Qatar’s Acquisition of Wizards Shares Reflects Fading NBA Influence and Rising Gulf Power
The boots finally hit the ground. A few days ago, the Qatar Investment Authority (QIA) purchased a 5% stake in the American Monument Entertainment Company at a price of US$4.05 billion. The latter is quite famous in the American sports circle. , the most famous of which is the (American Men’s Professional Basketball League) NBA’s Washington Wizards.
This also means that the Qataris have officially become one of the shareholders of the Wizards, and QIA has become the first sovereign fund to invest in a top American sports league. This is another stunning appearance of Qatar in top sports events after hosting the World Cup last year.
As early as the beginning of this year, Bloomberg broke the news that Qatar was interested in acquiring an NBA team, but it was widely rumored that the target was the New York Knicks. This news also aroused continuous public attention. Fans of the Lakers, Rockets and other teams have called on the “local tyrants” in the Middle East to buy their teams on social media.
The participation of Middle Easterners has benefited from a reform more than 2 years ago. In 2020, the NBA, which was struggling due to the impact of the epidemic, took the initiative to make changes and became the first mainstream league in the United States to allow private equity funds to acquire team equity; in November last year, the NBA further relaxed regulations, allowing sovereign wealth funds, university endowment funds and Pension funds have invested in the team, and this adjustment also opened the door for Qatar’s capital injection this time.
The gradual liberalization of investment restrictions reflects two realities. It can be considered that the NBA is becoming more and more “globalized”, and it also shows that the influence of the NBA and even the entire American basketball on the world basketball is constantly weakening. The twilight dynasty and the rich upstart hit it off, and they all got what they wanted, but can the capital injection of the Middle East consortium really change the plight of the NBA?
Acquiring shares in the Wizards is more like a test of the waters before entering North American professional sports on a large scale.
Qataris are not amateurs
Different from the stereotyped image of a Middle Eastern “local tyrant” who spends a lot of money but is very amateurish in operations, QIA, the new shareholder of the Wizards, is not only rich, but also deeply involved in a number of professional sports investments.
Qatar has a small land area and a small population, but thanks to its advantages in oil and gas resources, its per capita GDP has ranked among the top in the world for many years. Founded in 2005, QIA is one of the world’s top ten sovereign wealth funds with assets under control of US$460 billion. Its investments span biomedicine, the Internet, real estate, finance and other fields.
In terms of sports, QIA has a strong presence in European football. Qatar Sports Investment Company, a subsidiary of QIA, is at the helm of the Paris Saint-Germain Football Club. The reason why Paris Saint-Germain dared to spend a lot of money on signings was indispensable to the help of QIA. In addition, QIA owns 22% of the Portuguese Super League Braga team, and has been seeking to acquire the Premier League team Manchester United. The two sides have been rumored many times.
In order to better enter the U.S. market, in 2015, QIA set up a related office in New York, and also started construction of the City Center DC (City Center DC) commercial district construction project in Washington, which also laid the groundwork for future capital injection. Foreshadowing.
For basketball fans, there is actually no need to worry or look forward to the arrival of the Qataris. Hot money will surge rapidly, which will set off a round of “arms race” in the league in which superstars gather together and their salaries far exceed the salary cap. Unlike having the right to speak in Greater Paris, under the restrictions of the NBA, QIA’s position as a shareholder of the Wizards is a bit awkward-NBA spokesman Mike Bass stated in a statement that QIA will not participate in the operation or decision-making of the Wizards.
According to regulations, private equity funds and various investors can own up to 20% of the shares of an NBA team, a single team can sell up to 30% of the shares to investment funds, and a single fund can hold up to 5 team shares. Therefore, even if additional shares are added in the future, it will be difficult for QIA to occupy the bulk of the Wizards.
For QIA, the acquisition of shares in the Wizards is more like a test of the waters before entering North American professional sports on a large scale. Sports business-related experts told the Associated Press that sports are part of Qatar’s national branding and public diplomacy strategy. “In the European and American markets, especially in central cities, buying or sponsoring sports organization equity is very consistent with this strategic concept.”
Even if you don’t talk about the brand effect, in terms of investment income alone, QIA’s shareholding is still a good deal. Take Michael Jordan as an example. In 2010, he bought the Bobcats for $275 million. In the following 13 years, the team only made the playoffs once and was swept away. It is a veritable underdog in the league. But this still does not prevent the team’s valuation from increasing by a full 11 times. Not long ago, Jordan sold the team for $3 billion, making him a lot of money.
Since the NBA allowed private equity funds to invest in shares in 2020, the valuation of NBA teams has been bullish all the way. At that time, this seemed more like an expedient measure to deal with the impact of the epidemic, but there were unexpected surprises—the various funders were quite interested in the equity of NBA teams, even though the profitability of NBA teams was among the top sports leagues in the world. , not the best.
Gulf power that cannot be ignored
The fate of the NBA and the Middle East is not shallow. As early as 2011 during the NBA lockout, there were rumors that the “local tyrants” in the Middle East spent a lot of money to invite NBA stars to play. I just don’t know if it’s because the price has not been negotiated, or because the NBA’s suspension time is not too long, not many people make the trip in the end.
In those years, the relationship between NBA players and the Middle East was more than purely commercial considerations: the reason why All-Star player Amare Stoudemire and Kobe teammate Jordan Farmar went to the Israeli league for gold, and the two All are of Jewish ancestry. Among them, Stoudemire was received by then Prime Minister Shimon Peres in Israel and helped the team win two league championships.
But such a story is more like an accidental “basketball poverty alleviation”. In the years since then, only a few players such as Tarek Black and Sean Williams have joined the Middle East League. Most of them are marginal people in the NBA. The one with the highest career achievement should be OJ Mayo, but he had already passed his peak at that time, and he couldn’t even get a contract in the Chinese Men’s Basketball Professional League.
