Do the Saudis have their target set on the NBA?
The Saudis have successfully gone after golf and soccer in recent years
The Saudi Public Investment Fund
The Saudi Public Investment Fund (PIF) is the sovereign wealth fund of Saudi Arabia. With total assets estimated at $776 billion, it is one of the largest sovereign wealth funds in the world. One of the main goals of the PIF is to diversify the country’s revenue from oil. The PIF has its hands in all types of investments around the world — from energy companies, real estate, banking, entertainment, and tech, the PIF has invested in some of the biggest household names including Uber, Citigroup, Facebook, Live Nation, Disney, and Berkshire Hathaway.
Saudi Sports Investments
From wrestling to horse racing, the Saudis have invested a total of $20-$30 billion into sports. In 2021, LIV Golf was established as they sought to challenge the PGA to becoming the top golf tour in the world. Backed by endless amounts of money, LIV Golf convinced some of the most prominent and best golfers in the world to join the tour. Despite backlash for being paid ‘dirty money’ due to the Saudi’s history with human rights abuse, notable golfers such as Dustin Johnson and Phil Mickelson joined LIV for contracts reportedly worth $150 million and $200 million respectively. In June 2023, the PGA and LIV Golf announced that they would merge. After two years of the PGA shaming players and fighting LIV Golf, they are now working together.
The PIF has also recently started to go after soccer by buying some of the world’s best stars and paying them more than they are able to make in Europe. Christiano Ronaldo was the first major player to make the move and is reportedly being paid $213 million per year. To put things in perspective, Ronaldo was making approximately $31 million per year at Manchester United before he made his move to Saudi Arabia. Other stars to leave Europe for the Saudi Pro League include Neymar, Karim Benzema, and Riyad Mahrez.
The biggest offer the Saudi Pro League made was to Kylian Mbappé. The offer included a record setting transfer fee of $332 million to Mbappe’s current club, PSG, and then a $776 million contract to Mbappé for one year. With most of the players going to Sauidi past their prime, signing Mbappé at just 24 years old would have caused a tsunami wave in the soccer world. Mbappé ended up turning down the deal, but not before NBA stars chimed in.
The PIF’s strategy is to throw money into their sports leagues to attract the most popular athletes in the world. With the Saudis going after sports that are more and more popular on the world stage, it begs the question as to which sport they will go after next.
The NBA’s Growth
The NBA’s popularity has grown over the years. During the 1991-92 season, there were 23 international players from 18 different countries playing in the NBA. At the start of the 2022-23 season, that number has grown to 120 players from 40 countries. One could make an argument that four of the top five players in the NBA are all foreign born.
Out of the U.S. sport leagues, the NBA is the one with the highest earnings from international broadcasting rights. International viewership continues to rise, and approximately 45% of the NBA’s merchandise revenue is generated outside the U.S. and Canada. With the growth of the NBA and basketball in general, it makes for an attractive sport to buy into now as international popularity will continue to skyrocket.
The lure of Saudi Arabia
Put simply, if the PIF wanted to make an attempt to invest heavily in basketball, they have the resources to do it. They already have the Saudi Basketball League, which is a 12 team league that has been around since 1976. There are even Americans playing in the league right now.
The Saudi Basketball League doesn’t have salary caps like the NBA, so there would be no limits to what could be offered. Take Victor Wembanyama as an example. His 4 year, $55 million deal is the most a rookie can make in the NBA due to the rookie-scale contract rules. However, if he went to the Saudi Basketball League, they could theoretically offer him $55 million (or more) per year. An offer like that could be pretty enticing for a 19 year old. You could also consider Russell Westbrook, a polarizing player outside of his prime making barely above the veteran minimum. It wouldn’t take much for him or another veteran like him to think they are worth far more and take five times as much to play in Saudi Arabia. On top of the possibility of being paid more, Saudi Arabia also enjoys no income tax, so what athletes are offered is what they get. In some cases, player expenses are also paid for. Neymar has all his living expenses paid for and he is pocketing his full contract, plus incentives and perks.
Athletes are able to live by their own rules as well. In Saudi Arabia, it’s cohabitation law states unmarried couples can’t live together. Though Christiano Ronaldo has a family and kids, him and his girlfriend never were married. However, strings were pulled and exceptions were made to bring the star soccer player to the desert. A similar bending of rules for any circumstances would certainly be made in order to appease a star athlete if it meant bringing more attention, popularity, and revenue to Saudi Arabia.
Roadblocks to challenging the NBA
There are a number of roadblocks for the PIF if they want to challenge the NBA. The first is the negative image Saudi Arabia has in the U.S. With accounts of human abuses and a history of human rights violations, many athletes will think twice before making a move to Saudi Arabia. However, we know money can be a powerful thing and athletes will justify making the move, even for just a short time. Just look at the soccer players and golfers who decided to take the bait.
A second potential obstacle for the Saudis is FIBA, the governing board in place of international basketball. Most foreign leagues have clauses in them that allow players to leave for the NBA if the opportunity arises. FIBA would likely encourage the Saudi Basketball League to honor the NBA contracts of its players. Assuming the Saudi Basketball League would want to stay in FIBA’s good graces, they would have to wait until a player’s contract is completed before recruiting them over. If they didn’t honor NBA contracts, FIBA could step in and ban Saudi Arabia from any international competitions. We know with the PIF’s investment into their soccer league, one of the main goals is to make Saudi Arabia a top soccer talent country. If they had similar goals for basketball, a ban from international competitions would be catastrophic to their goal.
A third reason the PIF wouldn’t go after the NBA at this time is because of their focus on building a world-class soccer league. There seems to be real evidence that they are serious about building a domestic league that can compete with the best European leagues. That will take a lot of time, money, and effort, which will certainly attract most of their attention.
Lastly, political relationships between the U.S. and Saudi Arabia have been strained. When the merger of LIV Golf and the PGA was announced, there was at least one U.S. senator who wasn’t too pleased. Ron Wyden called the merger a “shameless cash grab” and said he planned to “dive into every nook and cranny of Saudi Arabia’s deal.” If government officials were compelled, they could potentially step in to try and protect the major sports leagues in the U.S. from foreign competition.
Alternative NBA investment options
If Saudi Arabia did want to get involved in the business of basketball, but didn’t want to take as big of a plunge as they have with golf and soccer, they could buy up to a 5% stake in an NBA team. With the NBA recently allowing funds from foreign governments to invest in teams, there is a clear path for governments to get a piece of the NBA pie. Qatar recently bought 5% of the Wizards a few months ago.
The NBA’s influence
One of the biggest goals of the NBA has been to grow its international footprint, which they have done successfully over the last 20 years. However, success breeds competition. Time will tell whether the NBA’s strategy will backfire in the end.
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