A Dark Cloud Over Spanish Soccer
Top-flight soccer was due to return to Spain this weekend with the start of the new season of La Liga — at least according to what had been scheduled.
Instead, players from La Liga’s 20 clubs, as well as their counterparts in the second division, are almost certain to strike in an effort to secure salary payment guarantees from the Spanish soccer federation.
The players and the federation were set to hold an 11th-hour meeting Friday to avoid what would be the first such strike since 1984. But whatever the outcome of the last-ditch negotiations, their acrimony has served to highlight the severity of Spanish soccer’s financial problems at a time when, paradoxically, the country’s players have accumulated unprecedented victories on the field, including the World Cup triumph in South Africa last year.
Half of the clubs that compete in Spain’s top two divisions have entered bankruptcy proceedings. The list includes all three clubs that won promotion to La Liga earlier this year — Real Betis, Rayo Vallecano and Granada.
With Spain’s economy struggling to stay afloat amid the world financial crisis, executives from smaller, debt-laden clubs warn that the workload for bankruptcy courts is bound to rise. The most recent Liga club to throw in the towel is Racing Santander, which sought protection from its creditors last month.
Some also accuse Spain’s two soccer powerhouses — Barcelona and Real Madrid — of being content to see rivals sink deeper into financial problems, whatever the consequences for a league that has increasingly becoming a duel between its two biggest protagonists. In fact, Barcelona has won the past three Liga titles with an average lead of 24 points over the third-placed team. Valencia was the last team to disrupt the Barcelona-Madrid duopoly, winning the Liga title in 2004.
Besides defeating each other, critics argue that Barcelona and Real Madrid’s only real interests lie in shining in the European Champions League, as well as increasing their fan base and commercial presence worldwide.
“The Liga is abandoning its status as a top-level tournament because of the huge differences in economic revenues,” said Ramón Planes, sporting director of Espanyol de Barcelona, a crosstown rival that is also one of La Liga’s oldest clubs. “I believe the big teams have no interest in fixing these differences, because that way they ensure their participation in the Champions League each season.”
While smaller clubs have struggled recently to find corporate backers, Barcelona reached the most lucrative shirt sponsorship deal in the history of soccer with the Qatar Foundation last December, worth €165 million, or $238 million, over five years.
But the most recurrent complaint made by Mr. Planes and other club executives concerns the gap in revenue from television coverage. Spain’s to-each-his-own approach, whereby every club has been negotiating its own television agreements, has allowed Real Madrid and Barcelona to pocket about half of the €650 million of annual television revenue generated by La Liga, as well as develop their own television channels. In contrast, Getafe, a Liga club from the Madrid suburbs, has received about €6 million.
Perhaps more tellingly, La Liga’s television revenue is less than half what clubs in the English Premiership share, and are dwarfed by the €915 million in television rights generated by the Italian Serie A in the season that ended in 2010. France’s top league, meanwhile, produced €607 million in television revenue that year, almost on par with Spain, according to a study published last month by José María Gay, a finance professor at the University of Barcelona.
Mr Gay suggested that Spanish soccer operated “without any sense of solidarity, in an environment where clubs never think about how to maximize their collective worth.” The risk, he added, was that viewers would eventually switch off, except for European clashes and “clásico” encounters between Real Madrid and Barcelona. “People watch French soccer not because of the higher standard but because it’s a very open and unpredictable competition,” he said.
Some form of solidarity, however, has been on display in the recent salary dispute, which centers on the players’ demand for more money to be set aside by the federation as part of an emergency fund to guarantee that players get paid even if their clubs are bankrupt. The strike planning has been led by star players like Carles Puyol of Barcelona and goalkeeper Iker Casillas, who reportedly earns €10 million a year at Real Madrid. According to the players’ association, Liga and second-division clubs already owed a combined €50 million to 200 players at the end of last season. The clubs, meanwhile, owe the Spanish state almost €650 million in unpaid taxes.
Threatened with a strike, the federation might have to improve salary arrangements for players. Changes are also afoot in television rights, even though most of the contracts struck by the clubs will not expire until 2014. Under an agreement signed last year, most clubs have pledged to share more fairly future television revenue and to guarantee that clubs that get relegated to a lower division maintain a slice of the television proceeds to ensure a smoother financial transition.
Spanish clubs will also have to comply with UEFA’s financial fair play rules, which come into effect in 2013 and are designed to limit transfer spending and help weaker clubs.
In the meantime, however, most clubs have shown little desire to alter their strategies, however financially unsustainable. Some have even continued to pay record transfer fees while under bankruptcy protection, taking advantage of lax Spanish legislation that allows such spending — much to the dismay of healthier rivals that claim unfair competition. For instance, Real Zaragoza, which is under bankruptcy protection after accumulating €134 million in debt, bought Roberto, a goalkeeper, from Benfica in Portugal for €8.6 million this summer.
The result is that several Spanish clubs have salary bills that are higher than their total revenue, even though FIFA, the world soccer body, recommends that salaries should never exceed 50 percent of revenue, according to José María Arrabal, a former executive of Real Madrid and Málaga who now runs a consulting firm that helps soccer clubs develop their business. “We need to impose professional management and the idea that you spend what you can afford, but that’s very hard to do when everybody feels under intense pressure to keep up with the biggest spenders,” he said.
Indeed, Real Madrid and Barcelona, which are also Europe’s two biggest clubs by revenue, have continued to write massive checks for new players this summer in order to bolster already sizeable squads.
Meanwhile, the difficulties of many clubs have also been exacerbated by past ties to now-collapsed industries, most notably construction companies that provided teams with massive sponsorship deals during Spain’s economic boom that came to an abrupt halt in 2008. Furthermore, some clubs budgeted ambitious real estate and stadium infrastructure projects that have failed to materialize.
A case in point is Valencia, which sits on an unfinished, 75,000-seat stadium that was due to open two years ago but whose construction was instead halted because of mounting financial problems.
“Soccer is largely a reflection of what has been happening in our economy, with people spending way beyond their income, relying on fanciful growth forecasts and ending up with unsustainable debt and an asset pricing bubble,” said Mr. Gay, the Barcelona university professor.
Should such financial woes persist in Spain, executives expect that more clubs will follow the example of Málaga, which was taken over last year by Sheikh Abdullah bin Nasser Al Thani, a member of the Qatari royal family.
So far, however, Málaga is the exception rather than the rule in Spain — in stark contrast to the English Premiership, which is replete with Russian, U.S. and Middle Eastern funding.
“Perhaps the general economic difficulties of Spain have made foreign investors wary for now, but I do think that more foreign money will be the best and perhaps only way to breathe some fresh air into our soccer,” said Fernando Sanz, a former Real Madrid player and former president of Málaga, who engineered the club’s Qatari takeover last year.
New York Times