GAMES OF STATE
By Alaa Shahine
Like most other government assets,
the nations football teams could be making a lot more money
In Europe, football a continental obsession
is a major moneymaker. In 2003, Britains Manchester
United chalked up £39 million ($71.4 million) in profits after
winning the English Premiership for the eighth time in the last
Although a number of European clubs are still suffering
financially, most are innovating to boost their bottom lines. Spanish
giant Real Madrid turned its fortunes around with the multi-million
dollar sale of the clubs old training facility in 2000, and
Chelsea, another English team, by the surprise takeover of Russian
oil tycoon Roman Abramovich last summer.
In Egypt, by contrast, football despite its
popularity seldom pays dividends. Introduced in the early
years of the 20th century, the sport continues to remain under the
dubious custodianship of the state. Ibrahim Osman, vice president
of the Ismailiya club, couldnt remember exactly how much money
his club lost after winning the 2001 league championship, although
he admitted that we have a budget deficit of some £E
3 million every year.
The situation, to talk to
insiders, is dire.
Khaled Refaat, a board member of the popular Zamalek club
one of the countrys two powerhouse teams said most
clubs would be threatened with bankruptcy in the coming few
years if alternative sources of revenue werent found.
The claim was echoed by Mahmoud Taher, board member of Zamalek nemesis
Ahly, crowned Africas Club of the Century in 2001.
Whats more, in the world of Egyptian football,
winning matches isnt necessarily the best case scenario budget-wise,
as costs rise in proportion to team performance. The more
you win the more money you lose, Osman complained. When
you win, you spend a lot of money on player bonuses and remunerations,
and the income is nothing like what you have to spend.
According to official figures, Ahly topped the list
of most-profitable Egyptian football clubs in 2003 with £E
5 million, despite or perhaps because of the fact
that it didnt win the league championship. Zamalek, which
did win, came in a distant second in terms of profits, with a relatively
meager £E 800,000. Every year, we have a constant increase
in expenditure, said Refaat, who has a degree in sports administration
and marketing from the English Football Association. And the
revenues dont match this.
A new game with the same rules
Marketing experts and club officials, meanwhile, claim that the
host of regulations governing the sport makes it almost impossible
for football clubs to boost revenue.
Under Egyptian law, clubs are by definition government-owned,
non-profit organizations. They are run through a board elected by
club members and arent allowed to produce merchandise.
Additionally, the rules for granting sports sponsorships are highly
proscribed. For example, we have to grant the concessions
to the highest bidder in auctions, although others may have offers
that are not necessarily better in terms of immediate cash injection,
but will bring the club long-term benefits, Taher explained.
While such a system might be suitable for a small-scale organization
serving a primarily social function, and with limited financial
requirements, it doesnt work for popular sports clubs. On
the contrary, many clubs say the introduction of paid players 14
years ago turned them into mass employers with rapidly increasing
wage bills not unlike other branches of the public sector.
New revenue streams, therefore, are badly needed.
The nature of the business has changed, but the laws governing
it havent and this is making our lives harder,
The Manchester United model
In the early 1990s, many European clubs faced similar predicaments.
Manchester United found its way out by raising £7 million
($12.8 million) in a 1991 stock market flotation, in which it transferred
its fixed assets and non-footballing businesses into a company,
which then received substantial shares of future advertising, sponsorship
and promotional revenues.
Having done this, the company now operates under Britains
stock market laws, and is unburdened by restrictions on dividend
payments unlike clubs affiliated to the English Football
Association. As a result, while the club had averaged annual pre-tax
losses of £130,000 ($238,000) between 1974 and 1990, Manchester
United PLCs cumulative profit from 1991 to 1997 was £81.8
million ($150 million), according to The Business Strategy of Football,
by Stefan Syzmanski and Tim Kuypers, which chronicles the teams
Similar attempts at football privatization in Egypt, however,
have proven unworkable, largely because of the regulatory cobweb
governing the state-controlled sport.
In 2000, when the Ahly club decided to go corporate, it brought
in local brokerage house EFG-Hermes to oversee the operation. But
the haziness of sporting regulations doomed the move to failure.
