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Spanish football finances examined in detail: Zaragoza, Real Madrid, Villarreal

I'm flying!  I'm a CASH-GENERATING MACHINE!!  (Photo by Denis Doyle/Getty Images)
I'm flying! I'm a CASH-GENERATING MACHINE!! (Photo by Denis Doyle/Getty Images)
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  Yesterday Marca's cover pictured a deflated soccer ball to underline the dire financial condition of many teams in Spain: 21 Spanish football teams in bankruptcy (Primera and Segunda), losses in the billions.   A number of players are owed money, and the players' union is even threatening a strike over this issue. The Segunda B is apparently even worse, and Villarreal's neighbors Castellón are a sad example.

   The paper conducted an online poll: "Quién tiene la culpa", they asked, "who's to blame"?  With rare unanimity, 95% of respondents blamed team management, only 5% the general Spanish economic situation.  And sometimes it seems like only 5% of clubs know what they are doing, so maybe the poll is pretty accurate!

So, we'll emulate Marca and focus on finances this morning.  We're going to look at a bankrupt disaster, Zaragoza;  a surprisingly robust "big club", Real Madrid; and then (of course) the little team that could, Villarreal.

The first is financial basket case Real Zaragoza, Spanish football's largest bankruptcy with debts of €100 million.  As Jamie McGregor points out here, it takes real talent to mismanage a team this badly; their catchment area is large, they have good attendances. 

But in 2009-10 they had only €35 million in operating income; €14 million from television revenues, and €21 million from matchday sources and commercial sponsorship.  (It seems to me this indicates some severe lack of attention to the commercial side of operations; as we'll see below, Villarreal does much better at this in a smaller ground and a smaller catchment area).

But, even so, the real problem is the team has continually overpaid for players given such a small revenue base; wages and salaries alone were €40 million the same year, so the team was losing money even before taking into account any other expenses! (In fact, their net loss was around €40 million, so they weren't controlling other expenses well either).

The local newspaper printed the list of Zaragoza's debtors.  The total debt owed to current members of the team is about €4.6 million; another €9 million or so is owed to former players (including €2.605 million to Fabian Ayala.  HA!  Remember when Zaragoza signed him from us? The Mouse has been retired for nearly two years now!)

And as for transfer fees, Zaragoza owes over €30 million, including €13 million to Shaktar Donetsk, €6 million to AC Milan, nearly €3 million to Getafe, and €1.5 million to Deportivo La Coruña.  (Villarreal evidently succeeded in collecting its fees, as they don't show in the debtor list).  Clearly, this failure to pay up has been going on for some time.

Getafe and Depor, not surprisingly, have argued Zaragoza should be relegated, and the league is apparently ready to consider penalizing teams that go into bankruptcy, though the odds of a retroactive punishment are slim.  (The league, by the way, is owed nearly €1.5 million by Zaragoza, too).

And Zaragoza are not alone, with 20 other teams joining them in bankruptcy.  It's not surprising, really; most receive miniscule TV rights payments each year, and how can you get valuable sponsorship deals or fill seats in the stadium wiithout spending for players?  The solvent teams are those that work the margins well and live within their means, but that's a hard recipe for success.

Meanwhile, even "solvent" teams are doing poorly.  Valencia continues to shuffle players madly in an attempt to reduce its bloated playing staff and pay down some debt, apparently willing to sacrifice up-and-coming youngsters like Isco in order to keep Juan Mata.  This is, of course, the legacy of the free-spending days which resulted in success domestically and in Europe, but also a huge debt burden and a half-built stadium.

Barcelona, if you believe their club president Rosell, already made the easy cuts (eliminating their baseball team!!) and now has eliminated color copies--all so they can bid for Cesc Fabregas yet again.  Barca has huge income (€400 million) but also very high expenses, which need to be brought into line soon.   Paying the playing staff bonuses for winning the CL final that were larger in total than the money the team received from their CL adventure indicates a certain lack of financial acuity, that's for sure!

Real Madrid:  Interestingly, there IS one Spanish team, at least, that is hugely profitable right now:  €30 million profit last year.  They easily will meet the FIFA Financial Fair Play rules limiting the percentage of revenues paid to players; their debt is well below dangerous levels, and they have a broad distribution of revenues, unlikely to decline significantly. Unfortunately for Michel Platini, who attacked their acquisition policy as "a serious challenge to fair play and the concept of financial balance", that team is indeed Real Madrid!

   The article I've linked to above is excellently done and worth reading in detail if you are a financial geek, but if you're not, here are the main takeaway points.  Madrid has a revenue stream of about €450 million. Team salaries are less than half of that, and the team has little outside debt, so interest payments are small.  And while it is tempting to criticize their big-money purchases, Madrid also sell well.  They make money on player sales (admittedly, some of these are cantera players with little "book value") year after year.  It is interesting to note that they owe more money to other teams for transfer fees than they owe banks, though!

