Egypt Prepares Proposal For 2036 Olympics Amid Sports Development Goals

September 24, 2024

 

Egypt is preparing to submit a proposal to the International Olympic Committee for the 2036 Games as part of the government’s efforts to establish goals for developing the sports industry over the next 12 years.

Competing for the right to host the Summer Olympic Games would cost “a pretty penny” to build the necessary infrastructure and facilities to accommodate athletes and millions of visitors. The BBC reported nearly 15.3 million people entered host nation France this summer to watch the games live. According to Market Watch, an economic platform, the country spent about $8.2 billion preparing the country for the tournament. 

To secure sufficient investments for Egypt to compete for the right to host the 2036 Olympics, the government has reformed the sports investment law to allow the private sector to invest in the industry for the first time and launched a strategy through 2032.

In addition to the challenge of securing investments, the government faces rising competition from cash-rich GCC countries, especially Saudi Arabia, which is investing heavily in sports. Additionally, local sports coverage and shows need to evolve to attract viewership on streaming platforms beyond mirroring their cable programming on YouTube.

New law

The government took its first steps to develop the local sports industry in 2017 when it introduced a heavily revised sports law to replace the 1975 one.

The modified legislation allows the creation of limited-liability corporations in Egypt that own and manage sports teams and clubs. Pre-2017, sports clubs had to comply with the 2002 Civil Organizations Law, which allowed only local individuals to own and operate a sports club. They could only establish a board of trustees composed of members representing themselves, not their corporations.

The 2017 law allows private-sector investors and corporations to establish “specialized sports clubs, health and fitness clubs, [and] sports teams financed by corporations based in Egypt, regardless of their original nationality,” the transcript said. It also allows sports investors to build or finance specialized facilities, develop and air sports-related marketing material, establish a licensed sports media outlet, and work with tourism companies to organize sports events.

The modified regulation also allows corporate owners to select the financing model for their projects and incentivizes sports investors to build infrastructure as they see fit.

The law also allows sports companies to list all or part of their shares on the stock exchange or in a private listing. However, that move would deprive them of several incentives in Entry 9 of the 2017 law, such as exemptions from paying real estate tax, various registration and licensing fees, and customs for imported equipment used in the sports establishment.

Additionally, listed sports companies must pay the entertainment tax when selling game tickets.

Lastly, listed sports establishments would not be eligible for a 75% discount on their water and electricity bills and a 50% to 66% deduction when using government-owned transport facilities and state-owned carriers.

The law contains additional restrictions. First, sports companies applying for a license can’t operate in any other sector. They can only establish sports clubs, build or manage sports stadiums or pools, open and operate health and fitness clubs, or operate sports academies.

The 2017 regulation retains Ministry of Youth and Sports “supervision rights” over sports clubs established by corporate investors to ensure compliance with local laws. One such example is sports betting, which is thriving in non-Muslim and some Muslim nations, but remains outlawed in Egypt.

The other restriction is privately owned sports establishments must comply with global conventions governing sports investment and activities, which the 2017 Egyptian law doesn’t address.

Research from Ra Center for Strategic Studies, a local think tank, said, “The 2017 law aims to balance the empowerment of the government as a sports regulator while ensuring independence for private-sector funded and managed sports activities and facilities.”

New strategy

In 2022, the Ministry of Youth and Sports announced a new sports investment strategy through 2032. Minister Ashraf Sobhy told the media the private sector already accounts for 21% of Egypt’s sports investments.

“The private sector is mainly focusing on construction, real estate development and contracting of sports facilities on behalf of the government,” said Sobhy. “We aim to have [them] invest in developing sports clubs and complexes to host international events as well as improving low-key facilities like youth clubs targeting the less privileged athletes.”

One of the first steps to realize the 2032 strategy was creating a state-owned company that links corporate sponsors with amateur athletes. “The idea is that all athletes are ‘managed with the private sector,’ giving them equal access to trainers, psych-doctors, dietitians, and other health and education facilities,” the sports ministry’s statement said.

The ministry also created a specialized medical company to treat and develop treatments for athletes and equip hospitals to treat their injuries. It also established a maintenance services company to maintain, manage and develop local sports facilities.

New money

Government efforts to attract private sports investments come amid a noticeable shift in how people watch sports. That change was evident during this year’s Olympics. “A third of viewers of the Paris games will watch not via broadcast, but online streaming,” The Economist said in July. “In some … countries, streaming will be the main way … young audiences tune in.”

That transition aligns with the changes impacting entertainment viewership worldwide. “The TV business has been turned upside down in the past five years by the migration of viewers from broadcast and cable to streaming,” The Economist said. “Big media firms … yanked their best shows from cable and put them online to attract subscribers.”

That transition was evident for Egypt-based viewers when Disney revoked the rights to broadcast its content on OSN, a paid cable service in the country, transferring it to its streaming Disney+ platform.

