From Sand to Stadium: How Saudi Arabia is Revolutionizing The Sports Industry
From Sand to Stadium: How Saudi Arabia is Revolutionizing The Sports Industry
Saudi Arabia & PIF are reimagining sports as we know it (for better or worse).
Saudi Arabia has been doing a lot to aggressively diversify its economy.
Why?
Its leadership knows that it cannot rely on oil forever.
And this has led the gulf kingdom to invest BIG money across sports.
I want to showcase some of those developments, highlight the trends, and touch on the impact this will have.
Let’s Dive In 👇
Saudi Arabia’s Investment Fund
I think it’s important to first understand how Saudi Arabia is able to spend all of this money on sports.
It starts with a plan known as Vision 2030, where the Public Investment Fund (PIF) seeks to amass $2 trillion in assets by 2030.
In July 2014, the Council of Ministers granted PIF the authority to fund new companies inside and outside the Kingdom (and PIF quickly expanded its staff from 50 to over 500 people).
This list of ownership stakes is staggering:
$496 million in Disney
$714 million in Boeing
$522 million in Citigroup
$522 million in Facebook
5% stake in Uber ($3.5 billion)
$828 million in oil company BP
$487 million in Bank of America
$500 million in Activision Blizzard
5.7% stake in Live Nation ($500 million)
62.72% stake in electric car company Lucid
2.32% stake in India's Jio Platforms ($1.5 billion)
Every single day you use a product/service that is partially owned by PIF and the Saudi Arabia Kingdom.
Yet…
A lot of people had a problem with Saudi Arabia's money entering sports.
Sportswashing
Many are accusing the Saudi Kingdom of something known as “sportswashing”.
What does that even mean?
Sportswashing is the use of sports to present a sanitized, friendlier version of a political regime or operation.
According to that definition, “sportswashing” is everywhere:
when a US president throws out the first pitch
when there is military appreciation month in the NFL
when FIFA and the IOC banned both Russia and Belarus from competition
when a college president talks about football as the “lifeblood” of a university
Sports seem like they aren't political, which is precisely why they are so often used for political purposes.
And one more thing…
Here’s what Charles Barkley had to say about Saudi Arabia:
"If you are in pro sports, you are taking some type of money from not a great cause. We have all taken blood money, and we’ve all sportswashed something, so I don't like those words…”
Let’s now explore how Saudia Arabia is aiming to transform the sports landscape:
Saudia Arabia & Sports
LIV Golf
We’re all familiar with LIV Golf and Saudi Arabia’s influence.
This was the first Saudi/PIF investment that woke people up to what the gulf kingdom is aiming to do.
Through 3 years, they’ve already spent over $2 billion to disrupt golf…
And showed the world that they aren’t afraid to pay top dollar.
Record-Breaking Salaries
Most of this isn’t public information, but we’ve had reports that…
Brooks Koepka = $100M
Bryson DeChambeau = $100M
Dustin Johnson = $150M
Phil Mickelson = $200M
And the spending didn’t stop at golf…
Cristiano Ronaldo is getting paid $175M/yr to play for Al-Nassr in the Saudi Professional League (soccer).
When players see contracts this high, it inflates salaries/prize money across the sports ecosystem.
eSports and Gaming
The Public Investment Fund (PIF) has set aside $37.8 billion for eSports and gaming.
In 2019, PIF announced the launch of a gaming and entertainment company, Electronic Games Development Company (EGDC), which aims to become a leader in the global gaming industry.
PIF also has stakes in:
Challengermode, an esports platform
SNK Corporation, a Japanese video game company
Activision Blizzard, one of the world's largest video game companies
Saudi Arabia doesn’t just want to win over “in-real-life” sports fans, but also those who are playing digitally.
Ownership in Teams
In 2020, PIF/Saudi Arabia surprised a lot of people when they bought English Premier League team Newcastle United for a little over $400 million.
They weren’t able to acquire Liverpool FC, but do have stakes in other teams:
Spanish soccer club, Real Valladolid
French soccer club, Paris Saint-Germain (PSG)
Canadian Football League's Edmonton Elks
With the NBA sure to expand in the near future, it will be interesting to see if Saudi Arabia is able to get their hands on a team.
