How Real Madrid can afford to buy Kaká ?
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June 4, 2009
How Real Madrid can afford to buy Kaká
Now that Florentino Pérez appears to have delivered on his election promise and Kaká is bound for the Bernabéu, you may be wondering just how Real Madrid's business model allows them to compete with the Premier League.
Without a Russian oligarch or Arab sheikh, where do Real find the money to outspend everyone? For a start, Real are a massive club, with possibly the biggest footballing brand name in the world. Not coincidentally, they have topped Deloitte's Money League for each of the past four seasons and they've done so despite doing poorly in the Champions League.
They have the third-highest average attendance in Europe and while their stadium revenue cannot compete with Manchester United, it still packs a punch. They have been extremely aggressive in pursuing sponsorship opportunities, including overseas tours (on several occasions they have held pre-season training camps in places such as Vietnam and China).
Anything else going for them? Oh yes. Their domestic television contract is by far the richest in the world. They are also helped greatly by tax legislation - originally intended for overseas bankers and executives - that allows their foreign players to pay tax at about 23 per cent for the first five years that they are in the country.
This means that, in headline figures, if they want to pay Kaká £8 million after tax, it would cost them less than £10 million a year, whereas it would cost United £16 million (thanks to the new 50p top marginal rate introduced at the last Budget). Over five years, that's a difference of £30 million.
Finally, there's Real's status as, effectively, a non-profit social trust. This means they do not need to generate £30 million a year just to service their debt (like United).
Whatever debt they hold (and detail here is murky) is with local banks, many of whom are under political and social pressure not to tighten the screws. Real are too big and too important to fail or to come under the kind of debt pressures that affect traditional clubs. The club's social, political and economic significance dwarfs that of any other club in the world, with the possible exception of Barcelona. In that sense, they play by a different set of rules.
Just how much is their TV contract worth? Well, according to the club, in 2006 they signed a seven-year deal with MediaPro guaranteeing €1.1 billion (now about £956 million) for their domestic league TV rights. At least, that's Real's version of events: MediaPro has never disclosed the figure and some dispute the amount. But, if it is true, they earn £135 million a season from their domestic league rights, more than twice what United receive.
How does the structure of the club differ from other leading sides? Real are one of four Spanish clubs - the others are Barcelona, Osasuna and Athletic Bilbao - who were exempted from a 1991 law forcing teams to become plcs. This means they hold regular elections to determine who will lead the club. The president then selects his board and appoints his men to key positions within the club.
So what do you need to do to get elected? To stand for election you have to be a Spanish citizen who has been a club member for at least ten years. And, crucially, you have to submit a deposit equal to 15 per cent of the club's budget, or about £50 million. (But you don't need to come up with the cash yourself, you just need a bank to vouch for you.) Once that's done, you campaign, just like in any other election, and, ultimately, it's the members who decide.
Now that Pérez has been elected, does he have to fund the club? No. In fact, he's not allowed to. He simply runs the club. Of course, Pérez is one of the wealthiest men in Europe, with wide-ranging business interests. No doubt he can leverage them to help the club, particularly when it comes to their relationship with banks and sponsors. Ultimately, though, he cannot finance the club. And, of course, he's not supposed to benefit from it financially.
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Perez: I Will Work Hard To Bring Kaka & Cristiano Ronaldo To Real Madrid
Florentino has continued to aim high as he promised fans he will do everything he can to land two of the best players in the world.
As Real Madrid continue to edge closer towards snapping up Kaka from AC Milan, president Florentino Perez has moved swiftly to outline his next big plan.
The supremo has assured Madridistas that he will not tuck his cheque book away if and when he does acquire the Brazilian, but he also asked for patience from the fans as he vowed to also bring Manchester United sensation Cristiano Ronaldo to the Santiago Bernabeu.
“Nothing will happen this week. But I am going to work so that Kaka and Cristiano Ronaldo will be at Real Madrid,” he said in an interview with Antenna 3.
“To work on this matter is not easy and with the pressure that we have on us, it is going to be very difficult.”
The supremo, however, revealed that former interim chief Vicente Boluda had not told him anything about the alleged pre-agreement with 'CR7'.
“I’ve been here for two and a half days but neither Boluda nor anyone else has spoken to me about this agreement,” he divulged.
“What would be really good is that these great players can be here at Madrid this season, and Cristiano would be one of them.”
Finally, Perez returned to the much talked about Kaka transfer tale and the sudden threat, albeit just rumours, posed by Chelsea.
He said, “The problem will not be the presentation of Kaka. The problem will be whether or not he will play at Real Madrid.
“However, their [Chelsea] official notice that they will not compete with us is good news. We have a good relationship with Milan and I am close friends with Adriano Galliani, which will facilitate this agreement.
“Also, the player has shown his willingness to play for us.”