It wasn’t until the entry of the UAE that the NBA began to turn its attention to the Gulf countries. Although the Qataris finally won the equity of the Wizards, it was the United Arab Emirates who had been “eye-catching” with the NBA before.
In October 2022, in Abu Dhabi, the capital of the United Arab Emirates, at the scene of the NBA preseason game, the fierce battle between last season’s champion Bucks and the old rival Eagles is in full swing. The NBA overseas game, which has been suspended for two years due to the epidemic, has officially restarted. The first stop will be in the UAE. This is also the first time the NBA has gone to the Middle East to hold an overseas game.
The overseas game was broadcast on streaming platforms such as television in the Middle East and North Africa, and the NBA game live subscription service. The game is also part of a series of cooperation between the NBA and the Abu Dhabi Department of Culture and Tourism. Earlier that year, the NBA created a youth basketball league for Abu Dhabi’s 11-14 year olds.
The NBA’s trip to Abu Dhabi can be described as “the best of the best.” The Bucks and Eagles have a number of All-Star players. The stars of the two teams, “Antetokounmpo” and Trey Young, are all new stars touted by the league. O’Neal, Carter, Grant Hill and other 6 A retired former NBA superstar came to the scene to build momentum.
In May of this year, the NBA announced that it would continue the event, with the Dallas Mavericks and Minnesota Timberwolves heading to the Etihad Arena on Yas Island in Abu Dhabi to present UAE fans with two exciting preseason games.
The constant influx of hot money from the Middle East is rewriting the business structure of the European and American sports industries.
The NBA, which pays more and more attention to the Middle East, is a microcosm of the European and American sports world. The continuous influx of hot money from the Middle East is rewriting the business structure of the European and American sports industry. No team can ignore the influence of Gulf power.
Chelsea and Arsenal in the Premier League, Real Madrid in La Liga, Lyon in Ligue 1, and Benfica in Portugal all have a common sponsor—Emirates.
The Saudis prefer to buy, buy, buy. In 2021, the Saudi Public Investment Fund (PIF) bought the Premier League’s Newcastle United; in June this year, the LIV Golf League under the PIF announced an agreement with the PGA Tour and the DP World Tour, and the three parties will merge their commercial businesses , set up a new profit-making entity, and PIF will continue to inject capital into this entity.
With the help of the Jin Yuan offensive, the LIV League, which was established less than three years ago, successfully forced the two old golf leagues to make peace. Some American media even called this “peace talk” “one of the most important moves in sports history.” one”.
In addition to football and golf, the Saudis are also eyeing professional tennis, and the possibility of holding the ATP World Tour in Saudi Arabia was also reported not long ago. American sports business media Sportico issued an article stating that Saudi Arabia’s increased investment in sports is an important part of reducing its dependence on oil and achieving economic diversification.
“Globalized” NBA
Compared with football in the five major leagues and tennis in the four major leagues, in the basketball world, the NBA has always been the dominant player. The influx of capital from the Middle East has revealed the twilight of the NBA under the appearance of “invincible”.
In 1989, then-NBA commissioner David Stern waited for an hour in the CCTV lobby. At that time, Stern would not know that this may be the longest hour of his life, which completely changed the development and destiny of the NBA in the next 20 years.
Since then, CCTV began to broadcast and record the NBA nationwide. The NBA has become the basketball enlightenment for countless Chinese children, and China has gradually developed into the NBA’s largest overseas market. Stern has played an important role in it.
The heaven and the earth all have the same force, and the hero is not free when transported away. Adam Silver’s reforms after he succeeded the NBA president in 2014 can also be regarded as drastic, but the failure of the Chinese market and the impact of the epidemic have made the NBA’s influence far less than before.
According to data from the American media Sports Media Watch, the TV ratings of the 2023 NBA Finals are only 6.1, which is the lowest ratings in the history of the NBA Finals except for the two years of the epidemic. The penultimate place dates back to 2007-that year, after the Spurs swept the Cavaliers 4-0 in the Finals, Duncan said to James that “the future is yours”, which was passed on as a good story.
Now, 16 years have passed, and James has already realized the “future” Duncan said at that time, but where is the future of the NBA? In Xiao Hua’s view, the answer to this question is overseas. As Stern’s successor, Silver now desperately needs a similar story.
Since taking the helm of the NBA, Xiao Hua has continued to promote the NBA to the world, wanting to promote the market to places where the influence has never been covered before. “We hope to bring this game to places that have never been touched, and the Middle East is one of them.” Xiao Hua said when talking about QIA’s investment in the parent company of the Wizards.
In addition to business logic, the weakening of the American basketball world also determines that the NBA cannot rely on its own players alone to hold up a pleasing basketball feast.
Since 2015, the Rookie Challenge on the first day of the NBA All-Star Weekend has been changed to the World Team against the US team. In the following 6 games, the two teams won 3 games each, and the US team did not have a clear advantage.
The seemingly inconspicuous Serbian Jokic in the 2017 World Team, shined in this year’s finals, defeated the Heat 4-1, and successfully crowned the MVP of the finals-and this is already a non-American player in 3 years It was the second time he won the Finals MVP trophy.
When a whale falls, all things live. Accompanied by the decline of American basketball dominance is the overall progress of world basketball. For the NBA, instead of being complacent, it is better to take advantage of the trend to promote openness.
Today, with the liberalization of the NBA’s investment policy, there may still be countless capital following in the footsteps of QIA and pouring into the NBA, the top palace in the basketball world. For basketball lovers, perhaps the NBA is still the holy land of basketball, but it has lost its former glory.
