Madrid and Barcelona don't like each other very much, but none of the other clubs in La Liga like either of them. No wonder they look so angry. (source: theaustralian.com.au) |
In
September 2011, Sevilla
president José María Del Nido invited all of La Liga's teams to
Seville to discuss their financial future. The two excluded clubs
were Real Madrid and FC Barcelona, Spain's two biggest clubs by all
metrics, left at home to pout like brooding, unpopular teenagers. Del
Nido's message was clear: the big two were cannibalising the rest of
the league, turning La Liga into what he called a “crap league --
the biggest pile of junk in Europe.”
Two
years on, and little has changed. Before their Supercopa match with
Barcelona, Atletico Madrid manager Diego Simone issued a damning
verdict. “Madrid and Barcelona play in a different league, and this
is a boring championship. We'll have to wait until there is a change
in the share of television revenue, because this is a two-teamleague."
Simone
is not wrong. The imbalance in Spain's TV revenues makes feudal
Europe look equal. Under the latest deal, the negotiation of which
Del Nido was trying to influence, Madrid and Barcelona between them
take 35% of all revenues. Atletico and Valencia then are allowed 11%,
and 45% is to be divided amongst the remaining 16 clubs (the
remainder is to be used for league placement payments and such). This
means that Real and Barca both take €140 million, almost three
times the receipts of Atletico and Valencia (€46 million and €48
million respectively), and more than ten times that of the majority
of clubs (seven teams receive €14 million, one €13 million and
two €15 million). By way of comparison, in the far more equitable
Premier League (in 2011/12), champions Manchester City earned £60million and relegated Blackburn Rovers and Wolverhampton Wanderers
earned £40 million from the television deal.
The
reason for this disparity is that the league does not negotiate its
TV rights collectively, as the other major European leagues –
including the Premier League, the Bundesliga and Serie A – do. The
result is that Barca and Madrid, the most popular La Liga teams by
far domestically and internationally, have greater TV rights income
than any other clubs in the world. According to Deloitte, Madrid
earned €199.2 million in total from TV distribution rights, and FC
Barcelona €178.9 million. By way of comparison, the next highest
earners were Chelsea, who received €139.4 million (in a bumper year
where they won the Champions League) and Manchester United, who
earned €128.5 million in total.
Spain's
TV deal thus gives Real Madrid and Barcelona a structural advantage
over their rivals both domestically and internationally. This is not
their only one. Both clubs enjoy status as
'membership clubs', allowing them to register as not-for-profit
organisations and receive significant corporate and property tax
breaks. In 1990 the Spanish government ruled that all clubs besides
Madrid, Barca, Osasuna and Athletic Bilbao had to become limited
companies, waiving their tax advantages.
The
result of these two structural advantages is that Real Madrid and
Barcelona are vastly wealthy. They are not just the richest two clubs
in Spain, but the richest two clubs in the world: their revenues of
€512.6 million and €483 million respectively are around €100
million greater than the third-richest club (Manchester United,
€395.9 million) and almost double the eighth-richest (AC Milan,
€256.9 million). No other Spanish teams make the top twenty;
indeed, Real
Madrid and Barcelona account for almost 60 per cent of revenues
generated by the 20 first league clubs, an unbalance far greater than
can be found in the other European leagues.
This
wealth is, of course, reflected in their on-the-pitch dominance. The
brilliance is easily visible to anyone who has seen the teams of
Messi and Ronaldo play. Both clubs routinely win by four or five
goals, and have been ratcheting up record points totals in
consecutive seasons. They also regularly reach the last stages of the
Champions League, with Barcelona having won the trophy three times in
the last decade. Pep Guardiola summed up the Madrid-Barcelona duopoly
as “fucking barbaric”.
It
is no coincidence that the last time a team other than Real or Barca
challenged for La Liga was Sevilla in 2006/7. This was the last boom
year before the financial havoc of the 2007 recession. As the big two
have risen, the rest of La Liga has slowly sunk into the mire of the
Spanish economy. Javier
Tebas, president of the Spanish football league, compares the
football market to the housing market: “The sector became inflated.
It grew through debts. Then the crisis brought an end to all this
money – and strangled us economically.” Professor
José Maria Gay de Liébana of the University of Barcelona agrees:
“Football is largely a reflection of what has been happening in our
economy, with people spending way beyond their income, relying on
fanciful growth forecasts and ending up with unsustainable debt and
an asset pricing bubble.”
