There was an interesting article in the Times by Gabriele Marcotti on Why Real Madrid’s finances outstrip Manchester United. Marcotti went into some of the details as to why Madrid are so rich and Soccer Tickets Online reader Ariff Ridzuan provided a lot more details on where Madrid’s money comes from.
When Real Madrid‘s new President Florentino Pérez announced his massive summer spending spree, the first thought I had was, how can Real Madrid afford to sign superstars like Kaka and Ronaldo? They are not owned by a Russian oligarch or Arab sheikh, so where does Real find the money to outspend everyone?
The reason is Real’s massive revenue stream. We have reported previously here and here that Deloitte has named Real the richest team in the word for the last four seasons (Manchester United is 2nd) with revenues of €366m (£290m).
So where does Real Madrid get all that money? As you might expect Madrid has several different revenue streams.
TV Rights
Unlike Premier League teams, Real Madrid (and Barcelona) are able to allowed to negotiate their own contracts. Real Madrid signed a five-year deal with Mediapro that kicks in with the 2009/2010 season. According to The Football Economy this deal is worth an estimated €1.1bn to Real Madrid. So that translates into just over €200 million in annual revenue for Madrid, which is about three times what Manchester United earn from the Premier Leagues current TV deal.
Membership
Real Madrid is not set up like English football clubs. It is a member’s sports club or sports co-operative that pays pay to belong too. According to Ariff:
To be a member of Real Madrid, and everything it entails, you have to pay something like $500 a year – for a standard membership. Now you have to see that Real Madrid has something like 150’000 members at the minute. And not all of them are standard members. Elite members pay tens of thousands of dollars a year to have that status. I believe the president has to pay something like $80 million a year for his membership – to be president! Hence the fact that most of their board, and presidents, are basically billionaires. As they are the only guys that can afford to be in office. So let’s just do the sums. 150’000 members paying $500 dollars a year. Even with that conservative estimate, they make $75 million a year in membership fees alone. Add in the elite members, and board members, and you’re maybe talking about $200-300 million dollars a season, in membership fees alone!
Attendance
The Bernabeu Stadium is huge and Real Madrid have the third-highest average attendance in Europe,
Image Rights
When Real Madrid sign a player they retain a significant portion of that players image rights. Those rights allow Madrid to able to make millions in advertising deals. It is believed that when David Beckham signed from Manchester United that Madrid was able to recoup the whole cost of his transfer as a result of new advertising and short deals, it was able to sign as a result of Beckham joining the team.
Taxes
The tax rate in Spain for foreign players is much lower than it is in the U.K. for example. That means that it is cheaper for Real Madrid to sign top players than it is for someone like Manchester United. For example when Ronaldo signed for Madrid, his reported salary will be around €8m net (£6.8m). With Spain’s non-domicile tax rate of 25%, the cost to Madrid is around €10m a year. If Manchester United had wanted to match Madrid’s salary offer to Ronaldo, it would have cost them €8m due to the 50% marginal tax rate in England. Over the length of Ronaldo’s contract, Madrid will pay around €30m less for him than Manchester United will. That is the equivalent of being able to sign a new superstar every year.
{ 4 comments… read them below or add one }
i agreed with the comment nade on thius site its truly the real statement. from madrid fan jamiu……..
It’s a bit more detailed than that.
Firstly, it’s not really a football club. It’s a sports co-operative. Real Madrid is a member’s sports club – for the people of Madrid – and is hence backed by the city and tax payer.
People think it’s just a football club. As they do Barcelona. They are not. Real Madrid covers about 7 or 8 different sports, like Basketball, football, handball, volleyball – and provides teams, and facilities in all of this for it’s members.
For all it’s vast profits, it ploughs plenty into the city, and it’s patrons, and in truth, offers a pretty good service. However, as you state, it also gets great backing and tax breaks in reply.
Secondly, as it’s a co-operative, membership system, this means that there are membership fees. To be a member of Real Madrid, and everything it entails, you have to pay something like $500 a year – for a standard membership.
Now you have to see that Real Madrid has something like 150’000 members at the minute. And not all of them are standard members. Elite members pay tens of thousands of dollars a year to have that status. I believe the president has to pay something like $80 million a year for his membership – to be president! Hence the fact that most of their board, and presidents, are basically billionaires. As they are the only guys that can afford to be in office.
So let’s just do the sums. 150’000 members paying $500 dollars a year. Even with that conservative estimate, they make $75 million a year in membership fees alone. Add in the elite members, and board members, and you’re maybe talking about $200-300 million dollars a season, in membership fees alone!
Thirdly, their TV contracts are far and away the biggest in sport. Unlike teams like Man Utd and The New York Giants, they are allowed to negociate their own contracts, and are not part of collective agreements – and hence, make something like 3 times more than Manchester United a year in TV revenue.
Fourthly, They buy players in a very specific way. When Manchester United or say Juventus buy a player, they generally pay less in wages and transfer fee, on the basis that the player will own their own image rights – and will be able to make millions in advertising deals, and things like that.
Real pay inflated fees, but they also insist on taking every players image rights with this, meaning they make millions in revenues from advertising, merchandise sales, and endorsements. I believe they paid off the entire David Beckham fee in something like 3 months from this!
Finally, a lot of myths about the club:
They are not financed by the Royal Family. The king of Spain isn’t even Spanish. He’s Italian. He merely took the Spanish throne in 1975, after Franco was toppled. I think he supports AC Milan or something!
Banks do help them out. The bank of Madrid is the 2nd biggest in the world, and is also a part owner of the club. So they get lots of attractive loans, and interest rates. However, as I stated – Real Madrid are not actually a profit making company like a Manchester United. Nobody owns them. They have no share holders. They have no owners. Any profits go straight back into the city and the sporting club – and to the members that pay to join
Fantastic insight into where Real Madrid’s money comes from Ariff. Thank you!!
David
Sorry, but a Basic membership costs 45€ a Year…so where did u get these facts from?