EFG couldnt figure out our legal structure, Taher
said. They wondered, how can we privatize our football
team and form a company while the club doesnt own its playing
Private sector experiments in local football had been thwarted before,
sometimes with disastrous results. While EFG was smart enough not
to risk capital in an untried sector, two businessmen who invested
heavily in a couple of mid-table clubs in 1998 in return,
reportedly, for a percentage of ad revenue werent so
lucky. They bailed out after reportedly suffering huge losses.
According to Osman, Anybody who makes such an attempt is
risking winding up in debt.
Soccer politics carry on own-goaling
The Ministry of Youth, the ultimate overseer of national football
activities, is reportedly considering changes in existing laws to
allow clubs the opportunity to make more cash.
According to Zohair Ammar, International Olympic Committee marketing
expert and member of the Egyptian Football Association (EFA) board,
a group of independent lawyers are currently studying a list of
proposed amendments to current regulations. One of these amendments,
Ammar said, is aimed at allowing clubs to subcontract out their
marketing and promotional activities to qualified companies for
one-year periods. Such arrangements could then be extended if clubs
havent in this time developed viable marketing departments
of their own.
Ammar, who himself contributed to the list of proposals, went
on to criticize what he saw as clubs general lack of
professional business mentality, and inability to take
advantage of existing opportunities. He suggested that several
innovative moneymaking options were open to clubs, such as the launching
of Internet-based web portals, replete with exclusive team content,
on sale to viewers. Another, more orthodox, means of boosting revenue
is by better regulating the industrys bread and butter:
gate income. According to Ammar, clubs should issue season tickets
and better control the illegal, unpaid attendance of matches, which
originally stems from hiring under-qualified people to handle the
While Ahlys Taher and Zamaleks Refaat agreed on these
points, they blamed inefficiency on inherent flaws in clubs
governing structures, saying board politics often take precedence
over innovation. Club elections produce the most popular people,
not those most qualified to run, and this is not economically sound,
Taher said. Firms are not run like that.
He went on to recount how, three years ago, he had presented a
proposal to launch a web portal featuring exclusive match highlights,
accessible only to paying subscribers. That idea only got
approved recently, because there are people who dont want
anybody gaining too much popularity ahead of club elections,
which are scheduled to be held this November.
Refaat said he faced similar obstacles with other proposed projects,
including one to demolish Zamaleks home stadium which
security authorities forbid the team to train in due to its location
in the commercial district of Mohandiseen and sell the property
to developers. We could have used the money to build a state-of-the-art
training facility in the outskirts of Cairo, and attracted big European
teams to spend their winter breaks there, he mused.
Cancellations among Arab leagues
But while youth minister Aly Eddin Helal appears to be open to
ideas of football liberalization, his appointment in March of Essam
Abdel-Moneim as caretaker president of the EFA came as a surprise.
One of the presidents first decisions to the dismay
of many clubs was to tighten the grip on Egyptian participation
in the lucrative Arab Champions League, owned and broadcast exclusively
by Saudi pay-TV network Arab Radio and Television (ART).
At a news conference in early April, Abdel-Moneim announced that
clubs wouldnt be allowed to bring their international players
home from the $6 million pan-Arab tournament (which is held in various
Middle Eastern venues), even if this prevented them from playing
their home matches in the event of a scheduling conflict. Clubs
will have no choice, he said. They can either pressure
the Arab Football Association [which runs the Arab Champions League
tournament] to change their dates, or play without their international
The EFA president, however, made no such restriction on less-lucrative
Months before his appointment, Abdel-Moneim, a prominent sports
journalist for state daily Al-Ahram, had called repeatedly to prevent
Egyptian clubs from taking part in pan-Arab competitions, unless
matches were televised on terrestrial channels.
Osman, for his part, took exception to the reasoning behind the
decision. This is hard currency coming from outside, which
will be spent in Egypt. Why say no to them? Does the EFA have hard
currency? he asked.
The decision prompted Ahly to withdraw from the Arab Champions
League three days before the teams much-anticipated showdown
with its historical rival Zamalek on April 15 in the tournaments
quarterfinals, which were being held in Cairo. According to the
club, playing without its international players would affect the
teams performance and damage its image.
