La Liga in profit, but watch the debts

A LOT of people have been quick to write-off Spain: the financial health of its clubs; the declining fortunes of its top names in the Champions League; and the fall of its national team to the status of also-rans.

Spain thrashed Slovakia 5-0 in Euro 2020 to qualify for the last 16, just 48 hours after Javier Tebas unveiled La Liga’s financial report for 2019-20 (not 2020-21 – what takes so long?). While the emphatic result against the Slovaks underlined that Spain, although not in the same class as their treble trophy-winners of 2008-12, are certainly better-equipped than most pundits have suggested. However, despite La Liga making a € 77.4 million profit in 2020, the short-term outlook appears to be challenging for the league and its flagship clubs. 2020-21, after all, was a year without matchday income as games were played in empty stadiums. As with most clubs and leagues, there is worse to come.

Across the league the clubs generated losses of around € 700 million, but half of that total – much to Tebas’s irritation, was down to Barcelona. Equally perturbing for Tebas must have been the involvement of his three standard-bearers in the European Super League mutiny.

La Liga generated € 5 billion in revenues in 2019-20, a record figure for the league and 3.6% higher than 2018-19. PwC estimate that without the burden of covid-19, La Liga would have generated a further € 300 million. Interestingly, over a five-year period, revenue growth has averaged 12% for the league, considerably higher than IBEX 35 companies who have, on average, lost 1.4% in that timeframe. 

While La Liga’s growth has been relatively robust, the future may be very different. PwC are estimating that revenues for 2020-21 could be as low as €3.5 billion, largely due to lower matchday and TV cash. 

In 2019-20, matchday income fell by 16% to € 796 million, while broadcasting revenues were up by 6.3%. The league is modifying the tender for domestic TV rights to allow new broadcasters to enter the Spanish market, a move that could yield up to € 1 billion.

Commercial income rose slightly but has been stable for the past three years. In such a difficult environment, making any sort of profit must have been satisfying, but the € 77.4 million of 2019-20 was substantially less than 2018-19’s € 225 million. Tellingly, La Liga was the only major league in profit. At the same time, net debt also went up to € 745 million, mostly due to increased investments in players and infrastructure.

Against this backdrop, it is unsurprising that some clubs are having financial difficulties. Barcelona and Real Madrid both have huge debts and in the case of Barca, there have been concerns they have systemic issues to deal with. The future of Lionel Messi is a topic of constant debate, with key figures in the Spanish game hinting that Barca will have to trim their wage bill in order to make room for Messi’s package or face the prospect of not being able to register the Argentinian superstar. Memphis Depay, who has now joined Barca from Lyon, apparently agreed a deal last September 2020, but was unable to sign because of the club’s financial problems.

There are also worries that there is not enough new Spanish talent coming through the ranks, although Barca demonstrated they have some outstanding youngsters. Real Madrid were not represented in the Spanish squad for Euro 2020, but given expatriates account for 70% of playing time at the club, is it really a shock? This figure is double the average for Spain and far lower than the averages for the other big five leagues. Similarly, only 16.5% of appearances were made by club-trained talent, somewhat less than Barca’s 30%. Hence, Spain has one of the oldest leagues across Europe, with only Cyprus and Turkey having older average ages.

Spain remains a big exporter of talent, which may also explain why Real’s multi-national squad has few representatives in Euro 2020. Spain’s 2020 squad has 10 home-based players and 10 Premier Leaguers, with just three (all Barca) from the big two. In the 2018 World Cup, there were 17 La Liga players and four Premier League. Real and Barca had 10 between them. It’s no coincidence that one of the most travelled paths for players is Spain to England. Transfer activity, generally, fell by more than half in 2019-20. 

Regardless of the financial woes of some clubs, Real Madrid, Barcelona and Atlético Madrid continue to feature at the top end of football finance lists created by Deloitte, KPMG Football Benchmark and Brand Finance. Indeed, six Spanish clubs feature in KPMG’s European Elite.

On the field of play, Atlético’s title win in 2021 can possibly be partly attributed to the distracting internal wranglings at Real and Barca. But for the third successive season, the Champions League did not go to Spain. Real Madrid were the last winners from Spain in 2018, hardly a crisis for Tebas and co. but by modern standards, a signal that the most recent golden period of Spanish football may have ended. In 2019-20, not a single La Liga club made the last four and in 2021, three clubs exited at the round of 16 stage. Real Madrid were comfortably beaten by eventual winners Chelsea. Three years does not represent a crisis – between 1966 and 1992, there was not a single Spanish European champion.

Spanish football will recover, in much the same way that the country overcome the worst of the financial crisis of 2008-10. La Liga is one of the most tech savvy leagues in the world and has enormous commercial and culture appeal. The current situation at the two biggest clubs, which has the potential to cause existential problems – not just for the clubs themselves, but the rest of the league. La Liga, UEFA and Spain needs the likes of Real Madrid and Barcelona to be healthy. They are both crucial to the football eco-system in their domestic market – they are the giant hippos with smaller birds and animals feeding off their backs. Furthermore, given La Liga contributes 1.4% to Spain’s GDP and over € 100 million to other causes, nobody should overlook the importance of the game in one of Europe’s major economies.


