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Wednesday, April 13, 2011

Middle East looks at creating ‘proper’ football industry


Al Arabiya


One of the stadiums to be built in Qatar for the 2022 World Cup. (File photo)
One of the stadiums to be built in Qatar for the 2022 World Cup. (File photo)
Qatar’s successful World Cup 2022 bid coupled with the Middle East’s dismal performance in this year’s Asian Cup, the economic fallout of lengthy suspensions of league matches in several Arab countries as a result of the political turmoil sweeping the region, and pressure from world soccer body FIFA, is forcing Middle Eastern soccer to commercialize and create a ‘proper’ football industry.

Hints at the beginning of an emerging football industry are visible across the region. In a sign of the times, Iranian Oil Minister Masoud Mir Kazemi this week advised four clubs owned by subsidiaries of his office that they would no longer receive funding starting in Iran’s next fiscal year, according to prominent Iranian soccer blogger Afshin Afshar. The oil ministry subsidizes an estimated 20 clubs, including Tehran’s Athletic and Cultural Club, whose Naft Tehran FC plays in the premier league. Much like Egypt, virtually all of Iran’s professional clubs are publicly funded.

The decision signals a first step towards compliance with the FIFA criteria that professional league teams have to meet. FIFA has been pressuring Middle Eastern nations to ensure compliance by 2013. This would force owners to own only one professional team per league and ensure that their clubs are financially sustainable and have their own stadiums.

The Iranian move is likely to reverberate in Egypt where all clubs are publicly funded and at least half of the premier league teams are owned by government institutions, the military and the police. The financial crisis that has hit Egyptian clubs teetering on the verge of bankruptcy has no doubt been aggravated by the country’s political turmoil that in February ousted President Hosni Mubarak but differs fundamentally little from that in Iran and in large parts of the rest of the Middle East and North Africa.

The prospect of a rupture in public funding for Egyptian clubs is fuelled by corruption charges filed against Sameh Fahmy, Mr. Mubarak’s petroleum minister. The prospect is reinforced by a second case filed by Alexandria-based lawyer Hesham Abd Rabou against Mr. Fahmy that seeks to halt all public funding of Egyptian football. As petroleum minister, Mr. Fahmy moved to the forefront of the Mubarak regime's effort to use football to distract Egyptians from economic, social and political problems. His successor, Abdullah Ghorab, the former chief executive of state-owned Egyptian General Petroleum Corporation, is believed to be less keen on continuing the generous handouts.

Appointed in 1999, Mr. Fahmy poured public funds into Engineering for the Petroleum and Process Industries Club (Enppi) and Petrojet, two of the country's football powerhouses. He also increased funding for the ministry-owned second-tier clubs Petrol Asyut and Gasco. The funding enabled Enppi to win promotion to the Premier League in 2002, followed by Petrojet a year later. Backed by Egyptian oil dollars, Enppi and Petrojet moved quickly to sign some of Egypt's top players, including international striker Amr Zaki and international winger Ahmed Elmohamady, who in March was sold to English Premier League club Sunderland for $3 million.

Despite the prospect of a drying up of government funding, both Iran and Egypt have yet to create proper revenue streams from broadcast rights, merchandising and advertisement. Egypt is nonetheless one step ahead of Iran where those segments of business have been turned on their head. Top tier Iranian football teams pay government broadcasters for the privilege of their matches being aired while advertising revenues are collected by municipal stadium owners. Income from ticket sales never leaves the coffers of the municipal stadium administrator.

Al Ahly SC, Egypt’s most popular and most crowned club and one of the few clubs to so far to have avoided the financial squeeze, opened this week in Cairo its first merchandising store although changes to the law that restrict the commercial activities of soccer clubs are unlikely to occur any time soon and in the hope of better enforcement of intellectual property rights. The club envisions the Cairo opening the first of a chain of stores across Egypt as well as in the Gulf, according to Al Ahly marketing director Adly El-Qayei.

“Establishing that store is a very important step towards increasing the club's revenues," Mr. El-Qayei told government-owned Al Ahram Online.

The dissolution of parliament in February, two days after Mr. Mubarak’s departure, has put on hold a draft law that would allow non-profit clubs to establish commercial companies whose assets would include player’s contracts. The law would enable clubs to leverage their assets and merchandise their brand. Al Ahly’s store opening is in anticipation of the draft being revived after parliamentary elections scheduled for August.

“Something is moving. The leagues, the football associations and the media are starting to buy into the concept. That’s how it started in Europe,” says Santino Saguto, a Dubai-based Italian soccer management consultant.

Proposed changes to Egypt’s telecommunications law that would have paved the way for the sale of broadcast rights have nonetheless been delayed like the ones defining clubs as non-profit organizations. The changes would deprive Egyptian telecommunications authorities of their exclusive right to license uplinks and the right of state-run television to broadcast anything that occurs on Egyptian soil. Authorities last year prevented an uplink being brought into a stadium during a match being played by Wadi Degla, one of only two privately owned, commercially run Premier League teams.

The UAE took a first step towards the sale of broadcasting rights when it a few years ago for the first time marketed the rights of its league matches – a key step in generating revenue and creating value. The UAE example is reportedly being discussed by Saudi Arabia, the region’s most important league beyond Egypt.

The UAE’s blazing of the trail is however not without its birth pangs. Commercial broadcasters charge that state-owned networks distort competition by paying absorbent amounts for the exclusive right to broadcast major football events. They point to Al Jazeera’s clinching last month of the right to broadcast the 2018 and 2022 World Cups for an undisclosed amount believed to be in excess of $3 billion. The Abu Dhabi Media Company was last year awarded the exclusive rights to air the UAE Premier League.

Some analysts argue that it may take a strong-willed broadcaster to shape a market that is still dominated by free-to-air channels, slow in the uptake of pay-tv and suffering from large-scale intellectual copy piracy. “It was the same in Europe until BSkyB forced issues with the introduction of its decoders,” Mr. Saguto says, cautioning that it took BSkyB several years to break even on its investment.

Media baron Rupert Murdoch, on the verge of acquiring BskyB and backed by his alliance with Saudi Arabia’s Rotana, owned by Saudi billionaire Prince Walid bin Talal, could become the Middle Eastern monkey wrench that drives the change needed to create value in football. Manchester United’s pioneering success in creating value on and off the pitch is one asset Qatar had hoped to gain control of with its failing bid to acquire the English Premier League club.

The UAE may also prove to be a trailblazer in the Gulf as President Cup Winner Al Jazira SCC seeks to brand itself by becoming the first club in the region to target expatriates rather than only locals as fans. “We want to create a fan base for the team that includes everyone residing in the country,” says Al Jazira CEO Phil Anderton.


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