Where do Real Madrid get their money? (2 Viewers)

OP
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Dec 16, 2004
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  • Thread Starter #21
    No offense or anything but the question itself is silly. They got Media, Tv behind them. They own their Stadium, they got stars in their teams, they got % of player's commercials/adv etc...

    Perez is spot on and he knows what he's doing. Purchasing stars will bring them money. Same with Zidane, Figo, Beckham era... difference is just that now they piad more but they'll recover faster.
    They probably will. But the question isn't silly at all. The only thing I like more than football is probably finance, and from a finance point of view it will be interesting to see how/if they will be able to pull this off. The amount they will spend on players this summer is probably around 60% of their total revenues this year. Don't forget that they have to pay salaries and other expenses as well as interest.
    Income statements/balance sheets/cash flow statements say a lot more than anything else about a company like Real Madrid. When you analyze the numbers you understand that this move is very drastic, even for a wealthy club like Real Madrid.
     

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    Stevie

    ..........
    Mar 30, 2003
    17,642
    #23
    I heard in the news the other day that Madrid were meant to of made nearly 100million from beckhams shirt sales in just a few months and also something like Madrid giving a lot of money to the spanish government throughout the year an when they need a loan to buy players or something the government gives it to them. Sorry i couldnt explain that to well.

    edit: here is something i found about it its a long read but it explains everything:

    How can Real Madrid afford Ronaldo?

    by Bill Wilson
    Business reporter, BBC News

    From Puskas and Di Stefano to Zidane and Beckham, Spanish football giant Real Madrid have aspired to acquire some of the most talented and glamorous names in world football.

    Now, in the latest chapter they have swooped in a matter of days for two of the biggest names in world football, Kaka and Ronaldo.

    The signing strategy is being led by the returning president of the club, construction magnate Florentino Perez, who previously led the Spanish team from 2000 to 2006 - during its famous "galacticos" era.

    It was under Mr Perez's first reign that the club initially aimed at becoming the world's richest and best known football brand.

    But how can they afford to pay the reported £56m for Kaka and offer a world-record £80m for Cristiano Ronaldo - existing as they do without the deep pockets of a billionaire benefactor?

    Growing match-day revenues, increasingly shrewd and global marketing, healthy commercial income, and a ground-breaking domestic TV deal, have all catapulted the club to the peak of the Deloitte's Football Money League this year.

    They have topped it for the past four straight years, despite being overshadowed in the Champions League by their bitter rivals Barcelona.

    'Remarkable growth'

    According to those most recent figures, for 2007/08, the club saw its revenue hit £290m during that season.

    Whilst Real Madrid's 4% revenue growth in 2007/08 was more modest than in preceding years, it meant that across a six year period the club had doubled its annual revenues since 2002.

    Perhaps crucially, it also gave the club a revenue lead of 41m euros (£32.5m) over Manchester United, in second place.

    "The engine driving Real's remarkable revenue growth, and its ascent to the top of the money league, has been the club's ability to increase commercial revenue," said Dan Jones, author of the Deloitte report, when it was issued in February.

    Matchday revenue has also increased significantly in the past couple of years thanks to the reconfiguring of areas of the club's stadium to increase corporate hospitality capacity and hence revenues.

    Average attendances at their home ground - the 80,354-capacity Santiago Bernabéu football stadium - are the third-highest in Europe.

    Emerging markets

    After the purchase of David Beckham from Manchester United in 2003, Real Madrid cleverly projected their brand into East Asia, on the back of the England star's appeal.

    "That was all about the race by the big European clubs to crack the East Asian, Indian and other emerging markets first, and the race is still going on," says Nigel Currie, of marketing and sponsorship giants Brand Rapport.

    "However good the Premier League and Spain's La Liga are, there is an elite breaking away, led by the likes of Real Madrid."

    He added: "What they are doing is partly a response to Barcelona's success, but these signings are them putting down a marker to be the top club and football brand in the world."

    Mr Currie said Real were targeting the world's best players - who were also the world's most marketable players.

    'Fickle allegiance'

    That, Mr Currie added, meant that in emerging markets fans may swap allegiance, from - for example - Manchester United to Real Madrid, simply because they preferred to support star players rather than clubs.

