Real Madrid are a cash machine

The authoritative Swiss Ramble has been examining Real Madrid's accounts for 2017/18. These accounts cover a season when they finished third in La Liga, but won the Champions League for a third consecutive year, the fourth time in five years, plus the Club World Cup and European and Spanish Super Cups. A club that once seemed mired in financial troubles, despite its success on the pitch, now enjoys considerable financial success.

They will once again officially have the highest revenue in world football when the 2017/18 Money League is published, as their €751m is much higher than Manchester United’s estimated €673m (£590m converted at 1.14).

Profit before tax increased by €17m from €26m to €43m (profit after tax up €10m from €21m to €31m). Revenue (Madrid’s definition) rose 11% (€76m), their largest rise since 2000, to a record high of €751m, while profit on player sales was 4% (€2m) up at €54m.

Most clubs in La Liga are profitable, but Real Madrid's 2017/18 €31m profit after tax would have been higher than all other clubs’ reported 2016/17 figures with Sevilla €23m and Celta Vigo €23m leading the way. In comparison, Barcelona’s 2017/18 profit was only €13m.

All revenue streams increased with the largest growth in marketing €41m (16%) to €295m, followed by international and friendly matches €13m (17%) to €100m, broadcasting €13m (8%) to €178m and membership fees and stadium revenue €8m (5%) to €174m.

Real Madrid are a cash machine, generating almost a billion (€973m) from operating activities in last seven years, though this has fallen from €195m in 2015 to €93m in 2018, mainly due to salaries and bonuses.

Real Madrid have made considerable efforts to reduce their debt, so much so that they actually have net funds of €107m, compared to €327m debt in 2009 (as per the club’s own definition, which includes transfer fees and infrastructure liabilities). Bank borrowings are only €60m.

Perhaps surprisingly, Real Madrid have made a profit from transfers in the last three seasons (annual average £28m), partly due to a transfer ban after the club was found guilty of breaching rules on signing youth players. This compares to £62m average net spend for preceding seven years.

Even though the club's profits have been remarkably consistent, it is evident that they have become increasingly reliant on player sales with average profits here more than doubling in last five years from €23m to €48m. The 2018/19 budget includes €102m (mainly Ronaldo to Juventus).

Despite the continued increase in wages, Rea lMadrid 53% wages to turnover ratio is still highly respectable (only marginally above the level recommended by Deloitte), thanks to their enormous revenue, and is around the same level as Barcelona 52%. That said, this is much higher than the 42-45% the club achieved between 2012 and 2016.

Champions League revenue will rise by 54% in 2018/19. There is also a new UEFA coefficient payment (based on performances over 10 years), which will benefit Real Madrid at the expense of clubs from countries with large TV pools (England and Italy), guaranteeing them €35m.

Thanks to their fantastic record in the Champions League, Real Madrid have earned a hefty €358m from European competition in the last 5 years, which is €82m and €87m more than Barcelona and Atletico Madrid respectively. In Europe, this is only surpassed by Juventus.

The club had the third highest commercial income in the Money League with €301m, only behind Bayern €343m and Manchester United €325m. They have an excellent shirt sponsorship with Emirates (€70m a year) and kit deal with Adidas (€70m a year plus guaranteed merchandising of €30m).

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The Political Economy of Football V2

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