Economic concept differences between Real Madrid and FC Barcelona

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Barcelona-Madrid: €257 million in transfers or a pool of €249 million

Recently, Catalan sports newspaper Sport today has followed up on a presentation to be made by Professor of Financial Economics and compatibility of the Faculty of Economics UB Liébana Jose Maria Gay who will present his research findings on Tuesday, September 29th with an analysis of their own.

While the professor research focuses on the two club revenues over the last decade, Sport focuses on the titles won since 2003 and the number of home-grown players involved. Since that year Barcelona has won an astonishing 10 titles (2 Champions league, 3 Liga Champions, 1 Copa del Rey, 1 European Super Cup and 3 Spanish Super Cups) against 4 titles for the Los Merengues (2 Liga champions and 2 Spanish Super Cups).

The paper found that it is FC Barcelona’s bet on bringing up and playing their own youth players that made the difference both on sporting and economical front. They calculated that Barcelona’s ten home-grown first team players amounts to a total of €249 million, almost the amount that Real Madrid spent on transfers under Florentino Perez (€257 million). To strengthen the team, Barcelona only spent €70 million on Ibrahimovic, Chygrynskiy, Maxwell and Keirrison.

It also concluded that the emergence of players like Xavi, Iniesta, Messi, Busquets and Valdes have helped FC Barcelona spends half of what Real Madrid need to spend on transfers. While Real Madrid has to spend €735 million on 40 players, Barcelona total spending on 35 players since 2003 only comes to €365 million.

Professor’s findings: Sustainable model against subsidized model

The professor’s research meanwhile found that over the years 1999 to 2009, Real Madrid total spending expenditures comes to €3,097 million while net income made for that period was €2,538 million, a shortfall of €559 million.

During Perez’s first Galaticos era, they compensated this shortfall by ceding part of the club’s sports facilities and grounds (rezoning) to the City of Madrid and a few companies plus the selling of television rights with the amount totaling €520 million. This business model is devastating according to the professor, as he believes that Real Madrid’s economic policy during this period have survived in part thanks to public support. With the advent of Perez’s new term as president in 2009, and a new era of Galacticos emerged, this system seems to have come up again as there is information about a new medium-term rezoning. The professor found this policy as unsustainable even when compensated with shirt sales. Their future lies with re-qualification, or perhaps an IPO (floated on stock market), he forecasted.

What did Barcelona do in 1999-2009? They adjusted their expenses and relied on their youth players, which eventually reduced the amount they  need to spend on new players. FC Barcelona’s operating income for that same period comes to €2,093 million, including for last year’s Triplet bonuses, their expenditure totaled €2,159. That is a deficit of only €66 million despite this current board having to cover for past mistakes dating back to Nunez as president by reorganizing debt-payment terms.

But Barcelona’s better management doesn’t stop there. They are threatening Real Madrid’s dominance in annual revenue income. In the 2006 – 2007 season, the difference was €351 million for Real Madrid and €290 for Barcelona but that has now been almost matched with the latest 2008 – 2009 account showing €370 million and €366 million respectively.

The professor concludes that even with increased expenditure and bonuses incurred with the conquest of the Triplet, he sees Barcelona’s economic model as more sustainable.