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Malaysian FA pushes club privatisation but weak revenues mean state support is here to stay

Malaysia's Johor Darul Ta'zim (Photo by Stanley Chou/Getty Images)

  • Malaysia’s 24 top football clubs have agreed with the Football Association of Malaysia to become private entities by September 8, 2020
  • Only two clubs are currently privately-owned; some clubs have been run by state governments for over 100 years
  • Clubs will need to grow broadcast and sponsorship revenues if they are to come off state support anytime soon

After decades of being operated by state governments, Malaysian football clubs will soon be privatized, albeit more in theory than in practice. Total separation from public funds will take rather longer, with broadcasting and sponsorship revenues not enough to sustain most teams.

Of the 24 teams in the top two tiers of the Malaysian league hierarchy, only two are fully private entities: Johor Darul Tazim (JDT) and Petaling Jaya City (PJ City). The majority are directly run and funded by various state governments up and down the country.

Turning 100-year-old teams like Perak FA and Selangor FA into Perak FC and Selangor FC will be a big challenge. It has been talked about for years but Stuart Ramalingam, general secretary of the Football Association of Malaysia (FAM), is determined to make it happen. Instead of dealing with politicians or civil servants when he communicates with clubs, he wants to talk to business and football people.

“We can see what happens around the world in successful leagues,” Ramalingam, a former consultant with sporting agencies IMG and Dentsu, tells SportBusiness. “Privatisation is the way forward. The way the states work is short-term, with people placed in charge for just two or four years.”

Short-term thinking and a lack of accountability is a reason why Malaysian clubs pay the highest salaries in Southeast Asia yet often hit the headlines for late or non-payment of wages. Ramalingam says the Malaysian league had 262 cases of unpaid salaries in 2019, the highest in Asia, and in August the total figure in arrears was MYR 6.4m (€1.4m/$1.6m).

“Privatisation will provide a more stable environment for football,” he adds. “We want to turn these FAs into FCs but this does not mean the end of FAs. They will be free of the burden of running clubs and be able to focus on the development of football in their states.”

“The state governments should no longer be cash cows for the state teams,” says Haresh Deol, Kuala Lumpur-based sports consultant and editor of news website TwentyTwo13.com. “When clubs are fully privatised, they can then invest in proper infrastructure instead of relying on government facilities. For the sport and industry to grow, it needs to think and act like a business and not a government entity.”

The deadline

September 8, 2020 is the deadline recently agreed by Ramalingam and the respective general secretaries. On that day, the organisations running the teams will become private entities, at least officially.

“We believe that this will happen from a documentation standpoint,” says Ramalingam. “We want to ensure that the split in management actually happens. Once we get there, we will see where we are.”

(Image Credit: Malaysia Football League website)

The FAM hopes that seeing private clubs run professionally will encourage Malaysian businesses or tycoons, such as Cardiff City owner Vincent Tan, to invest in local football. There is a recognition however that the state financial involvement is not going to end in the near future. “We see the split hopefully incorporating a lot of government and state support as it will be needed in the initial years,” says Ramalingam.

Selangor FA, traditionally one of Malaysia’s biggest teams, exemplify the early stages of the change.

In January, Selangor FA secretary-general Johan Kamal Hamidon outlined the ownership structure of the new football club, comprising four stakes. One stake – of 30 per cent – will be held by the Selangor State Development Corporation, one by the FA itself and a third by the crown prince of Selangor – leaving room for other investors to come in.

The challenges

For clubs to achieve self-sufficiency, broadcasting and sponsorship revenues will have to increase. There are difficulties in both aspects.

Just in December, the Malaysian Football League announced that a scheduled payment of MYR 3m, due to all clubs in the top two tiers, would not be paid. The league was hit hard by the March 2019 collapse of its media and marketing rights deal with Telekom Malaysia, which had been worth MYR 60m per season. Media revenues from ongoing deals with OTT platform iFlix and public-service broadcaster RTM are worth significantly less than the TM deal.

“It is unfortunate for us in Malaysia that the broadcasting industry lacks competition,” explains Ramalingam. “There are not many players and not everyone in Malaysia can afford to pay for sport. “

With clubs traditionally reliant on state funding, marketing and sponsorship efforts have been patchy. Some clubs have just two or three partners. Even for those with more, revenues are not large.

“It is a fact that many teams do not have sustainable revenue channels, they fail to transform into commercially viable entities and continue to rely heavily on state funding,” says Sri Vijay Eswaran, the owner of PJ City. “Many clubs have failed to secure lucrative advertising contracts or commercial deals with the private sector or sponsors.”  The Executive Chairman of QI Group, a Hong Kong-based multi-level marketing company, wants to see more businesses, sports marketing agencies, merchandising agencies, sports lawyers and insurance companies to enter the Malaysian football industry.

The future

Johor Darul Ta’zim FC is the model to follow on and off the pitch. Since turning private in 2013, the club has invested heavily in players, facilities, training staff as well as in other fields such as social media marketing, resulting in 2.3 million followers on Facebook. Champions every year since 2014, JDT are the only Malaysian team to participate in the AFC Champions League and its new 40,000 capacity stadium is due to open on January 28.

(Image Credit: Malaysia Football League website)

“With strategic planning, JDT went from being a simple club to a powerhouse,” says the FAM’s marketing manager Rehvan Arumugam. “They show the flexibility private clubs will have in building revenue streams: sponsorship, broadcast, gate receipts, merchandise & events.”

Other clubs can follow in building such emotional connections, he insists. “Great teams like Kedah, Selangor and Perak have big fan bases and if there is a planned marketing and communication strategy, more sponsors will want to work with them.

“If I am a team owner then I would focus on the Gen Z of this next market share which will have the most disposable income in time and get to know what attracts them emotionally.

“The traditional media doesn’t work effectively with this group. We have to sell fans a deep emotional connection. The more awareness and stories being shared about the teams in the digital media landscape raises the level of audience eventually progressing towards revenue.”

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