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January 3, 2024

Gulf states are vying for sports fans’ hearts and minds—one sovereign wealth fund at a time

By Joze Pelayo

In 2023, the annual tennis tournament colloquially called the Washington Open was renamed the Mubadala Citi DC Open thanks to a sponsorship from Abu Dhabi-based Mubadala Investment Company—an unknown name to most Washington sports fans, but one they may see again. The Gulf Arab states have been turning their efforts and attention to Beltway sports amid a rush of new investment.

The tennis tournament was not the first time that Mubadala—the United Arab Emirates’ sovereign wealth and investment fund, with a portfolio valued at $276 billion under management—had sponsored a sporting event. But it was the first time it had done so in the Beltway, where Abu Dhabi probably views these sponsorships as fruitful business investments that yield meaningful political and reputational benefits. (In the interest of disclosure: The Emirati government is a donor to the Atlantic Council.) 

The United Arab Emirates (UAE) joins Saudi Arabia and Qatar in their race to position their countries as global sporting leaders. In June 2023, Qatar’s sovereign wealth fund became the first foreign sovereign fund to invest in a major US sports franchise. Saudi Arabia is now set to host the 2034 World Cup.

Other countries have invested in US sports teams as well. Norway’s sovereign fund, valued at $1.3 trillion, has reduced its sports investments since 2020, but it still owns a small equity share of 1.07 percent in Madison Square Garden Sports, which manages the National Basketball Association (NBA) team the New York Knicks, National Hockey League (NHL) team the New York Rangers, and some of the latter’s minor league affiliates.

Since 2022, the NBA and Women’s NBA have allowed such foreign investments so long as they consist of no more than a 20 percent stake and do not include ownership control. However, it remains an open question how long these investments will be restricted to non-controlling interests. Currently, Major League Baseball (MLB) does not prohibit sovereign investment fund investments in its clubs, nor does the NHL. For now, the National Football League (NFL) prohibits sovereign wealth funds’ investments in its franchises. According to NFL commissioner Roger Goodell, such investments are something the league will “contemplate at some point in time.” The commissioner of Major League Soccer also said in July that the league was considering allowing such investments.

More than just oil

Starting around 2040, revenues from oil are expected to decline because of reductions in global demand driven by a higher need for renewable energy. Amid rising interest in international sports, as well as broadcasting and merchandising opportunities, sports clubs offer an opportunity for Gulf investment funds to generate returns. Gulf leaders also want to remodel their countries’ oil-focused images into ones that attract investment and people who want to work and live there. They want to show that they can impact and contribute to world powers—not vice versa.

The Mubadala Citi DC Open happened shortly after the announcement that the Qatar Investment Authority had bought a 5 percent stake in Monumental Sports and Entertainment. Monumental owns NBC Sports Washington, the NBA’s Washington Wizards, and the NHL’s Washington Capitals—a successful franchise that won the league championship in 2018. Monumental’s founder and CEO Ted Leonsis has also been in negotiations to buy the MLB’s Washington Nationals.

Saudi Arabia probably made the most significant move in this realm in 2023; the Saudi LIV Golf-PGA Tour merger—now being investigated by Congress and the US Department of Justice to determine whether it violates federal antitrust statutes amid suspicion regarding the Saudis’ widening role in US sports—marked the $650 billion Saudi Public Investment Fund’s first foray into the US sports market.

US sports franchises are arguably more multifaceted businesses than those in Europe, where Gulf investments in sports are not new. And US sports franchises offer no risk of relegation—unlike European football clubs in the Union of European Football Associations leagues—which makes the valuation of US teams exceedingly high. From 2012 to 2021, the average value of an NBA team increased by 387 percent while the average value of an NHL team increased by 207 percent. As a result, US sports franchises are viewed as “recession-proof,” outpacing the growth of the S&P 500—a US stock market index made up of 500 of the largest public companies—from 2004 to 2012.

Given these political and economic benefits, Gulf investments in US sports are likely to rise. US sports franchises offer a limited investment risk with known recurring revenue, eye-popping valuations, and a loyal fan and customer base. Such investments provide Gulf states media attention and a means of influencing public opinion and molding their countries’ brands.

A new field competition

One big question is whether US regulators will scrutinize these deals more, especially controlling stakes in US teams if and when they happen. The Committee on Foreign Investment in the United States (CFIUS)—the interagency committee that examines the national security implications of foreign acquisitions of US companies—could have jurisdiction if there are national security concerns related to the data collected by these teams. But such a review would not adequately examine these deals based on reputational risk to the teams. Given that, the US government should consider whether it wants to give CFIUS those powers or create a new review mechanism.

Gulf investments in US teams could pose reputational challenges to those teams as a result of Western concerns about the state of political, social, and labor rights in Gulf countries. Additionally, the increased attention that comes along with growing investments will also bring potential challenges for Arab Gulf governments. The scrutiny on the 2022 FIFA World Cup in Qatar is likely to be repeated for World Cup 2034 host Saudi Arabia, especially as it seeks to get more involved in US sports franchises and become a global sports hub. 

But these investments aren’t going away. Any resistance in US sports leagues to controlling stakes and foreign ownership will likely dissipate in the next decade or two if such investments prove effective and productive and ownership rules continue to change, albeit slowly. Expect Gulf countries to increase their investments in US sports teams while trying to play up the economic benefits of those investments and their impact on the community, as they have done in the United Kingdom.

In the United Kingdom, research conducted by New Economy Manchester, a local governmental entity, showed a return on investment of £1.63 per pound invested in Abu Dhabi United Group-owned Manchester City’s City in the Community, a program that benefits individuals with disabilities. The same study reported a return on investment of £1.98 per pound invested in Manchester City’s Kicks program, which helps reduce anti-social behavior and crime among youth. Nevertheless, others, including Amnesty International, argue that Manchester City is being used as part of an exercise in “sportswashing”—allowing a nation with a record of human rights abuses to project a positive image of itself on the world stage given the immense international advertising platform that the Premier League provides. They posit that, by investing in the emotional power of football clubs and East Manchester, Abu Dhabi is instrumentalizing sports to win hearts and minds.

In the contest among Gulf states for stakes in US sports franchises and tournaments, the next front in the United States could be the MLB—especially if Leonsis and Monumental Sports buy the Nationals. Such a sale would put three major Washington sports teams (the NBA, NHL, and MLB squads) and NBC Washington Sports under Monumental, providing the Qatar Investment Fund a huge platform and opportunities for growth and partnerships in the nation’s capital. In November 2023, Muriel Bowser, the mayor of Washington, DC, departed for Qatar “to engage with leaders on the issues of infrastructure, sports and education, as well as promote Washington, DC as a destination for investment and tourism,” signaling interest from a top Beltway official in allowing these investments to move forward.

One thing is certain: There will be more competition among Gulf countries to become the biggest shapers of global sports, with each vying to have the most popular US team in their portfolio. Fans will care most about their teams winning, but they will—perhaps unwittingly—be taking part in another rivalry half a world away.

Joze Pelayo is an associate director at the Scowcroft Middle East Security Initiative. Follow him on Twitter: @jozemrpelayo.

Further reading

Image: Portuguese football star Cristiano Ronaldo poses with AlNassr Football Club President Mossali Al-Muammar at press conference in Riyadh, Kingdom of Saudi Arabia, on January 3, 2023. Photo by Balkis Press/ABACAPRESS.COM