KEY POINTS
1. Saudi Arabia is using sports investments to diversify its economy away from oil.
2. Goal is to attract up to 100 million visitors by 2030 and support youth cultural transformation.
3. Sports investments may spark growth and investment across consumer and media.
Saudi Arabia, the world's biggest oil exporter, has targeted the sports industry as part of a larger effort to transform its economy by 2030. The Kingdom is seeking to attract players, teams, and leagues in an attempt to upend golf and football events. In its latest bid to reshape global sports, Saudi Arabia will host the 2034 men's FIFA World Cup after Australia withdrew its interest in hosting the world's biggest sporting event.
In football, or soccer as it's better known in the U.S., Saudi Arabia's Public Investment Fund (PIF) has been successful in winning some of the world's top players, including Karim Benzema and Cristiano Ronaldo, to play in a revamped domestic league. PIF also has a majority stake in Newcastle United, a club playing in the English Premier League, which has qualified to compete in the prestigious Champions League this season.
In golf, the Saudi-LIV Golf tournament is merging with the PGA Tour, America's men's circuit. Meanwhile, women's golf and football were leading conversations at the recent Future Investment Initiative (FII) Institute conference in Riyadh.
With a global energy transition looming, the multi-billion dollar push into global sports is part of the Vision 2030 plan by Crown Prince and Prime Minister Muhammad bin Salman, colloquially known as MbS, to diversify the economy away from oil, while opening up country socially and culturally.
Apart from headline-grabbing moves, the Kingdom has expanded its reach across other sports including Formula 1 car racing, mixed martial arts, equestrian events, boxing and eSports. The annual Riyadh Season, the state-sponsored winter festival of sports and entertainment, kicked off on October 28 with a global heavyweight boxing event held in the newly opened Kingdom Arena. In early 2018, the American professional wrestling promotion WWE began a 10-year strategic multiplatform partnership with the Ministry of Sport (formerly General Sports Authority) and the WWE CROWN JEWEL 2023 was held in Riyadh on November 4.
Critics regard the investments as sportswashing1 designed to enhance the reputation of the Kingdom. We view the moves as part of the country's overall transformation and development, which will help create jobs for the country's young population, of which 63% are 30 or younger.2
Source: EY, 2023.
Tourism, a key pillar of these reforms, will become one of the biggest industries after energy. The sector is expected to contribute 10% to GDP by the end of the decade,3 up from about 3% in recent years. According to the World Travel & Tourism Council (WTTC), the Kingdom's travel and tourism sector will grow 11% annually on average over the next decade, making it the fastest growing market in the Middle East.
But the investments also suggest there is a new window of opportunity in global sports: to grab bigger and newer audiences, create new tournaments and reinvent established events. There is significant room for future businesses to develop across other sectors, including real estate, new sports media companies, event management and sports merchandising. Saudi Arabia's splurge is happening just as the global sports industry is being shaken by digital disruption and a new wave of private equity investment.
Bottom line: Saudi Arabia's investments in sports amplify Vision 2030 plans to diversify and expand the economy. Investors may well be served to broaden their knowledge of the transformation as the MSCI EM Index weight to Saudi Arabia grows with new listings and investment opportunities.
1 Sportswashing is a practice of nations, individuals, groups, corporations or governments using sports in an attempt to distract from bad practices elsewhere.
2 Saudi population at 32.2 million, 63% of Saudis under 30 years old, census shows, Reuters, May 31, 2023.
3 Saudi Arabia, OECD Tourism Trends and Policies 2022. Forecasts/estimates are subject to change, and may not necessarily come to pass.
