Soccer Sports Business

The Real World Of Soccer

Real Madrid Summer Purchases

Ronaldo – £80 million

Kaka – £56 million

Benzema – £30 million

Albiol – £12 million

Manchester City Summer Purchases

Santa-Cruz – £18 million

Tevez- £25 million

Adebayor – £25 million

Barry – £12 million

These are the transfers that have knocked the wind out of the summer transfer window in European soccer. In an economic climate where the world is saving and not spending, Real Madrid and Manchester City have continued to fulfill their reputations as big spenders, and have accordingly purchased the best available talent on the market. No other clubs could compete – the likes of Chelsea and Manchester United (normally high fliers in the market themselves) have had eerily quiet summers with limited transfer activity and it must be partly due to the acquisitions made by City and Madrid.

Manchester City have sourced their funds from Billionaire owners Abu Dhabi United Group. Real Madrid are a different kettle of fish. Madrid should have been made insolvent countless times over the years due to the fact that they tend to spend money that they do not actually have. However, with the King of Spain as a huge supporter (‘Real’ means ‘Royal’), they have had their debts written off by banks who do not dare bankrupt the King’s club.

In either case, these are teams who seemingly have unlimited spending power, without consequence. This is becoming a major concern to the football fan in Europe. How can their team compete or make big signings when the big-guns of Madrid and City continue to dominate a market that was anticipating a deflation of transfer fees, as opposed to the inflation that has actually materialised?

Has the time finally come for the governing bodies to impose transfer expenditure caps? The concept of salary caps has been a much discussed topic in the media and online blogs, and the general conclusion is that they are illegal and very difficult to incorporate – EU law protects individuals against mechanisms that impose restrictions preventing a worker from realising his earning potential. Would a restriction on a club’s ability to spend be capable of circumventing the grasp of EU law however?

Perhaps the governing bodies could come up with a reasonable limit (£20 million?) that a club may spend in a given summer. Maybe it could be £20 million plus whatever revenue that comes from the sale of any pre-existing players of the squad. The restriction could be as simple as one that forbids any club spending money that is not disposable income – my previous post on Southampton FC highlights quite clearly how disastrous the consequences can be for clubs that do not spend within their means. Any measure brought forward that is in the interest of sport might be capable of successful implementation.

In any case, the expenditure of City and Madrid has distorted the market and does not reflect the current state of economic affairs. Is it an overreaction to suggest that something need be done in response to this? Some might be of the view that there is nothing that can realistically be done to stop or regulate the way clubs spend money on transfers. The solution could be simple – clubs should rename themselves ‘Real’….

3 replies on “The Real World Of Soccer”

I liked the article, I think Man. Utd.. is was starting to feel the recessed economy and it's debt building on them (1.08 Bill) before the selling of Ronaldo. In every sport there is several teams that have reputations and tend to buy the all-stars (yankees or Chelsea FC) if they didn't they would be letting down their fans. And I think Man City is ready to attempt to become another team in that realm.

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