Domestic Industrial Investment Failing Football

EghtesadOnline; The investment of industries in sports may seem like a perfect solution for the problems facing football clubs, but in Iran the policy outcome shows otherwise.

News ID: ۷۳۸۶۷۳

17 December 2016

National football clubs, either public or private, are struggling businesses. Most of them are state-owned and clubs can see several executive management changes in a season.

Despite the serious money flowing into football clubs from their owner industries, the teams are usually underperforming and consequently the subject of intense debates among officials, journalists and their disappointed fans.

In a write-up in Tejarat-e Farda Persian weekly, Sadeq Raeesi-Kia, former managing director of Rah Ahan F.C., takes a look at reasons for the failure of investment of industries in Iranian football to produce the desired results. He recalls three contributing factors in analyzing such investments.

Impact of Labor Law’s Mandate

Under the Iranian Labor Law, employers are responsible for the health of their employees and “are obliged to cooperate with the Ministry of Cooperatives, Labor and Social Welfare”.

By erroneously interpreting the law, the employers have opted for direct investment in the professional football league system instead of spending money on their workers’ health by providing them sports facilities.

Manufacturing companies own at least 60% of the sports clubs present in the Persian Gulf Pro League. They have crowded out professional clubs and teams belonging to the private sector companies. This has thwarted the formation of a strong market for national football.

Their presence has given rise to a rampant inflation of transfer fees and a new wave of intermediaries. Above all, these industries have short-changed the services they offer to their employees.

Iran’s Third National Economic Development Plan allowed domestic economic institutions to allocate 1% of their budget to sports promotion. For close to a decade, the directors of these companies lavished a huge budget on running football clubs.

The negative impacts of such an approach are over-reliance on public budget, unqualified football directors, corruption and poor management that made people mistrustful of national football.

Promotion and Marketing

International companies see football as an important way of expanding their brands. Football marketing focuses both on the promotion of the sports event and teams as well as the advertisement of other products and services through sporting events and teams.

It is a service in which the element promoted can be a physical product or a brand name, but it seems unreasonable to market a product when it already has a treasure trove of customers, according to Financial Tribune.

Investment in football by companies such as Iran Khodro and SAIPA would bring no advantages to football. This would also be disheartening for the companies of the private sector eager to invest in football clubs.

Examples of successful investments in football show economic institutions mostly prefer sponsorship deals with the clubs rather than owning them.

In Iran, it is common for sponsorship deals to be on a match-by-match basis as opposed to annual or multi-year contracts seen in Europe and the United States.

Iranian industries could borrow a leaf out of the leading international companies’ book by long-term sponsoring of sports events rather than taking over a club.