Sound finances at Real Madrid without owner funding

The authoritative Swiss Ramble reviews Real Madrid’s2021/22 accounts, when they reported €20m pre-tax profit, though figures benefited from €316m once-off gain after selling stadium rights to Sixth Street. Football wages €478m. Financial debt was up to €1 bln due to stadium investment. Their finances benefited from the effects of COVID “gradually subsiding” and the consequent return of fans to the stadium.

They have budgeted for a further increase in revenue to €770m in 2022/23, as the recovery from the pandemic continues. Looking further ahead, the Bernabéu stadium development will represent a major challenge, but also an opportunity to generate more money.

Work on the development of Real Madrid’s Santiago Bernabéu stadium continues with €538m investment to date (€259m in 2021/22)). Expected to be fully operational for the 2023/24 season with a revised cost of €800m, but driving a “significant” increase in revenue.

Although Florentino Pérez argued that club finances were awful and football was “sick” when pushing for the European Super League, his club has performed better than others during COVID, though these figures obviously benefited from the major Sixth Street/Legends deal.

According to the Deloitte Money League, Real Madrid had the second highest revenue in the world in 2020/21, with their €641m only surpassed by Manchester City €645m, but comfortably ahead of Bayern Munich €611m, Barcelona €582m, Man United €558m and PSG €556m.

Marketing revenue fell €24m (8%) from €314m to €290m (no pre-season tour), but still highest in Spain, ahead of Barcelona €270m, Atleti €96m & Valencia €20m. In 2021 they had 3rd highest commercial income in Europe (per Deloitte), only behind Bayern and PSG.

It’s an “arms race” in shirt sponsorships and kit deals, but Real Madrid’s are among the very highest in the world with Emirates and Adidas paying €70m and €110m a year respectively. Both deals have been extended: Emirates to 2026 and Adidas to 2028 (merchandising is on top).

Broadcasting income was flat at €311m, as higher revenue from winning Champions League & La Liga was offset by €37m in prior year deferred from 2019/20 for games played after accounting close. 2nd highest in Europe in 2020/21, only below Manchester City.

Based on the Swiss Ramble’s estimate, RealMadrid earned €133m for winning the Champions League, €23m more than prior season €110m (when they reached the semi-finals). This was much more than Atletico Madrid €90m, Villarreal €77m, Barcelona €64 and Sevilla €52m.

They have earned around half a billion Euros from European competition in the last 5 years, which is €65m and €107m more than Barcelona and Atletico Madrid respectively. Madrid have won the Champions League an incredible five times since 2014.

Wages

Football wages rose €106m (28%) from €372m to €478m, due to prior year’s 10% salary cut in response to COVID, higher bonuses following success on the pitch and higher termination payments. Total wage bill, including basketball €41m, was €519m.

The €478m wage bill is now higher than Barcelona’s €432m, though the Catalans’ new figure when they publish 2021/22 accounts will be interesting. There was a big gap to Atletico Madrid €266m, then Sevilla €133m and Athletic Bilbao €99m. Sixth highest in Europe in 2020/21.

Despite the revenue increase, RealMadrid wages to turnover ratio increased from 57% to 66%, though still one of the lowest in Spain, much better than Barcelona 85%. The club has budgeted a €69m reduction in football wage bill for 2022/23 from €478m to €409m.

They spent €116m on player purchases in 2021/22, including contingent payments from prior year acquisitions, with €49m net spend. Their €832m gross spend in 5 years up to 2021 was the 6th highest in Europe, despite spending only €45m in 2020/21. Interest payments unchanged at €4m, so much lower than most elite European clubs in 2021, especially Barcelona €41m. However, worth noting that start of (fixed) interest on stadium loans has been delayed: €575m (2.5%) to July 2023, €225m (1.53%) to July 2024.

Of course, Real Madrid do not benefit from owner funding (loans and share capital), unlike many other leading clubs, whose business model is reliant on benevolent owners, e.g. in the last 10 years Inter and Milan have received over €900m, with Chelsea and Manchester City just under €800m.

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The Political Economy of Football V2

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