The Pérez statement: Still difficult to see beyond self interest

IT WAS always going to be hard to come to terms with the chipping away of football’s global position, but Real Madrid’s president, Florentino Pérez, may be a little premature in speaking of the first signs of terminal decline. Given what we know about the European Super League project, it almost seems it suits some people to talk of a diminishing appetite for the world’s most popular sport.

There can be no denying that football is as popular as it has ever been. The attendances, the financial power and the commercial appeal may have plateaued to some extent, but for the past 30 years, the trajectory has been upwards. It is a trajectory that has benefitted the likes of Real Madrid more than the small and weak, but some clubs have become richer, more influential and, in most cases, more successful. New giants have also been created and this has not been well received by the old establishment, a group that includes Real, Barca, Manchester United, Arsenal and Liverpool. The new guard, so to speak, includes Chelsea, Manchester City and Paris Saint-Germain, clubs whose growth has been far from organic, if there is such a thing in top-class football.

The creation of elitism never goes down well, except among the beneficiaries. It is inconceivable that the 12 clubs who advocated a European Super League expected the reaction to be positive for their original plan. Football fans baulk at anything that threatens the very essence of the game, of which the unexpected plays a very crucial role. Unsurprisingly, there were protests from the supporters of the 12 clubs, the management of which showed a remarkable level of naivety in anticipating anything less than disapproval.

The project never went away and there are signs that another attempt to win the hearts of the sceptics may not be far away. Pérez spoke only recently of the sickness at the heart of football, but there is no admission that his club are at the forefront of football capitalism. Football’s popularity has fed this capitalism (fans do not need to buy merchandise, pay high ticket prices and form virtual queues for season tickets), but the machine has been sold itself well, encouraging loyalty and the fear of missing out. If younger generations are not interested in 90-minute football, it may have something to do with the high prices of tickets, stagnating wages and youth unemployment – at a time when players’ wages continue to rise and transfer fees climb ever higher.

At the same time, football’s imbalances have been assisted by governing bodies pandering to the needs of the big clubs, creating competitions that almost guarantee the elite clubs remain just that. Knockout competitions are never seen as the mark of a team, so pan-European competitions have become more inclusive with structures more akin to seeded leagues, thereby ensuring the crème de la crème rise to the top on a consistent basis.

Take a look at the UEFA Champions League. Since 2004-05, Chelsea’s first title win under Roman Abramovich, heralding the age of the so-called steroid club, 16 of the 18 Champions Leagues have been won by eight teams from the European Super League 12 (Bayern Munich, in 2013 and 2020 were the winners of the other two), while 14 of 18 finalists have also come from the same group. In the previous 18 seasons, 12 different clubs won the competition (including its predecessor), with six coming from that ESL 12.

And now, clubs at the very top of the tree, which are also among the 20 richest, are eager to shake-up European football to ensure they remain at the summit. If football is in crisis, then it surely cannot free itself of problems by creating a structure that makes a select band of clubs richer. Pérez seems concerned about too many inconsequential matches within UEFA’s plans for a new-look portfolio.

He also points to the regular meetings of the top tennis players as an example of elite clashes that capture the imagination of the public and continue to grow the sport. It is ludicrous to compare tennis to football, because firstly there are more elite clubs than elite tennis players and in any case, fans do not like repetitive finals. It should be noted that Grand Slam competitions are essentially knockout tournaments.

Football becomes boring when the same teams play in finals time after time. Tennis fans might like Federer v Djokovic every time (or the equivalent), but keep on serving up Real Madrid v Barcelona or Real Madrid v Liverpool and the attraction becomes diluted.

Football is not in competition with other sports and comparisons between the TV deals of the game with American sports is largely unimportant. It could be that football’s media rights have actually peaked, for a number of reasons. It is more worthwhile to compare the media rights of La Liga or the Premier League with MLS rather than sports like gridiron, basketball and ice hockey. Football is a genuinely worldwide game, unlike some of the US-centric sports that are embedded in American culture. Furthermore, the global economy, which seems on the brink of a new downturn, has never truly recovered since 2008, which should resonate with La Liga clubs. We’ve had 2008, the pandemic, political uncertainty and now war in Ukraine. Football, like society, has suffered from the gradual erosion of certainty.