Sports Companies
And while the PGA Tour and LIV Golf are currently still in legal battles…
Never forget, the PGA is tied to Saudi money itself.
The PGA Tour Fan Shop is a white-labeled version of Fanatics, a company now valued at over $30 billion.
In 2017, Fanatics received a $1 billion investment from the Saudi PIF-backed SoftBank Vision Fund.
The majority stakeholder in that fund is Saudi PIF, with over 45% ownership.
Sports Sponsorships
Saudi Arabia has been investing heavily in sports sponsorships as part of its efforts to promote the country as a global sports destination (and also boost its tourism industry).
Check this out…
The kingdom has spent over $2.3 billion in the last few years:
$120 million to host the Dakar Rally event
10-year deal to host a Formula 1 race, Jeddah Street Circuit
hosted major boxing events, including the World Boxing Super Series final
The kingdom is positioning itself as a hub for major sports events, and its investments in sports infrastructure and sponsorships are likely to continue in the coming years.
Winter Olympics
Saudi Arabia has a $500 billion budget to build the smart city NEOM, which will host many futuristic sporting events.
The main one circled on the calendar…
2029 Winter Olympics.
Yep — skiing, snowboarding, and tubing in a country that is 95% desert.
T20 and Cricket
Last week, high-level discussions took place between the Saudi government and owners of Indian Premier League (IPL) teams.
Why’s this important? 🏏
The IPL is currently the most-watched cricket league in the world and Saudi Arabia plans to enter the market and make the Kingdom a global cricketing destination.
There is no doubt that Saudi Arabia’s T20 League would be the richest cricket league in the world if it happens.
Foreign Investment + Grassroot Efforts
Last month, 25 British companies visited Saudi Arabia to explore key investment opportunities in the Kingdom’s sports sector.
By spending money elsewhere, Saudi Arabia has started to attract investment inward.
And while Saudi Arabia is fine to pay enormous salaries to foreign players like Cristiano Ronaldo and Phil Mickelson…
It ultimately wants to start producing some of its own global talents.
The Kingdom has 3 goals in mind:
develop Saudi-born elite athletes
achieve a 40% participation rate by 2030
grow and empower the sports economy
It might take decades, but at this pace, we’re sure to have Saudi-born sports stars.
Going Forward
All true power and money come from the ownership of natural resources.
In America, it’s how much land you own.
In Saudi Arabia, it’s how much oil you own.
From there, you diversify assets by investing in the future of technology (and sports often fall in that mix).
Saudi Arabia is on a spending spree to diversify its economy away from oil/gas over the next decade.
For better or worse, sports are in their crosshairs.
It will be interesting to see if/when they start focusing more on the downstream levels of sports & technology.
For example…
What would happen if PIF started paying college athletes $5M NIL deals in exchange for playing in Saudi professional leagues post-graduation? 👀
Podcast 🎙
Today’s guest is Jason Shatsky, CEO & Co-Founder of TicketRev.
TicketRev closed a $1.1m seed round this past week — which included an investment from the Minnesota Twins for their reverse ticketing marketplace.
You’ll enjoy this episode as we discuss:
The process of going through a sports tech accelerator
Winning a $100,000 startup competition (and the art of pitching)
Inside look at the sports ticketing industry and how TicketRev plans to disrupt it
Check out the podcast episode here.
Thanks for reading (and listening today).
Have a fabulous weekend!
Peace,
AP
Sources:
https://www.bloomberg.com/news/articles/2023-01-27/how-giant-saudi-fund-is-building-a-post-oil-future-quicktake
https://en.wikipedia.org/wiki/Public_Investment_Fund
https://www.si.com/olympics/2022/12/29/sportswashing-olympics-world-cup-daily-cover
https://finance.yahoo.com/news/softbank-invest-1-billion-sports-204017932.html
https://progolfweekly.com/saudi-backed-fund-owns-stake-in-fanatic-pga-tour-fan-shop/
https://pkbnews.in/saudi-arabia-t20-league-worlds-richest-t20-cricket-league/
https://ussaudi.org/saudi-arabia-introduces-new-opportunities-in-sports-and-athletics/