Friday January 25 2013
Boom or bust in Spain?

As Deloitte announce that Real Madrid and Barcelona were the big earners in 2011-12, Garreth Nunn looks at why nobody in Spain is celebrating.

Deloitte published its annual Football Money League report this week and it was no surprise to see Real Madrid and Barcelona sitting at the top. Los Blancos, after winning the League and making it to the semi-final of the Champions League, became the first side ever to record an income in excess of €500m. With ticket sales, TV rights and sales of merchandise and friendly fees, Florentino Perez is laughing all the way to the bank.

Behind them sit Barca who had a revenue increase of over 7 per cent and earned €483m, a figure not to be sniffed at either. However, you need to look down a long list to find the next Spanish side. While the Clasico duo are doing well, the rest of La Liga is struggling. On Deloitte’s list Valencia sit in 21st with a drop in review from the previous year, more bad news for the club.

In 1992 a new system was introduced to stop clubs running up debts. SAD’s (Sports Limited Companies) were set up for clubs who had debts of over €100m at the time. The result saw men that would give Tony Soprano the chills take over clubs. 20 years later the League will still not admit its mistake in starting this venture, a venture that is causing more and more clubs to go to the wall.

After Valencia failed to pay back a loan to Spanish bank, Bankia, the club fell into the hands of the city council that had acted as a guarantor in 2009 when the club took out a loan with the bailed out National bank. The people of Valencia became the owners of over 70 per cent of the club but no-one was rejoicing. The club owe in the region of €380m and have two stadiums. One is run down and falling apart and the other is an abandoned building site because the club were forced to stop construction when money became tight.

Over the past few summers they have had to sell key players and while it has helped to reduce the debt, it has only been a small dent in the total they owe. Sadly Valencia isn’t a one off, it is becoming the norm. In fact the City Council of Valencia now hold the controlling percentage of shares not only in Los Che but also in Elche and Hercules.

In the north of Spain there is more bad news as Deportivo de La Coruna filed for bankruptcy earlier this month. The club’s money problems were well-known and last week the administrators were called in. This week it was announced that the club owe in the region of €90m with €40m of that believed to be owed to the Spanish tax authorities, the Hacienda. Clubs owing tax is nothing out of the ordinary with a report last year suggesting that a total amount owed by clubs in the top flight being over €700m, with the worst offender being Atletico Madrid.

Los Rojiblancos are believed to owe around €200m to the Taxman alone. While the club’s CEO, Miguel Angel Gil, has constantly denied that the figure is this high, the club’s accounts suggest they are. Two years ago the club were forced to sell Kun Aguero to settle a €50m bill. Since then the club have thrashed out a deal that sees them make yearly payments and it seems the club have learned from their past mistakes as last summer they spent a measly €1m on transfer fees. However, they are still struggling with debt.

With the current recession, clubs are seeing fans staying away from grounds and abstaining from buying their new shirts. Sponsors are also hard to come by. As Arsenal announced a €150m five-year sponsor deal, Atletico announced a €10m boost from an 18-month one. Since 2011, the side that have won four Europeans trophies in two years have struggled to find a permanent sponsor to pay their asking price of €7m a year.

The real issue is that there are no real penalties to stop sides running up debts. Villarreal were one of the few clubs that played it by the book. It was a club that honoured its debts and was an example for all. Their reward for running things well? Relegation!

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