle fans – there are two clubs that are publicly ready for some form of investment in Liverpool and Manchester United and with no disrespect to Newcastle United, they are much bigger fish,” he said.
“Sports investments are attractive. Given the high prices they are likely to pay for a club of this size you are not necessarily getting a financial return but a non-financial return as we have seen with both Etihad (home of Manchester City) and PSG is positive. “
The individual star-signing model could threaten MLS
Rating 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 profile of European and North American clubs.
“As football clubs in Europe have player costs tied to their revenues, an increase in individual salaries due to overseas demand could reduce squad quality over time. This could have a longer-term impact on on-pitch results, brand value and viewership for teams unable to grow revenue and reinvest in their rosters,” said Michael Goldberg, DBRS senior vice president for sports finance Morningstar.
Saudi investment has disrupted professional golf in the form of LIV Golf, a breakaway competition from the traditional PGA Tour that has used Riyadh’s deep pockets to attract some of the game’s biggest names.
However, Goldberg hinted that luring a handful of superstars to a team sports league in the twilight of their careers would not be enough for Saudi Arabia to garner a critical mass of fan interest, as the quality of play would still be significantly lower than at the top European leagues.
The Saudi model poses a greater threat to the US, he noted, as Major League Soccer (MLS) has a longstanding strategy of attracting aging star players to build interest and viewership. To this end, each club is allowed to sign three players whose compensation package is exempt from the team’s salary cap.
For example, Italy winger Lorenzo Insigne left Serie A side Napoli for Toronto FC in 2022, becoming the highest-paid player in MLS history with a reported annual salary of $12.4 million. That pales in comparison to Ronaldo’s mammoth contract.
“The SPL can pay off MLS clubs widely and could threaten a key aspect of the MLS business model. While the overall quality of play in MLS has increased rapidly through investment in player development, coaching and designated players, the quality gap is in between and the SPL is much narrower than the SPL compared to European leagues,” Goldberg said.
As such, DBRS Morningstar believes that the SPL’s financial power and willingness to target star players from European leagues who might otherwise consider the MLS could adversely affect North American clubs’ credit profiles.
Goldberg believes Saudi investment will pose a greater immediate risk to individual sports such as golf, tennis, mixed martial arts (MMA) and racing.
European wage inflation
European clubs have consistently increased transfer fees and player salaries over the past few decades to attract and retain top talent and remain competitive.
Goldberg hinted that Saudi investment in individual players could drive up player salaries, but European football’s governing body UEFA recently introduced rules requiring no club to spend more than 90% of its annual revenue on salaries, transfers and agent fees in 2023 may spend. This limit will be further reduced to 70% by 2025.
“If revenue doesn’t continue to rise, European clubs’ payroll costs will be capped. In this scenario, higher individual player salaries could lead to reduced roster quality over time and a competitive disadvantage compared to teams outside of Europe,” said Goldberg.
“Any negative impact on on-pitch results, brand values and attendances would also impact the credit profiles of European football clubs and clubs unable to grow revenues and reinvest in their teams would be most at risk.”