From Gold to Goal: The Investment Trend of GCC

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Money, it’s a gas

Grab that cash with both hands and make a stash

New car, caviar, four star daydream

Think I’ll buy me a football team

-Pink Floyd

There are ways to make money by investing in a foot ball club including stadium naming rights, jersey sponsorship deals, and player transfer fees and sponsorships. In 2004, Emirates paid Arsenal FC £100 million for 15 years of naming rights on the stadium and 8 years on the jersey.
Investing in foot ball clubs offer lucrative deals including stadium naming rights, jersey sponsorship, and player transfer fees and sponsorship. In 2004, Emirates paid Arsenal FC £100 million for 15 years of naming rights on the stadium and 8 years on the jersey. Photo-MKR/Flickr

As the wealth of countries of the GCC matures, a new kind of market is being established. These markets have been seen in the West and East previously, but it seems that the Middle East is also inclined towards these lucrative opportunities. The recent acquiring of football clubs by the region shows a key interest in more risk based investment by the investors and moving away from the conventional investment vehicles used before.

Previously, the region has seen more and more investment in traditional instruments like tangible firms that produce goods or substantial form of investment in local enterprises. The growth of hospitality industry and more profitable projects in the region had been seen before. The second round saw parking of assets in the US and even investing in safe companies in order to grow the wealth over time in a safe proportion. Now it seems that the trend is moving towards acquiring sports franchises which does seem a departure from previous routine.

The acquiring of franchises had been seen in the past by Western countries and even some Asian investors as their choice of investment. The purchase of Manchester City and Paris Saint Germain has shown that now GCC countries are prepared to invest in more risky investments than before. The rise in popularity of football around the world has meant that now billion of people tune into the grudge matches around the world and with royalties and merchandising, there are endless revenue streams for the company itself. However, profit is not the only motivation for owning a club, there are many ancillary benefits too.

The unorthodox feature of these investment is that compared to a normal organization, there is a huge disparity between the owners, the management and the functionality of the company. Unlike a normal organization, where lack of efficiency can be addressed by a management change or a reversal of ideology, a football club operates in a much different manner. Regardless of the people who run it, or the people who own it, the main focus is how the players perform and how well they are able to generate revenue in the future.

If a product is launched and it fails, it can be scrapped. A similar analogy cannot be made for a player who is bought at exorbitant fees and then is benched or sold at a loss. Due to the strange nature of the business, many people stay away from such an investment and would rather go for much safer options. The experience has started in a profitable manner.

The purchase of Manchester city by an Abu Dhabi consortium did see the club bring its first English Premier League title after a long wait and a similar story can be repeated in France by Paris Saint Germain. But, the test of investment is not when it is performing well and reaping benefits but rather when things get tough and there is a survival of the fittest nature in the market. That still has to be tested and the clubs have to go through that period of fire when the time comes.

On the other hand, the fans and the management have welcomed the new ownership which can also be a test where fans can launch a backlash against owners themselves. The key will be to see how long will this trend continue and whether these investments will reap the benefits that are expected of them.

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