    Even when the new TV deal comes into effect (and I would say, even if it becomes substantially fairer along the lines of what Sevilla and Villarreal have suggested) Madrid won't hurt for money.  They have been very forward-thinking in their approach to matchday revenues, building luxury suites in the Bernabeu, and when it comes to the commercial side of things Madrid is second to none. 

They have large sponsorship deals with bwin and adidas, and their best players ("CR7", Casillas, and Ramos, especially) are essentially money machines for the club, who get a sizeable percentage of their image rights and huge sales of shirts and so on. The only clouds on the horizon are possible changes in Spanish taxation which could result in some of those players wanting to move abroad, and/or Jose Mourinho transforming the team into an unlikeable monster.  He's trying, anyway....

Now let's look at Villarreal, commonly considered one of the best managed team in Spain and the poster child for doing a lot with very little. Note that the wage bill is not that different from Zaragoza's; revenues have been consistently higher, though.

Here is what data I could find or estimate for the last three years (all data in millions of euros).

2008-09: operating revenues were €75: I estimate €25 came from TV (excluding Champions League), €28 from matchday and sponsorship deals, and €22 from the Champions League.  Profits from player sales (not included in operating revenues) were €28.5 for total revenue of €103.5.

 On the expense side, wages and salaries were €45.5, amortization of transfer fees was €32.8, and other expenses were €17.7, as the team made €7.5 million profit that year.

2009-10: revenues from TV were €25 again, matchday/sponsorship revenues up to €30.5, but the team only earned €3.2 million from competing in the Europa League so had revenues of €58.75.

   Wages and salaries declined to €39. I don't have figures for player sales and amortization, but the "net expenses" (other expenses plus amortization, less player sales) must have been around €20 at most, as I believe the team basically broke even.

2010-11: Assuming the other revenue sources didn't change much, the Villarreal revenues in 2010-11 should have been around €62 since the club earned an extra €3 or so from the Europa League.  Wages and salaries I would expect to have declined further, given the various players offloaded last summer, maybe to €36-37.  If the net expenses figure was again about €20, then the team should post a profit of about €5-6 this time round.

That this might be correct is supported by Sr. Roig's comment in April that this year's budget might expand by €5 million or so (he's reinvesting the profits) and the notion that without the Europa League income (which wasn't assured by any means in the summer) the club would have essentially broken even.  We'll have to see when the figures are released whether this is right!

Villarreal's revenues are remarkably constrained: matchday revenues are pretty much capped because the club can't build oodles of luxury boxes and fill a 70,000 seat stadium in Vila-real.

TV revenues are set until a new deal comes in in 2015 or whenever it is; sponsorship agreements are clearly an area where the club would like to generate more income, though Barca and Madrid's numbers (€150 per year each) are completely out of reach. If Villarreal could generate as much through all its commercial activities as Barca receives from its new shirt sponsor (€30/yr) this would be quite an achievement.

Villarreal's cantera functions as a source of players to the team, of course, but hasn't generated many players to be sold for profits, nor does Villarreal intend to use it that way. 

So the only real source of income that can be expanded, albeit not easily, is the revenue stream from the Champions League and/or Europa League.  If Villarreal can make it into the top four in consecutive years, it begins to pick up the revenue stream to expand the budget, which is necessary in order to bring in the players to compete for the top four, get the picture.   Sr. Roig has said if the TV revenues were €10-15 higher, the team could compete very well, and this is true inasmuch as it would relieve the dependence on CL revenues.  Until that happens, it's all a bit of a merry-go-round.

   The way to fall off this merry-go-round is to take the big gamble; spend lots of money on players who can't really increase the matchday and sponsorship revenues (unlike Real Madrid, who essentially can turn players like Ronaldo into cash machines for the club); can't increase the TV revenues, can only increase the wage bill and (hopefully) the return from CL football. 

     It's a big gamble without much reward in the grand scheme of things, and it's a gamble the Villarreal management hasn't been willing to take.   It's true the club has virtually no external debt to speak of; I hear supporters sometimes complaining that the team should borrow money to increase the playing budget and mount a stronger challenge for Europe, but the upside is very small.  So, Villarreal management runs a tight submarine (ouch!).

Villarreal has had good success working slowly and carefully, and intends to keep doing that.  Their challenge is less the big two than it is clubs such as Sevilla, Valencia, Atleti, Athletic, and now Malaga--teams that can realistically challenge for Europe on a regular basis.  We'll just have to see what the remainder of the summer and next year brings, on the financial front and on the pitch!

   I want to thank the writer of the "Vendovos Mario" blog (, from whose articles most of the financial data here was taken. Any mistakes are mine, though!