    "They are far more fickle in terms of allegiance," he said. "But it is not about Real looking to sell more merchandising in places like China, in fact they would not make a great deal from doing that.

    "They are looking to make money from these signings by maximising their future overseas TV rights," says Mr Currie.

    "There will be massive TV deals coming up for them overseas in the next few years, that is the big carrot.

    "With the developments this week Real Madrid will already have restored their profile and status to number one in these emerging markets.

    "And the team that has the most marketable players, and the most supporters, will get the best TV deals."

    'Important role'

    The television money, both overseas and at home, is crucial to Real's surge in income in recent years.

    Since 1997 Spanish clubs have sold their own rights individually.

    Real Madrid signed its latest deal in 2006 - for a reported record 1.1bn euros - with Spanish film and TV company Mediapro for seven seasons of broadcast rights.

    That works out at a huge 150m euros a year.

    "Spanish television rights have increased significantly in the past three years, and would no doubt play an important role in these large Real Madrid transfers," says James Pickles, editor of industry journal TV Sports Markets.

    Big name sponsors

    But overseas merchandising, domestic and TV rights, and matchday earnings are not Real's only income streams.

    It also has a number of high profile sponsorship partners - Bwin.com, Adidas, Coca-Cola, Audi, and Spanish beer brand Mahou.

    An image rights deal with Adidas alone in early 2007 garnered them 762m euros.

    Another benefit, one that helps attract top name players, is the fact that tax legislation allows their foreign players to pay tax at about 23% for the first five years that they are in the country.

    It also helps that Real - from before the 1950s heyday of Di Stefano - is considered the "establishment team" and can call on close links with the government or city authorities when cash is tight.

    Last but by no means least is the fact that Real, like Barcelona, are exempt from demands imposed on the majority of Spanish football clubs to become publicly listed companies.

    Unlike the majority of European football clubs, Real Madrid are owned by its thousands of members, known as "socios", who elect the president.

    That leaves it free of all the ramifications for takeovers and potential debt issues that being a listed company could involve.

    In its report Deloitte said it would be difficult to see anyone topping Real Madrid at the top of the money league next year, but added "it will be interesting to see how the club copes with the loss of the Brand Beckham effect."

    It appears Real are now answering that question by plugging that gap with the purchase of Kaka, and proposed purchase of Ronaldo.
     

    AngelaL

    Jinx Minx
    Aug 25, 2006
    10,215
    #24
    Where do Real Madrid get their money?

    Good question and it's one many people are asking!


    It's drug money, I tell you.
    That thought crossed my mind too! :D

    :luckyluke: What bank would loan out hundreds of millions of Euros to a football club? Most clubs struggle to make ends meet and need loans just to get by - and they struggle even with loans. For a bank to loan such huge amounts to a club in the current economic climate would be madness.

    Sure Real make more money than most teams, but they squander far more. Their TV channel is a freebie on my goggle-box, so they must be making a loss on that too! I'd have to pay extra to get ManU, Chelsea, or Liverpool channels (not that I would pay extra to see them).

    I have to admit, I think that their finances need investigating!:shifty:
     

    Geof

    Senior Member
    May 14, 2004
    6,740
    #25
    I know Real owned quite a lot of real estate and ground that they sold to appure *some* debt a couple of years ago.
    Also, they own their stadium, which means that they can get loans pretty easily by collateralising their stadium.

    But anyway, I find that people like Perez, Abramovich etc. act like children who bought a toy. Many succesful business people (also on smaller scale, local clubs) do stupid things when they're in charge of football. I guess it's a way for them to buy recognition.
     

    Byrone

    Peen Meister
    Dec 19, 2005
    30,778
    #26
    Oh please if clubs didnt make profit then there would be no point in even bothering with the whole damn thing.

    Everybody's laughing at Real now but they will certainly recoup more than what is currently spent on these players.David Beckham anyone??????

    Real's international fan base is going to double in size with Kaka & Ronaldo on board not to mention their profits from merchadise & tickets.
     