The withdrawal, however, whatever the reason, could result in
heavy penalties for the fabled Cairo side. According to tournament
regulations, clubs that pull out during a championship can be fined
up to $13,000. Additionally, Ahly will lose out on the 400,000 Saudi
riyal ($106,000) prize awarded to fourth-place finishers in the
Ahly will also be obliged to pay back all the travel expenses
incurred for its away matches during the competition, originally
paid by ART, and may well be banned from next years championship,
according to tournament spokesman Ali Al-Dawoud. We offered
several solutions, including postponing matches that conflict with
the Egyptian national teams preparations, but Ahly management
seemed determined to pull out, Al-Dawoud told Business Monthy.
Samir Zaher, vice president of the Arab Football Association,
lashed out at Ahly, but held the EFA chiefly responsible for the
fiasco. It was a disgraceful decision by Ahly, he said
in remarks published in pan-Arab daily Al-Hayat. But the Egyptian
associations put a lot of obstacles in Ahlys way, and forced
the club to withdraw.
According to Taher Abou Zeid, one of three Ahly board members
that voted against the decision, the clubs management knew
the financial consequences of withdrawing, yet did it anyway. This
is an unprecedented act in the history of a club thats been
a pillar of nationalism and sportsmanship since its foundation in
1907, he fumed.
The big beef: TV rights
Despite all the trouble caused by the EFA presidents decision,
Abdel-Monien has a point. In his view, ART along with other
pay-TV networks takes advantage of the popular obsession
with soccer to milk revenue from the average football fan.
Clubs, however, regard the banning of free broadcasts of live
matches as a possible solution to their financial worries. To them,
such a move would boost gate sales and open a bidding war between
satellite channels for exclusive broadcast rights, for which private
stations would pay much more than Egyptian state television does.
Currently, Ahly and Zamalek, the two biggest and most popular
clubs, receive £E 150,000 per game from the state for airing
matches on Egyptian TV. In games where the two are pitted against
each other, arguably the most anticipated club football matches
in the Middle East, each gets £E 350,000. Most other Egyptian
clubs collect about £E 65,000 per game.
This is very low when were providing 90 minutes every
week of prime time television ads, Taher noted. And
even at these rates, we sometime wait a whole year before getting
But demanding more money for TV rights, or banning free-to-air
broadcasts, can be a sensitive issue. In 1999, police were mobilized
in several cases to disperse large crowds gathered in public areas
to watch the Egyptian national team playing in the Confederations
Cup tournament in Mexico. At the time, ART, owned by Saudi billionaire
Sheikh Saleh Kamel, had demanded sky-high fees from the Egyptian
Radio and Television Union to air the game on Egyptian TV, enraging
local public opinion.
A year later, Egyptian businessman Ehab Saleh proposed a scheme
by which local football matches would be encoded, and households
could pay £E 150 for a simple UHF decoder, paying an additional
pound per match. While Saleh claims he received a verbal go-ahead
from then prime minister Kamal El-Ganzouri, the project eventually
died on the vine.
Radio Free Football
Nevertheless, many observers say the introduction of pay-TV to
the Egyptian market is inevitable. Eventually, encoding will
be officially introduced, said Hesham El-Kheshen, owner of
Stryx marketing company. The fact that the Ahly-Ismailiya
match in the Arab Champions League was held in Cairo but not aired
on Egyptian TV is a healthy sign, he added, noting that more
than 60,000 fans watched the match at the stadium.
Both Ahly and Zamalek are hoping to position themselves for any
such shift in media delivery trends. Ahly, for example, is currently
discussing the launch of its own private TV station, which, according
to club estimates, could generate as much as £E 10 million
a year in advertising. Just where project financing will come from
is, however, unclear.
Zamalek, meanwhile, is reportedly considering its own radio station,
although this, too, is in the early stages of discussion.
Despite the tentative baby steps towards notions of profitability,
though, and the grand plans for media launches, Refaat is pessimistic.
We could go bankrupt in five or six years because our actions
are only reactions, he lamented. The youth ministry
sets up development committees after Egypts elimination from
major tournaments but its decisions are never carried out.
The public sector is, after all, the public sector.
Zamalek denies tax evasion charges
Zamaleks financial worries were compounded further
after the governments Central Auditing Agency, along
with the youth ministry, accused the club of tax evasion in
March 2004. The state is now demanding that the club pay some
£E 14 million in taxes on several player-transfer deals
signed in 2000 and 2001.
