Spain triumphs but clubs broke
Source: Agencies |
July 14, 2010, Wednesday
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SPAIN'S triumphant march to its first World Cup success has deflected attention from the parlous financial state of many of the clubs living beyond their means in the domestic league.
Even La Liga giant Barcelona, second on accountancy firm Deloitte's latest list of the world's richest clubs by revenue, admitted cashflow difficulties last week. New president Sandro Rosell said the Catalans were seeking a US$190-million bank loan to address "liquidity problems".
Spain's worst recession in at least 50 years, the collapse of the real estate market and surging wage and transfer costs have combined to push clubs deeper into the red and forced some, such as Real Mallorca, into administration. The situation has been critical for some time but little action has been taken by the football association (RFEF), the professional soccer league (LFP) or the government.
A large part of the problem is the power wielded by Barcelona and its big-spending arch-rival Real Madrid. Real topped Deloitte's Football Money League with income in the 2008/09 season of 401.4 million euros compared to Barcelona's 366 million.
Unlike in rival European leagues, deals for television rights, a key revenue stream for soccer clubs, are negotiated individually and Real and Barcelona rake in about half of the 600 million-euro TV pot between them.
"The financial instability in Spain is mainly due to excessive outlay on players," Angel Barajas, associate professor of financial management at the University of Vigo, said.
"This elevated spending is an attempt to remain competitive with clubs like Real Madrid and Barcelona who have a much bigger revenue-generating capacity," he added. "It means a lot of clubs invest quantities in players that are greater even than what they are capable of earning. They accumulate debts that they cannot cope with and go into administration or have to sell off assets to survive."
The LFP has proposed capping the amount spent each year on player wages and transfers at 70 percent of income but analysts have said the measure would leave too much wiggle room. The battle over income from Spanish TV deals escalated in May when some richer teams said they planned to create a separate first division.
Even La Liga giant Barcelona, second on accountancy firm Deloitte's latest list of the world's richest clubs by revenue, admitted cashflow difficulties last week. New president Sandro Rosell said the Catalans were seeking a US$190-million bank loan to address "liquidity problems".
Spain's worst recession in at least 50 years, the collapse of the real estate market and surging wage and transfer costs have combined to push clubs deeper into the red and forced some, such as Real Mallorca, into administration. The situation has been critical for some time but little action has been taken by the football association (RFEF), the professional soccer league (LFP) or the government.
A large part of the problem is the power wielded by Barcelona and its big-spending arch-rival Real Madrid. Real topped Deloitte's Football Money League with income in the 2008/09 season of 401.4 million euros compared to Barcelona's 366 million.
Unlike in rival European leagues, deals for television rights, a key revenue stream for soccer clubs, are negotiated individually and Real and Barcelona rake in about half of the 600 million-euro TV pot between them.
"The financial instability in Spain is mainly due to excessive outlay on players," Angel Barajas, associate professor of financial management at the University of Vigo, said.
"This elevated spending is an attempt to remain competitive with clubs like Real Madrid and Barcelona who have a much bigger revenue-generating capacity," he added. "It means a lot of clubs invest quantities in players that are greater even than what they are capable of earning. They accumulate debts that they cannot cope with and go into administration or have to sell off assets to survive."
The LFP has proposed capping the amount spent each year on player wages and transfers at 70 percent of income but analysts have said the measure would leave too much wiggle room. The battle over income from Spanish TV deals escalated in May when some richer teams said they planned to create a separate first division.
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