    .zero

    ★ ★ ★
    Aug 8, 2006
    80,373
    #27
    Oh please if clubs didnt make profit then there would be no point in even bothering with the whole damn thing.

    Everybody's laughing at Real now but they will certainly recoup more than what is currently spent on these players.David Beckham anyone??????

    Real's international fan base is going to double in size with Kaka & Ronaldo on board not to mention their profits from merchadise & tickets.
    exactly

    money ain't a thang for RM
     
    OP
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    Paid-off-Ref

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    Dec 16, 2004
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  • Thread Starter #29
    Oh please if clubs didnt make profit then there would be no point in even bothering with the whole damn thing.

    Everybody's laughing at Real now but they will certainly recoup more than what is currently spent on these players.David Beckham anyone??????

    Real's international fan base is going to double in size with Kaka & Ronaldo on board not to mention their profits from merchadise & tickets.
    Clubs usually have a very low profit margin. You can prove me wrong by showing me an annual report that shows otherwise. Football clubs are strange companies as they don't only value financial success but also success on the field. Often success on the field is even more important to them. I think the reason the profit margin is so low is because clubs have to spend in order to stay competitive while always looking at potential future profits. The upward trend of costs usually follows the rising revenues in recent years. Thus the profit margin stays the same even though revenues increase. If clubs didn't spend they'd fall behind as players would go some place else for higher salaries. The football economy doesn't allow high profits because of fierce competition I think. Arsenal has tried to go upstream and get costs under control by putting up a wage ceiling. The effect of that is that they lose their best players to other clubs.
     

    Byrone

    Peen Meister
    Dec 19, 2005
    30,778
    #30
    Clubs usually have a very low profit margin. You can prove me wrong by showing me an annual report that shows otherwise. Football clubs are strange companies as they don't only value financial success but also success on the field. Often success on the field is even more important to them. I think the reason the profit margin is so low is because clubs have to spend in order to stay competitive while always looking at potential future profits. The upward trend of costs usually follows the rising revenues in recent years. Thus the profit margin stays the same even though revenues increase. If clubs didn't spend they'd fall behind as players would go some place else for higher salaries. The football economy doesn't allow high profits because of fierce competition I think. Arsenal has tried to go upstream and get costs under control by putting up a wage ceiling. The effect of that is that they lose their best players to other clubs.
    Please make up your mind & dont back track,either they make money or they dont.Like your post below.


    First of all, football clubs are not profitable at all. Most clubs, for example Juventus, do not make a profit.
    The point of any business is to make a profit however small the profit margin.None the less your right as the majority of the profit goes into players salaries but to suggest that they dont make profit is just crazy.Look however miniscule the profit margins are to the average business its a pretty massive amount of money to bring in.

    Juventus for example imo is on a sound financial road as the stadium belongs to the club & more investment is put into youth players.If the club can get its marketing division up to scratch Juve could make some serious money.
     

    Seven

    In bocca al lupo, Fabio.
    Jun 25, 2003
    38,189
    #31
    I know Real owned quite a lot of real estate and ground that they sold to appure *some* debt a couple of years ago.
    Also, they own their stadium, which means that they can get loans pretty easily by collateralising their stadium.

    But anyway, I find that people like Perez, Abramovich etc. act like children who bought a toy. Many succesful business people (also on smaller scale, local clubs) do stupid things when they're in charge of football. I guess it's a way for them to buy recognition.
    Do you know who bought most of that real estate? ;)
     

    Seven

    In bocca al lupo, Fabio.
    Jun 25, 2003
    38,189
    #32
    No offense or anything but the question itself is silly. They got Media, Tv behind them. They own their Stadium, they got stars in their teams, they got % of player's commercials/adv etc...

    Perez is spot on and he knows what he's doing. Purchasing stars will bring them money. Same with Zidane, Figo, Beckham era... difference is just that now they piad more but they'll recover faster.
    If purchasing stars would bring instant money, Juventus would be doing it all the time. It's tricky. In a lot of cases it does bring money, but it's not that simple.
     