Zamalek, meanwhile, argues that the clubs former board
had used tax-free bonds to pay for its players contracts.
One Zamalek official told Business Monthly that the use of
tax-free bonds was completely legitimate, and
that they expected the dispute to be resolved soon. Although
it was a policy adopted by the former board, we can safely
say that there is nothing wrong by law with
issuing these bonds, said Khaled Refaat, a Zamalek board
member. I am sure we can settle it with the ministry.
The rising costs of fame
Its little wonder that clubs are complaining about
the unsustainability of their operations. For the past 14
years, players salaries following the trend in
the US and Europe have risen into the stratosphere.
1990 The Egyptian Football Association decides to
change players official status from amateur to professional.
Thereafter, according to regulations, players must sign contracts
with their clubs and abstain from engaging in other professions.
1990 After participating in the World Cup finals in
Italy, several Egyptian national team members sign new contracts
with their clubs. Zamalek's Ismail Youssef, signs a three-year
contract worth £E 35,000.
1998 International player Magdi Toulba leaves Ahly
after a dispute with the club's management over a contract
extension. Toulba asks for £E 85,000; the club insists
on its £E 75,000-per-season offer.
1998 Ahly signs international striker Ahli Maher for
a staggering £E 1 million, paid to his former Cairo
2000 Zamalek poaches legendary twins Hossam and Ibrahim
Hassan from Ahly, contracting the two for £E 1.2 million
2002 Ibrahim Saeed renews his contract with Ahly for
three seasons, for which the club pays him £E 1.1 million.
At each others throats since 1948
While politics and religious inclinations have contributed
to fierce football rivalries in Europe, such as those between
Spains Real Madrid and Barcelona, or Englands
Manchester United and Manchester City, the long-standing rivalry
between Ahly and Zamalek can be largely attributed to one
Hussein Hegazy had in the words of sports writers
and those who saw him play football a charismatic
quality and unmatched footballing skills.
In the second decade of the 20th century, Hegazy began playing
for the Ahly football club, then known as the High School
Students Club. He secured for the freshly established
association a huge fan base, which was mesmerized by his proficiency
at the game that had been introduced to Egypt by the British
occupation at the dawn of the 20th century.
In the 1920s, Hegazy moved to the Zamalek club, then known
as Mukhtalat. The athlete had become so popular
by that time though that many fans moved with him, switching
their allegiance, and triggering what would later become the
context in which the countrys most anticipated grudge
matches would be fought.
The enmity deepened later.
In 1944, the Ahly team went to Palestine still under
the mandate of his Britannic Majesty to play a friendly
match, despite the objections of the Egyptian authorities.
The trip, which had flown in the face of palace policy, resulted
in a ban on the players that went.
The ban lasted for several months, only to be lifted shortly
before Ahly was scheduled to play in the Egypt Cup final against
Zamalek, a favorite of King Farouk, who watched the match
from the stands.
Ahlys rusty condition showed, in the form of a humiliating
0-6 hiding. Zamalek, meanwhile, flush with victory and the
blessings of the sovereign, changed its name to the Farouk
club, provoking criticism from the pro-independence opposition,
who by this time saw Ahly as a symbol of the nationalist movement.
Player transfers continued to fan the rivalry into open
flame. Apart from Hegazy, many other celebrated players moved
from one team to the other. One of the most contentious of
these defections happened as recently as 2001, when Ahlys
legendary twins Hossam and Ibrahim Hassan switched to Zamalek.
Ahly devotees were, needless to say, outraged, but Zamalek
fans considered the acquisition payback for Ahlys signing
of their midfield sensation Reda Abdel-Aal in 1993.
The teams first league derby which ended in
a 2-2 tie was played in October 1948. Since then, the
teams have played each other in 91 league matches, of which
Ahly haswon 30 and Zamalek 23. Thirty-nine matches ended in
Perhaps the most memorable league match was in the 2001/02
season, when four goals by Khaled Ali, nicknamed Bebo, and
a goal each by Ahmed Belal and Reda Shehata, secured Ahly
a 6-1 win over its archrival, whose sole goal was scored by
former Ahly striker Hossam Hassan.