Football's
asset pricing bubble has left much of La Liga in disarray. Many clubs
have been through periods of governmental administration; almost all
are heavily in debt. Professor Gay estimates that the debt of La Liga
clubs was €3.5 billion, with half of them having negative equity
(i.e. their reported liabilities are greater than their assets i.e.
they're fucked). Around €700 million of this debt is owned in taxes
to the Spanish government. With the bursting of the bubble, and the
continued struggles of the Spanish economy, these debts have become a
heavy burden for the league. For every club, excluding the big two
(and Athletic Bilbao), footballing glory is no longer a target. They
can only aim for survival.
Despite
these problems, the clubs' chances of continued existence have
improved recently. The first was the introduction, at the time of the
last TV rights deal, of parachute payments for relegated clubs. Money
would now be paid from the TV deal of the top division to those teams
relegated into the second one, in order to help them deal with the
far harsher financial realities one rung down the ladder. Francisco
Roca, the chief executive of La
Liga says that “If
you get relegated in England, it is difficult. In Spain, it is
catastrophic. You don't even get 10% of the revenue you used to have.
We have doubled that amount, but we have to do more."
The
arrival of necessary parachute payments came at a large cost: it was
in this round of negotiation that Barcelona and Madrid quashed the
Sevilla-lead rebellion and enshrined their televisual dominance. The
problem the La Liga clubs face is that the big two's popularity is
essential to making the league's TV rights seem appealing to
prospective buyers. As much as Madrid and Barca are cannibals on
their fellow clubs, these same clubs are parasites of the backs of
the two behemoths. The clubs accepted a raw deal on TV revenues
because they needed parachute payments to guarantee survival; they
are trapped in a vicious circle that may well lead to increased big
two wealth and popularity, and further little 18 financial jeopardy.
All the parties know this, and Madrid and Barcelona use this
knowledge to browbeat the league in negotiation. As Espanyol director
Joan Collet puts it, “when Madrid and Barcelona stand before them,
when Florentino [Pérez, the Madrid president] starts to talk, the
other clubs shit themselves."
Nonetheless,
there may be some hope for the future. Madrid and Barcelona (and
Osasuna and Athletic Bilbao) may soon lose their tax advantage. The
special status of the four clubs is under review by the European
Commission's competition office, which is seeking to determine
whether the tax-breaks the clubs' status allows qualifies as illegal
government aid. So far, the commission has taken more than four years
to come to a decision, and has still not announced what this decision
might be (usually investigations with the same priority as this one
are decided in one year, but the competition office have repeatedly
overshot their deadlines). Increased pressure from several European
clubs, most prominently Bayern München, however, has lead to the
intervention of the European
Ombudsman. The Independent reported that a spokeswoman of the EC
competition office said that it was "in contact with the
Ombudsman" over the issue of Madrid and Barcelona's member-owned
status and expected "to take a position as regards state aid to
professional sport in the near future".
The
two outcomes seem to be either that the four clubs will lose their
special tax privileges, or, as Inside World Football suggest, that
the 1990 act imposing the limited company model on professional clubs
will be deemed against the European Union's Directive on Services in
the Internal Market, and will therefore be removed. Either way, the
playing field should be slightly more level for everyone else.
There
is some hope being generated by the clubs themselves. While it seems
to have been a failure on a macroeconomic level, within the Spanish
football market the policy of austerity is starting to have some
success. La Liga teams have reduced their annual losses from €200
million in the 2011-12 season to under €40 million in 2012-13.
Furthermore, the predictions for next year are good, with losses
potentially falling collectively to just €10 million.
If
La Liga continues to manage and reduce its debt, then there is hope
that the teams can once again become more competitive with their
divisional giants. At the very least, no longer being on the brink of
annihilation should give the clubs a stronger bargaining position
when the TV rights are next up for renegotiation.
The
greatest source of hope, however, is the players themselves. Spain is
currently enjoying an unprecedented quality and depth of professional
footballers. One of the reasons Spanish clubs have been able to
reduce their losses is the continual production of highly talented,
and therefore highly priced, young footballers. Currently these
players are being sold to fend off oblivion; in a slightly more
stable economic environment, clubs may be able to hold onto their
talented youngsters just a little longer. After all, Valencia had
David Villa for five peak years; Málaga could only cling to Isco for
two seasons. Isco is now only 21, and already cost Madrid €30
million. Undoubtedly, in classic Real Madrid style, he will be pretty
good for a couple of seasons and then wastefully sold on abroad, at a
loss, so the next idiotic president can splurge the next world-record
transfer fee on the next unneeded glamour signing. Gerardo 'Tata'
Martino, the current Barcelona manager, has recently said that Gareth
Bale's transfer fee shows “a lack of respect for the world in
general”, and he is completely right. The only problem is that
Barcelona paid an equally disrespectful €57 million for Neymar.