Home > Football > The REAL reason why Manchester United, Liverpool and Manchester City can't compete with Madrid
by Vishnu Vasanth on 30 June 2009
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Just how did Los Blancos manage to raise such gargantuan sums in this tight market? And, what makes them so sure that they can smash the transfer record twice (maybe three times) in the same year and still come out smelling of roses?
A few years from now, will the same adoring fans and the ridiculously pro-Madrid tabloids (AS and MARCA) berate Floentino Perez for sinking the institution that was Real Madrid? Are Real Madrid going the Leeds United way? Is Senor Perez doing a Peter Ridsdale?
Not likely, according to most financial and marketing analysts. The ethics and morals of such massive deals during times of unprecedented crisis make for an entirely valid argument, but that is reserved for another discussion.
Also, the technical qualities of Kaka and Cristiano Ronaldo are beyond the scope of this article. I'm assuming that both are untalented/semi-talented, and that all they can do is sell jerseys.
Real Madrid are one of the few clubs in the world (apart from AC Milan, Barcelona, Manchester United and Liverpool) that have the marketing infrastructure to reap the benefits of such a deal. If Manchester City were to try this, they would probably not generate nearly enough financial traction from such a deal.
On the other hand, by all accounts, Real Madrid are comfortably expected to sell a million-and-a-half jerseys in the next two years alone at an average price of €90, recouping nearly all of the fees paid for Kaka and Ronaldo. The crucial fact here being that they already have a global appeal and marketing infrastructure in place to reap the financial benefits from such audacious deals.
As mentioned earlier, Madrid are not the only ones who have this marketing machine behind them. So, why can't Manchester United offer those numbers for some of their targets?
The club have a similar global stature and have been far more successful over the last three years in sporting terms. The answer lies in television revenues.
While Madrid can, and have, negotiated their own television contracts, United rely on the English Premier League to do this and consequently share (albeit unequally) their TV revenues with the league's other clubs. To put the effect of this in perspective, United make just half of what Madrid make in TV revenue.
In fact, the Spanish bank that extended the loan for these deals is reported to have said that if any other club or individual can furnish the same collateral (i.e. TV contracts with assured revenues), they would cheerfully extend similar loans to them, too.
Sadly, even if this TV deal business is sorted out, the likes of United and Liverpool aren't likely to be bidding big money for their transfer targets. Their recent takeovers have been fueled by significant leverage, making it far more risky to pull off such mega transfers.
In contrast, Real Madrid are owned by the socios or the members, hence the debt on the club's books is used purely to cater to the ongoing needs of the club and not as a result of an acquisition.
The billionaire-fueled newly-richclubs, like Manchester City, don't have the infrastructure to benefit financially from a mega deal, and the Uniteds and Liverpools don't have too little TV revenue and too much takeover-related debt to pull off such a mega transfer.
Until such time as this changes, Real will continue to make hay. No club is loved or hated by fans around the world in equal proportion. Most of the club's fan base (outside of Spain) is in South America, Portugal and France.
The Kaka and Ronaldo transfers will have the effect of further boosting the Real brand, causing young footballers in these nations to grow up dreaming of Real. This is a less obvious aspect that Senor Perez and Co. refer to when they over-use the phrase investment while discussing these transfers.
So, this whole article seems to underscore what many have voiced openly; Florentino Perez is an evil genius, maybe Satan himself!
Furthering the angst of football-loving Real haters is the thought of Ronaldo and Kaka (and possibly Franck Ribery or Karim Benzema) prancing around the Bernebau turf showing off their stepovers, flicks and DIVES.
So, for the benefit of the millions of Real haters the world over, what CAN go wrong? Lots.
Firstly, Real might alienate a huge portion of their fan base who are shocked by the club's opulent spending with no sensitivity to their fans' personal financial crises.
This is a real risk and one which Perez might not have anticipated. Another risk (though less probable) is that the Galacticos empire might implode, resulting in a pathetic on-the-field showing, thereby reducing Real to a laughing stock in the footballing world.
This would make it so embarrassing for fans to be caught wearing a Real jersey that shirt sales would virtually dry up, causing Perez's master plan to go bust.
