By Thomas Chow and Ruhi Ramesh
LOS ANGELES — Imagine if your favorite sports team suddenly got an unlimited amount of money to spend. They would be able to recruit star players, invest in upgrades to their facilities and eventually achieve top team status.
These dreams became reality for Newcastle fans on Oct. 7, when English soccer club Newcastle United announced that a financial takeover by a consortium of firms, including Saudi-based Public Investment Fund (PIF), had been completed. The takeover saw previous owner Mike Ashley, a British billionaire entrepreneur, sell ownership of the club for approximately $400 million.
Newcastle fans have every reason to rejoice. The takeover means that years of mediocrity under Ashley’s ownership might finally end. Ashley’s tenure as the owner was a turbulent period of Newcastle United history, characterized by constant struggles on and off the pitch and two relegations from the English Premier League.
As one Newcastle fan told the BBC: “Any time there was a good feeling around the club, it seemed like Mike Ashley deliberately tried to pull everyone back down to earth with a dreadful decision that served no one’s interests but his own.”
Ashley put the club for sale in several instances before, but he was not able to find the desired buyer until the Middle Easterners called. The new owner, PIF, is a Saudi Arabian sovereign wealth fund. It is one of the richest sovereign wealth funds in the world, estimated to have approximately $450 billion in assets. PIF’s ownership immediately elevates Newcastle United to the richest soccer club in the world. However, the takeover is nothing short of controversial.
The first major issue is the nature of PIF as a sovereign wealth fund. Last July, a takeover negotiation between the same parties broke down because the English Premier League did not give regulatory approval as a result of PIF’s ties to the Saudi state. Eventually, the Premier League approved the takeover, stating that it had “legally binding assurances that the Kingdom of Saudi Arabia will not control Newcastle United Football Club.”
The connection between PIF and the Saudi state also brings Saudi Arabia’s questionable human rights record to debate. Amnesty International accused the Saudi government of “sportswashing” by using the takeover to distract from its human rights violations, which include the imprisonment of women’s rights activists and the executions of journalists.
Saudi Arabia was also accused of censorship. In 2018, Qatar filed a complaint to the World Trade Organization claiming that the Saudi government blocked beIN sports, a Qatari company, from broadcasting in Saudi Arabia. The court case — which sees Qatar claiming around $1 billion in damages — is still pending, but Saudi Arabia recently lifted the ban on beIN sports.
Despite the controversies surrounding Saudi Arabia and PIF, a poll by Newcastle United Supporters Trust in August found that 93.8% of the respondents were in favor of the takeover. Alan Shearer, a club legend who scored over 140 goals for Newcastle between 1996-2006, has mixed feelings about the takeover.
He wrote on The Athletic: “I want my club to represent my city and my region and not some distant, authoritarian regime, but it looks like the second thing is opening the way to the first. Maybe it’s just our go.”
The presence of Middle Eastern money within European football leagues is not a new phenomenon. In 2008, the Abu Dhabi Investment Group (ADIG), a private equity company based in the United Arab Emirates, bought the English football club Manchester City for approximately $212 million. While the football club is now formally owned by City Football Group — a holding company formed by a consortium of different investors — the majority stake still lies with ADIG. ADIG is owned by Sheikh Mansour bin Zayed Al Nayhan, the deputy prime minister of the UAE and member of the Abu Dhabi royal family.
In 2011, Qatar Sports Investments (QSi) bought a 70% majority stake in French football club Paris St-Germain (PSG). QSi is a sovereign wealth fund established to invest in the sports and leisure industry within Qatar and abroad. While the company was founded by the emir of Qatar, it is currently run by Qatari businessman Nasser Al-Khelaifi. Shortly after the takeover, Khelaifi became the president and CEO of PSG, indicating the power and influence of Qatari leadership.
Both of these acquisitions signalled a huge cash infusion for clubs, which meant these clubs could attract and retain the best talent across the pool — from players on the field to managers making the tactical decisions. The most famous display of the sheer money-wielding prowess of these clubs is the transfer of Lionel Messi from FC Barcelona to PSG last summer. After spending 21 years at Barcelona, Messi was unable to renew his contract after the club faced severe financial difficulties that prevented management from being able to pay for the contract as well as comply with the football authority’s financial fair play rules. Even after Messi agreed to a 50% wage cut, Barcelona was unable to restructure itself adequately to afford paying his contract.
Some of PSG’s biggest signings since the Qatari takeover include Edison Cavani for €63 million (2013), Neymar for a record €222 million (2017) and the permanent transfer of Kylian Mbappe for €180 million (also 2017). While PSG has yet to win the elusive UEFA Champions League trophy, this does not seem to be an issue for its Qatari investors who appear to believe the solution is spending more money. With a star-studded team and the recent signing of Messi, it is likely that a championship lies in the club’s near future.
If there was a poster child for the success of Middle Eastern money, it would be Manchester City. Since 2011, the club has won five Premier League titles, two FA cups and six Carabao cups. While Manchester City has also not yet managed to win a Champions League trophy, the club has succeeded in acquiring some of the best football talent for obsequious amounts of money, including players Ruben Dias for £61.2 million, Jack Graelish for £105 million and Kevin De Bruyne for £55 million. Manchester City is also managed by Pep Guardiola, who is currently the highest paid manager in the world with an annual salary of £20 million.
While these takeovers are controversial for a variety of reasons, one of the most significant debates centers on equity — is this fair?
Currently, Newcastle sits at the 19th position in the Premier League rankings, at risk of relegation next season. However, if previous takeovers have demonstrated anything, one would expect PIF’s generous spending to propel the club towards greater success. In fact, Newcastle has already made two new signings — Kieran Trippier for £12 million and Chris Wood for £25 million — and seem ready to sign more new talent. These new additions could give Newcastle the competitive edge it needs to make a run for the Premier League top ten and avoid relegation.
This raises the question: Should football associations place spending caps on club expenses? Some believe this would allow football associations to better regulate spending on talent and make the landscape among all teams more fair. With standardized salary caps installed in football leagues, players would not be swayed by differences in wages when deciding between contracts for which team to play. Moreover, the best talent wouldn’t be restricted to the richest clubs and even lower-ranked clubs would have an opportunity to build up their squad.
However, the biggest problem with the idea of implementing salary caps is the fact that European football consists of approximately 40 different football leagues across 31 different countries. In order to install a uniform salary cap, regulators would need to navigate the multitude of differences that exist between each country’s tax laws, wage laws and employment laws. Another major obstacle is the current landscape of massive wealth disparities between teams across the league. Regulators would likely face an enormous amount of pushback from rich teams, which would be reluctant to cut wages in order to level the playing field for poorer teams.
While the idea of salary caps continues to be debated, La Liga remains the only European league to have implemented a salary cap. It is doubtful that other leagues will follow suit, and even more unlikely following the effect of the cap on Lionel Messi. However, with continued investment from international entities, such as sovereign wealth funds in the Middle East, salary caps may not be necessary — especially as more teams are propped up by Middle Eastern monarchies.