Spanish soccer giants Real Madrid have announced an increase in net profits to $42m for the 2018/19 season excluding player transfers, representing an increase of 23% over the previous year. The club also reported a cash balance of $170.8m.
Non-transfer revenues have remained near level at $830.6 million, with the club attributing the low growth to an early exit from the UEFA Champions League, having been eliminated by Ajax in the round of 16. Excluded from the figures is the impact of the sale of Cristiano Ronaldo to Juventus for ~$110m. Transfer revenue is typically accounted for separately because of its non-recurring nature.
Real Madrid forecasts that 2019/20 revenue will climb to $901.6m (excluding player transfers) in anticipation of LaLiga’s new rights sales and the activation of new sponsorship contracts.
There’s been a burst of activity in the It’s been a busy winter for soccer financing the major European clubs
Real Madrid has secured financing for the long awaited redevelopment of the Santiago Bernabeu with a syndicate of banks taking on a €575 million issue. US lenders Bank of America and JP Morgan led the deal with local banks Santander and CaixaBank also participating. El Confidencial says the financing is for a period of 30 years, with interest capped at a maximum of 2.5%.
Juventus has been busy issuing €200 million in non-convertible bonds to qualified investors across Europe just last week. Use of proceeds is stated by the club as “to provide the Company with financial resources for its general corporate purposes, streamlining the structure and the maturity of the debt.” With the purchase of Cristiano Ronaldo and recruitment of other high-wage stars the emphasis is likely to be on the latter and using the funds to clean up the capital structure. Juventus is also exploring plans to redevelop their Turin home.
And finally, Barcelona also announced €140 million in financing from two US funds, according to El Pais. Pricoa Capital Group and Barings have extended €90 million and €50 million respectively for use in normal operations and transfer funds. El Pais says the club do not have to repay the loans for five years and have agreed an interest rate of 1.8% subject to periodic adjustment. While most reporting is treating this as long-term debt it appears that this is actually a revolving credit facility that Barca will draw on for short-term financing.
An excellent piece by the New York Times details the setup at FC Stumbras Kaunas, a Lithuanian club intently focused on being a transfer waystation to the clubs of Europe. It is a rare glimpse into the for-profit soccer industry and the costs, for both players and owners, involved in chasing part of the transfer market payday.
The story follows Ibrahima Sory Soumah, a player tapped by AS Monaco but who finds himself at Stumbras instead because of visa issues:
[Soumah], signed to a contract that pays him a minimum-wage salary of $470 a month but, bizarrely, includes a multimillion-dollar buyout, he was sharing a bedroom with a teammate in a house owned by F.C. Stumbras,
Similar stories abound throughout the squad, with many players arriving in the past two years hoping to make the step up to a larger club.
Stumbras has been co-owned by Irish financier Richard Walsh and Portuguese coach Mariano Barreto since 2016 with the strategy of using Lithuania’s EU membership as an gateway for free agents to enter the European market. So far the strategy has yielded no high profile transfer coups and met with resistance from players and agents who claim the contracts are unenforceable. Walsh himself has expressed frustration about working with the industry:
“I can’t say I have found more difficult people than people in the football industry,” he said. “I find them anything but truthful and straightforward.”
It is unclear if an experiment like Stumbras can succeed, particularly with an adversarial stance towards agents who hold serious power in the soccer ecosystem.
Full article: New York Times
On August 3rd 2017, Neymar da Silva Santos Júnior joined Paris St. Germain from Barcelona in a $263 million deal that makes him the most expensive player in soccer history. The fee smashes a record set only one year earlier by Paul Pogba’s $116 million transfer to Manchester United.
The Neymar saga proved to be just the tip of the iceberg with players moving throughout the summer of 2017 at valuations which seemed unthinkable just a few years ago. Romelu Lukaku, Alvaro Morata, Alexander Lacazette, Gylfi Sigurdsson, and Leonardo Bonucci are just a few examples of large fee transfers completed this summer. Many are quick to point to PSG owner Qatar Sports Investments, an investment fund directly backed by the Qatari government, as the inflationary spark saying that investment coming from the sovereign fund is distorting the entire market. But did PSG’s big ticket purchase really set everything off?
This is where it’s helpful to have some perspective. Here’s a visualization of the net transfer spending of the top European leagues (Premier League, La Liga, Serie A, Bundesliga, Ligue 1) with the five biggest English clubs + PSG highlighted:
Note that in the past five years these six clubs have accounted for at least 30% (most years the figure is closer to 50%) of total net spending within the European leagues.
If we include all Premier League clubs the gap becomes even more pronounced, with English clubs spending the vast majority of transfer fees in the past decade barring two years in which Ronaldo and Fabregas respectively were sold outside the league.
Maybe PSG is just catching up to the party that the Premier League started?