    OP
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    Paid-off-Ref

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    Dec 16, 2004
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  • Thread Starter #33
    The point of a company is to maximize the shareholder's value. Sometimes it means not profiting for a while. A good example of this is a football club. If a club decided to put up a pay roof, it will certainly improve the income statement in the short term. But in the long term the club loses prestige and will lose out more than if it was taking a small hit every year. I'm not sure, but I think Juventus last made a profit in 2003. When I said that clubs weren't "profitable" I should have said "most". Those who do have low profit margins. Ofcourse revenues always exceed profits (Unless there was a company with no costs at all), but if the ratio between the two numbers is 2%, in my view you might as well brake out even. Also from an investors point of view, investing in a football club is not profitable at all as the rate of return is probably very low.
     

    Paolo Sosa

    Senior Member
    Nov 11, 2005
    2,377
    #34
    The point of a company is to maximize the shareholder's value. Sometimes it means not profiting for a while. A good example of this is a football club. If a club decided to put up a pay roof, it will certainly improve the income statement in the short term. But in the long term the club loses prestige and will lose out more than if it was taking a small hit every year. I'm not sure, but I think Juventus last made a profit in 2003. When I said that clubs weren't "profitable" I should have said "most". Those who do have low profit margins. Ofcourse revenues always exceed profits (Unless there was a company with no costs at all), but if the ratio between the two numbers is 2%, in my view you might as well brake out even. Also from an investors point of view, investing in a football club is not profitable at all as the rate of return is probably very low.
    am sorry bro, i know u r tying to simplify it but i can't understand some of what u r trying to sayin . i don't see the break even point to have any importance to Real Madrid at this point since Pereve is a really smart guy he is looking to the return on investment.
    look at it from this point of veiw think of the players as a product, in 2002 who was the best "product" it was Zidane and what made this product even more popular is that he was labeled the most expensive player in the world. but still the return on investment was not as expected, so he looked else where, and boom there was the more fashionable product " Beckham", he was a hit in marketing the Real Madrid brand.
    so Perez brought Kaka and he is a great player but he is the "Zidane" of the new real madrid brand, great quality but not that much in selling so he looked for the New Beckham product and thats why he got "C.Ronaldo".
    eventhough tactically CR7 is not really needed, but Marketing wise he is the best product in the market. having a huge expected return on investment.
     

    Bjerknes

    "Top Economist"
    Mar 16, 2004
    111,511
    #36
    The point of a company is to maximize the shareholder's value. Sometimes it means not profiting for a while. A good example of this is a football club. If a club decided to put up a pay roof, it will certainly improve the income statement in the short term. But in the long term the club loses prestige and will lose out more than if it was taking a small hit every year. I'm not sure, but I think Juventus last made a profit in 2003. When I said that clubs weren't "profitable" I should have said "most". Those who do have low profit margins. Ofcourse revenues always exceed profits (Unless there was a company with no costs at all), but if the ratio between the two numbers is 2%, in my view you might as well brake out even. Also from an investors point of view, investing in a football club is not profitable at all as the rate of return is probably very low.
    While this should be true for the most part, clubs can make a profit by buying low and selling high when it comes to players, just like equities. I think clubs like Udinese used to be somewhat profitable in this regard, especially when they made Europe.

    Making money investing in shares of football clubs doesn't usually work out.
     

    C4ISR

    Senior Member
    Dec 18, 2005
    2,362
    #37
    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.
    http://www.timesonline.co.uk/tol/sport/football/european_football/article6426983.ece
     

    Cronios

    Juventolog
    Jun 7, 2004
    27,412
    #38
    They are funded by the king, it is a national matter to defend the proud of the country, from the Catalans...
    Besides the state and city funding, they are one of the largest natural money making industries...
     

    only-juve

    Senior Member
    Jan 5, 2008
    7,451
    #40
    th election part is really cool, imagine if Juventus had the same system, it would really be good for the club
    :disagree: i think we're better off the way we are.

    IMO madrid's main problem is the instability of its Board. Every president that is elected have he's own idea's and own ways in doing things, when he's gone someone else will come along and start a new trend in the club. One of the reasons i think that helped the top english clubs alot in europe in recent years apart from the $$ is the stability they had in the management Dep.
     

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