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Making the Arsenal

Or is Deuda, Deuda in any language?

By Cameron Wolfe.

On the day when Manchester United and Liverpool have come out and admitted that they are in a group of clubs demanding that the Premier League board introduce financial controls on clubs’ spending, so that each club would be forced to break even each year or face sanctions, we take a look at what happens when such controls are not in place….

Barcelona v’s Real Madrid (A tale of two Cities)

Barcelona:

Barcelona get all the footballing plaudits on the field but looking at their figures there is a question as to whether they manage to stay within FFP.    If they fail to meet the FIFA requirements. Will they be excluded from the CL?

Or will colourful accounting kick in?

In 2011, Forbes evaluated Barcelona’s worth to be around £596million, ranking them fourth after Manchester United, Real Madrid, and Arsenal, based on figures from the 2010 season.

Barcelona recorded revenue of £290million in the same period, ranking second to Real Madrid, who generated £380 million in revenue.

2010 figures showed that Barcelona had a net debt of £350 million, currently 58% of net worth. The club managed to record a loss of £63 million over the course of the year, despite having defended their La Liga title.

For 2011, Barcelona’s gross debt stands at around £382m. Barcelona was found to have the highest average salary per player of all professional sports teams in the world, just ahead of rivals Real Madrid.

But Barcelona’s operational costs are enormous. A player-wage bill of £185m is the highest in the world. Wages / turnover ratio is a heart-stopping 76.8%. Extra running costs push total expenditure to £301.1m

In brief just as with some clubs in the EPL, Barcelona are currently losing money year on year. Yet they persist in signing the best players and have the highest wage bill not just in their league but in the whole world.

The current squad is estimated value is £200m and doesn’t include players brought through the youth system.

The T.V. revenue in Spain is split with 49% going between Barcelona and Real Madrid. All the other teams share the rest.

When Barcelona bought Cesc the August before. It was with a lump sum of £14m and the remainder with staggered payments.

Real Madrid:

Real Madrid’s by contrast do make a healthy profit each year. Turnover, before the transfer of players increased from £350m in 2009-10 to £380 million in 2010-11.

A club statement read: “Real Madrid closes the 2010-11 fiscal year with £380m turnover. An 8.6% increase over last year. It is the largest revenue obtained by any sports institution in the world.   Debt also fell due to the increased revenue from £193m to £133million.

For the fickle Arsenal fans that persist with the theory of signing the best players regardless of cost to the club, a cautionary tale would be Real’s attempt in the 2010 CL campaign that included Cristiano Ronaldo, Kaká, Xabi Alonso, Karim Benzema and Raúl Albiol

Club President Perez announced “Real Madrid’s philosophy is to always sign the best players in the world regardless of the cost to the club.”

It ended in an ignominious exit from the Champions League, when Lyon (managed by Remi Garde) eliminated them at the last 16 stage. This meant that Madrid had not won a Champions League knock-out tie for six years, leading the local Madrid media to conclude that their “stratospheric spending” was nothing more than a colossal waste of money. Even the conservative daily ABC was moved to describe it as “more than £200m down the drain.”

UEFA’s President, Michel Platini, has condemned Madrid’s “excessive transfers as representing a serious challenge to the idea of fair play and the concept of financial balance”, leading to the assumption that Real Madrid would not be able to meet UEFA’s forthcoming Financial Fair Play (FFP) regulations that encourage football clubs to live within their means (although Real Madrid would contest this).

Madrid has been accused of colourful accounting, mostly relating to the purchase of players, and colourful banking (mostly for being a little too close to their bankers).   During the first Pérez regime, the club decided to write-off the cost of new players in the period of acquisition instead of capitalising the cost as an asset and then amortising it over the length of the player’s contract. This policy is not line with international accounting standards.

In brief. Madrid is managing to make a profit each year even with such high profile expensive additions on the playing field. The fact that the club generates such huge amounts of revenue each year allows them to indulge the fans and to get whichever player they want as the search for success.  According to their figures over the last four seasons. Madrid’s profit has been £120m

As a side note here is a list of the highest average sports stars wages.

2011 Average sports wage from around the world.

* Highest paid in that league.

Rank (last year) Ave pay per year (week)

1 (1) Barcelona * £5,260,313 (£101,160)

2 (2) Real Madrid £4,724,662 (£90,859)

3 (10) Manchester City * £4,486,580 (£86,280)

4 (6) Chelsea £4,118,227 (£79,197)

5 (4) LA Lakers * £3,804,441 (£73,162) Basketball

6 (3) New York Yankees * £3,748,831 (£72,093) Baseball

7 (14) Milan * £3,699,411 (£71,143)

8 (12) Bayern Munich * £3,579,961 (£68,845)

9 (13) Philadelphia Phillies £3,525,612 (£67,800) Baseball

10 (7) Internazionale £3,454,681 (£66,436)

For reference points here are some other clubs…

16 (22) Arsenal £3,199,678 (£61,532)

18 (20) Liverpool £3,169,631 (£60,954)

51 (110) Tottenham £2,308,494 (£44,394)

172 (163) Celtic * £1,065,304 (£20,487)

213 (-) Blackpool £435,640 (£8,378) Lowest paid

227 (229) Sporting Gijon £230,664 (£4,436) Lowest paid

277 (272) Hamilton £55,548 (£1,068) Lowest paid

Before anyone gets carried away. I know that Messi and Ronaldo are paid far more than those figures. They’re an average for the whole squad.

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