The latest noises from Saudi Arabia give a clue about the Public Investment Fund’s long-term plans for Newcastle United.
The Newcastle hierarchy know that increasing revenue is the only way to achieve greater flexibility in terms of Premier League Profit and Sustainability Rules.
The PSR system (formerly known as financial fair play, or FFP) has acted as an anchor in the transfer market.
And the net could be about to get even tighter, with a seismic impact on Eddie Howe’s budget.
A new squad cost control ratio and financial anchoring system is expected to be passed at the Premier League‘s AGM tomorrow.
That will put even more onus on Newcastle to raise turnover to fulfil their ambitions on the pitch.
One area Amanda Staveley, Mehrdad Ghodoussi and Yasir Al-Rumayyan have focused on so far is commercial revenue.
Income from sponsors has rocketed since the takeover in October 2021.
And this due in large part to deals they have orchestrated with companies from within PIF’s own portfolio.
But comments from one senior PIF figure may indicate that this strategy could change in the long term.
Newcastle could transition away from PIF-owned sponsors
Newcastle are not the only club in PIF’s orbit.
The sovereign wealth fund also controls a number of teams in the Saudi Pro League, including Al-Hilal, the home of Neymar and former Newcastle striker Alexander Mitrovic
As relayed by Sport Business, Al-Hilal chief commercial officer Sultan bin Abdulaziz Alsheikh has insisted that the club is keen to move away from PIF-financed sponsorship.
The sponsorship and merchandise expert claimed that Al-Hilal want to target more global brands as the popularity of the Pro League grows.
PIF are always looking at the big picture. If one club in their network is looking at this strategy, it is likely that the rest are too. And Newcastle won’t be an exception.
Pivoting to this strategy would a long time. And given that it is the £79m
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PIF deals worth £71m per year to Newcastle: Can they be replaced?
For Newcastle, this is not a short or even medium-term ambition.
At present, they are so heavily reliant on PIF-funded deals that it is inconceivable that they would ditch them.
Their front-of-shirt with Sela is worth £25m per year and, as it is a multi-year deal, we know it is worth at least £50m to the Tynesiders.
One of the first partnerships Newcastle forged with a PIF company was their sleeve deal with Noon, a Middle Eastern ecommerce platform.
That arrangement is worth £7.5m every season. Given that it will extend beyond 2024-25, that alliance is worth another £15m.
There is also the arrangement with Saudia, who pay the club around £3m per season to be their official airline partner. Again, Newcastle can expect to earn at least £6m from this multi-year deal.
That’s £71m of commercial income right there.
However, in the long term, the Magpies will look to diversify their sponsorship portfolio.
The current pressure Man City are under with regards to associated party deals will only lead to more scrutiny in this department.
It’s clear to see which way the wind is blowing with regard to associated party transactions. Newcastle will eventually be forced to stand on their own two feet, even if that seems like a remote prospect at present.