While this would not pauper the Los Blancos, it would shrink their resources severely, making them virtually impotent in future transfer windows.
Only time will tell how this one will pan out. While we're waiting, enjoy the spectacle on offer at the Santiago Bernabeu.
Comments (14)
by Jason Halfpenny on June 30, 2009
Vishnu Vasanth, you are arrogant and naive to think Real Madrid are some kind of ultimate superpower in football so its plain obvious you are just another puppet Real Madrid fan gving it 'the big we are' war cry. Only the truth is Real Madrid have won nothing last season because FC Barcelona are by far better and not won the Champions League in how many years?, because they are by far not as huge as you make out. A Bunch of play boy, fly boy players who can not even play together to achieve anything. As for competing on a financial scale well, Manchester City FC could of oubid and outclassed Real Madrid for Cristiano Ronaldo if Real Madrid did not have such a par history as United. Truth is we City fans would of boycotted any such move for Ronaldo and our club knew it. Well i can speak for most City fans when i say we never wanted Kaka at Manchester City either, we already have Robinho, a far better player than Kaka and any Brazilian citizen would agree with me on that. Manchester City are the richest in the world and its only a matter of time before we knock you elite glory hunting fans off your mountains.
by Oliver on June 30, 2009
Well, actually clubs only get like 10% of the value of each shirt sold. The shirts afterall have to be made, transported and marketed. So contrary to what you write here, 1.5 million Real Madrid shirts will only bring less than €15 Million to Real Madrid. That will leave another 15 years to make the Ronaldo & Kaka money back. And they have and are planning to spend even more. This is the biggest fairy tale since George W. Bush.
on June 30, 2009 on June 30, 2009
madrid also know that if they do come into some serious financial diffuculties the king of spain will bail them out
by Herbie Popnecker on June 30, 2009
Hand it to the myopic Citeh supporter to spout nonsense. Robinho better than Kaka? In which game system? Cause in real life only one of them's won the Ballon D'or. The reason why Madrid can afford these sorts of deals and United or the United Arab Citizens can't is that Madrid negotiate their TV deal individually while Prem clubs negotiate as a group. The overall deal is bigger in England but Real Madrid get a far greater piece of their pie than any English club do of theirs. And it isn't the King of Spain who'll bail them out. Perez is the owner of one of the biggest construction companies in Spain. His connections with banks and the leverage he already has over them gives him an unfair advantage on loan rates and payment plans. Don't get me wrong, I hate Madrid, and I'm no glory hunter, I support one of the smaller clubs in Spain, but hate them for the right reasons. They do have an unfair advantage. So does Barca by the way.
by Shantharam Shenoy on June 30, 2009
I know this is stuff of dreams but it would be something brilliant if Madrid get relegated..but practically speaking its highly unlikely..but expect scorelines like 8-8 or more...Hope Barca thrash Madrid... I just DETEST them
by William Boland on June 30, 2009
Real Madrid would have sold those million and a half jerseys anyway, just with a different name on the back. No matter how they try to sell it there is absolutely no chance of them recouping what they have paid out on them. They said the same thing about Beckham a few years back, but really they were just selling Beckham jerseys instead of Raul ones. Manchester City on the other hand have all the potential in the world to increase their market share. Any big name player will help them move into markets that they haven't been able to reach before. Its simple marketing and economics.
by Vishnu on July 01, 2009
Hi Jason, If you read the article fully, you will clearly see that I did not mean to be biased towards Real in any way. I'm merely analyzing what makes Real's transfer escapades possible. I have even tried to point out what could go wrong and why. And, I have not expressed disrespect to any club (incl Man City), which makes your anger all the more inexplicable. Cheers
on July 03, 2009 on July 03, 2009
Robinho is not a far better player than Kaka.
by Joe Fraiser on August 17, 2009
How can any Man City fan have the audacity to even talk of Real Madrid in the same breath? Not too long ago u were fighting to avoid relegation & now u have the guts to take on millions of fans of the 9 time european champions ?? I hope the Arabs abandon u & send u back to mid table, for most of us ders only 1 club in Manchester & its not d blue one..
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