Meanwhile, Watch It and Shahid platforms have streaming-exclusive content, including Egyptian movies, series, cartoons and documentaries. Additionally, their entire catalog of cable content is available on their platforms. 

However, local sports content lags. Government-owned free cable channel ONTime Sports is the only outlet authorized to air live local sports events. It mirrors its content on YouTube, cutting up chunks of its programming and games into short video segments as well as streaming games live.

That generic streaming strategy is missing out on significant potential revenue by not increasing engagement with young audiences. “Streaming services need to prioritize user experience, innovative content delivery and ensure robust technological infrastructure,” Paul Myers, head of EMEA at Brightcove, a streaming platform developer, told Broadcast, a U.K. news platform, in July.

Innovations include offering exclusive content alongside matches and post- and pre-match analysis, Myers said. Such material must be compelling, insightful and unique, with high quality production, for existing streaming platforms to pay for the right to air that content or for the cable channel to find sufficient financial feasibility to develop its own streaming platform.

A case in point is Netflix’s 2019 Drive to Survive, an ongoing documentary about behind-the-scenes developments and political power plays during every Formula 1 season. “Years ago, when you went [to Formula 1 races], people were hardcore racing car enthusiasts, and now it’s like people just like the vibe of Formula 1… the entertainment factor,” Guenther Steiner, then principal of the MoneyGram Haas team, told GQ in March, commenting on the show’s popularity.

That success is despite Netflix not having the rights to stream races live or even put them on the platform after they end.

Instead, the show’s popularity comes from how it covers the sport’s technical and human behind-the-scenes aspects to satisfy informed fans and casual viewers alike. “Our sport is drivers with gloves and a helmet inside the car. You don’t know anything [about them or what they do]. So the way to be attractive is to show behind the scenes, in a sort of narrative way,” says Stefano Domenicali, F1’s chief executive.

Regional competition

Another obstacle facing Egypt’s attempts to attract sports investment is increasingly stiff competition from GCC countries. In August 2023, Control Risks, a consultancy, noted that GCC nations “have made several high-profile investments in international sports.”

They see the opportunity to generate revenue from “rising global interest in international sport and associated broadcasting and merchandising opportunities,” Control Risks explained. “[Additionally,] external and internal investment in sport and entertainment will continue to support [their] domestic economic diversification plans.”

GCC nations’ focus is naturally on football, the world’s most popular sport, in addition to sports popular in the United States. Their strategy is to either buy minority stakes in international sports organizations or attract top-tier talent to their local clubs.

In June 2023, the Qatar Investment Authority purchased a 5% stake — paying over $4 billion — in the parent company of the Washington Wizards basketball team, Washington Capitals hockey team and Washington Mystics women’s basketball team. 

The decision followed the country organizing the most profitable men’s Football World Cup. FIFA, football’s regulator, earned a “record $7.5 billion in … commercial deals tied to the [event],” AP reported in November 2022. 

In June 2023, Saudi Arabia announced that LIV Golf, a professional men’s tour backed by the Saudi Public Investment Fund (PIF), merged with the PGA Tour, the US organizer of men’s professional golf tournaments. “The two entities signed an agreement that would combine the PGA Tour’s and LIV Golf’s commercial businesses and rights into a new … for-profit company,” reported David Faber, a journalist for CNBC. “PIF is prepared to invest billions of new capital into the new entity.”

 Saudi Arabia also has invested heavily in football, paying significant amounts for top talent to play in the local league. According to Sportico, a football stats platform, the three most expensive players in the European football leagues saw their annual salaries increase from between $19 million and $35 million in Europe to $110 million to $218 million in Saudi Arabia.

Sportico noted that other GCC states have invested in international football clubs. “Governments across the Gulf have bought up stakes in various European football clubs in recent years.” One of the most prominent deals was the UAE royal family buying UK-based Manchester City. “Meanwhile, footballer Lionel Messi has signed a contract with Saudi Arabia’s tourist board to promote tourism in the Kingdom,” Sportico added.

PIF is “reportedly in talks with [The Association of Tennis Professionals] to … expand the events calendar to new markets,” report Control Risks.

Meanwhile, publicly listed Saudi Aramco, the world’s biggest oil company, has had sponsorship deals in Formula 1 since 2020, while Qatar Airways entered the sport as a sponsor in 2022.

“These developments are not just deepening the familiarity of sports fans with the Gulf region … but disrupting the sports themselves,” Control Risks’ paper noted. That is creating a global buzz for the region as “many fans are keen to see what new opportunities these investments will bring.”

To cope with the fast-paced growth of sports investment in the GCC, Egypt needs to “transform sports … into a real industry,” Mohamed Morgan, chairman of Estadat, the state-owned firm developing local sports facilities, told Ahram, the national newspaper. “It needs to be managed by a professional investment mindset, as we have seen that sports are no longer just for entertainment. It is fertile ground for investment and part of the backbone to create an investment-driven economy for future generations.”

This article first appeared in September’s print edition of Business Monthly.