Photo: Arrano via flickr CC BY-NC-ND 2.0

La Liga’s European worries – decline may be a strong word

THERE was a little introspection in Madrid, Barcelona and Seville after the first legs of the UEFA Champions League, with Spanish football officials fearing a series of setbacks had signalled the decline of the most successful nation in European club competitions.

Like most events big or small, disappointment was accompanied by social media-driven over-reaction and hysteria, with some keyboard experts interpreting the results as the onset of the apocalypse. 

In the past, underperformance would be brushed aside in the knowledge that players like Lionel Messi and the now departed Cristiano Ronaldo would soon produce a rabbit out of a top hat and restore normal service. Not so today, for time has painfully caught-up with Barca and Atlético Madrid were effectively hoisted by their own petard. Meanwhile, in the Europa League, early season leaders Real Sociedad – David Silva and all – were thrashed at “home” by Manchester United. Real scraped a win against Atalanta, but this is no classic campaign for the reigning La Liga champions.

The pandemic has hit Spanish football hard, exposing the high debt levels of the country’s major clubs. Before anyone had ever heard of covid-19, though, debt levels at Real, Barca and Atléti were already substantial. Debt is fine if you can service it and you keep it manageable, but the diminished levels of income have made people a little nervous and some are treating it as an existential threat. 

La Liga’s Javier Tebas has tried to brush aside the debt story, although it was the outspoken league president who predicted a financial crisis could break out in the aftermath of the pandemic. He revealed that a series of financial controls have helped clubs prepare for a major crisis and believes they will manage their way out of any difficulties. The league also plays an important part in determining how much a club can spend on salaries. Tebas added he is more concerned about Barcelona’s lack of leadership as their presidential election approaches.

The debt levels are intimidating by any standards, though, with the overall total debt of the big three clubs now heading towards a staggering € 3 billion. On a net debt basis, however, Barca’s figure is around € 300 million and Real’s € 118 million, still sizeable figures but not the “bankruptcy level” some newspapers are talking of. As Tebas said, the important thing about debt is its relationship to the ability to generate revenue. Obviously, the pandemic has compromised that ability, for the time being, although matchday revenues only account for just 18% and 15% of Real and Barca’s income respectively. 

One can safely assume that Barca will work their way through their problems and that nobody, be they bankers, politicians or creditors, will want to be responsible for pushing the club towards the wall. Nevertheless, debt may stymie clubs from competing on the European stage, especially as Real and Barca are in need of a squad rebuilding programme that would require hard cash. Not that transfer activity is frantic at the moment, it has fallen off a cliff in Spain thanks to the pandemic. Both Barca and Real are also undergoing major infrastructure projects, which will be a drag on capital. 

Has Spain become less attractive as a vibrant football market and has started to lose the battle with the Premier League and Bundesliga? There’s no doubt there are fewer world class players in their prime currently earning a living in La Liga. A glance at the Guardian’s top 100 players list, which was last issued in December 2020, provides some evidence. There were only eight Spanish players included and 21 playing for Spanish clubs. The top Spaniard is 34 year-old Sergio Ramos of Real Madrid. 

Compare that to the 2015 list when there were 16 Spaniards and 28 La Liga representatives. There has been a 50% decline in five years of Spanish players in the top 100. The elite clubs – Atléti (72%), Real (72%), Sevilla (66.5%), Barca (65.3%) and Valencia (57.8%) – are heavily staffed by foreign players. Equally concerning has to be the average age of La Liga squads, almost 28 years of age, which is one of the highest across Europe – only Turkey and Cyprus have older squads.

It may be that Spain is simply coming to the end of a golden age, one in which Spanish clubs won 17 out of 30 European competitions (eight Champions League, nine Europa League) including four years where the country won both major prizes. Nothing goes on forever, even though cyclical success is less accepted than at any time in the past.

Even so, four teams won through to the last 16 of the Champions League in 2020-21 which suggests Spain still has strength in depth. Real were the sole group winners, but Atléti, Sevilla and Barca lost only one game each. It is the results against clubs from the big five leagues that have worried Spain’s footballing community. Barca’s 4-1 home defeat at the hands of Paris Saint-Germain was devastating, especially as it came a few months after their 8-2 humiliation by Bayern Munich. Atléti looked very limited and lacking in invention against a Chelsea team still in transition.  

Spain’s record in the Champions League knockout phase over the past five years has produced a 58% win rate in big-five KO games, but in 2019-20, it was a rather lowly 38%. As well as Barca’s collapse, Real were beaten twice by Manchester City and Atléti slipped up against Leipzig. Go back five years and the win rate was an impressive 70%. It is not out of the question that there may not be a Spanish club in the last eight this season for the first time since 2005. 

A combination of lower performance levels, financial pressure, ageing star players and empty stadiums makes for a slightly downbeat environment, but Spain is not alone. Football across Europe has suffered but when life begins to return to normal, the hunger for the game will, if anything, result in something of a boom period. And Spain will be among the front-runners once more.

Photo: PA Images