The inauguration of a super league may suit a dozen clubs, but it will do little for the eco-system that exists in European football. However, there is no guarantee that a 12-team structure will become as compelling in year five as it might be in year one. It may be a way to bolster damaged balance sheets, reduce debt in the short-term and give a bigger slice of the pie to those driving change, but football’s charm is all about the big and the small, the prospect of “what might happen” and the drama of “David v Goliath”. Tamper with these things and what do you have?

Real Madrid’s finances – a display of resilience?

REAL MADRID are on a bit of a cautious high at the moment; European and Spanish champions, in the middle of a stadium redevelopment programme and seemingly starting to bounce back from a financial perspective.  Preliminary figures for 2021-22 issued by the club provided further evidence of the resilience of their finances, despite losing around € 400 million through the pandemic.

Real have also started the 2022-23 season well and have a 100% record in the league and Champions League. Although Real were part of the aborted European Super League project, they remain at the forefront of European football.

Real have just reported a remarkable profit of € 13 million for the 2021-22 season, which continues their profitability through the covid-19 years. Their profit for was € 12 million higher than 2020-21 and even higher than 2020’s € 313,000. Their financial performance is in marked contrast to their bitter rivals, Barcelona, who have been mired in crisis over the past couple of years.

When Real won the Champions League last season, it was something of a surprise as many people wrote them off. Their squad has looked a little aged at times, but in 2021-22, they profited from a stellar year from one of their veterans, Karim Benzema who scored 44 goals. Likewise, their coach, Carlo Ancelotti, who returned to the club in 2021, demonstrated his skill in getting the best out of a bunch of seasoned professionals.

Real Madrid (the whole club), generated € 721.5 million in revenues in 2021-22, a 10% increase on 2020-21. This figure is higher than the last two seasons, but still around € 30 million below the peaks of 2018 and 2019. In 2022-23, the club anticipates revenues to head towards € 800 million and make a pre-tax profit of approximately € 5 million.

Interestingly, Real’s cash position has improved, rising from € 122 million to € 425 million. Furthermore, the club has a net liquidity position of € 263 million, a spectacular turnaround from 2021 when they had net debt of € 46.4 million. During the crisis, Real have reduced debt by more than € 300 million. The club’s liquidity felt the benefit of the € 360 million 20-year deal signed with Sixth Street/Legacy for use of the stadium.

During the pandemic, Real had to be relatively conservative around player acquisition and this may have contributed to their failure to land some of their targets in 2021 and 2022. Their net position across 2020-21 to 2021-22  was € 111 million in gross spend and € 274 million receipts, translating to a net positive of € 163 million. In 2022-23, they have spent € 80 million and recouped € 92 million. In the summer of 2022, there were a number of departures of players who had been on Real’s books for some years, notably Marcelo, Gareth Bale, Isco and Casemiro, the latter who was sold to Manchester United for € 70 million. As for the younger players, such as Vínicius Júnior and Rodrygo, they are starting to really flourish, although there are continued rumours they will try and secure Paris Saint-Germain’s  Klyian Mbappé in 2022-23.

Real’s president, Florentino Pérez, met with shareholders before announcing the closure of the books for 2021-22 and pointed to the club’s operational efficiency, investment capabilities and cost containment measures, all of which had contributed to the healthier cash and debt positions. Although the effects of the pandemic are clearly subsiding, they are still impacting revenues.

The Bernabéu remodelling is a major project and Real have taken further cash from the loan facility allocated for the project, making the total drawings so far to € 800 million. Real have had problems with their pitch this season, largely due to the new turf which has come from a part of Spain – Extramadura where summer temperatures have soared. The new-look stadium will include a mechanism that will allow the pitch to be stored underground.

Real’s full and segmentalised financial figures will be published in due course.