Real Madrid Dodges Fair Play Ban With Purchase of Gareth BaleAlex Duff
Real Madrid is fueling European soccer’s $2.2 billion transfer market with its purchase of Gareth Bale, upsetting authorities who want to rein in spending.
The Spanish team yesterday acquired Bale from Tottenham Hotspur for 78 million pounds ($121 million), according to a Real Madrid executive with knowledge of the deal who was granted anonymity because the clubs didn’t disclose the fee.
European soccer’s ruling body UEFA is implementing “financial fair play” rules to stop teams spending more than they earn. While Real will adhere to the regulations by spreading out the cost of Bale’s fee over the six years of his contract, the trade hurts UEFA’s plan to make the sport more sustainable, said Jose Maria Gay, a Barcelona University accountancy professor who researches soccer finance.
“The gap between the richest teams and the rest in soccer is widening,” Gay said in a phone interview. “It hardly seems fair play.”
The British Broadcasting Corp., without saying where it got the information, put the fee for Bale at 85.3 million pounds,
5.3 million pounds more than the record Real paid Manchester United for Cristiano Ronaldo four years ago.
Transfer spending rose 7 percent to 1.65 billion euros before Bale’s move, according to data collated by Barcelona-based consultant Prime Time Sport and released to Bloomberg News on Aug. 23.
13 Percent Rise
At that level, the value of transfers in Europe’s five biggest leagues in July and August will rise at least 13 percent from a year earlier, according to Bloomberg News calculations based on Prime Time Sport’s research. Player trading ends today.
Real Madrid didn’t immediately return a call and an e-mail seeking comment.
The European player transfer market has increased sevenfold in value since 1995, according to a February report by Brussels-based policy consultancy KEA European Affairs. An influx of team owners from Russia and the Middle East has increased the number of clubs willing to push up spending on marquee players in the search for trophies.
Monaco’s billionaire owner Dmitry Rybolovlev bankrolled more than $175 million of spending on striker Radamel Falcao and other players. Paris Saint-Germain, owned by sovereign wealth fund Qatar Investment Authority, acquired forward Edinson Cavani for as much as $85 million.
UEFA President Michel Platini said Aug. 30 he wanted to reduce the length of the two-month offseason trading window and introduce a “more healthy” transfer system, calling current fees a “robbery.”
“It’s an opportunity for a lot of people to make a lot of money,” Platini told reporters in Monaco. “A player is more a product than a footballer with a whole pile of people trying to get commissions.”
UEFA’s financial fair play rules seek to stop clubs risking their future by overspending. The Nyon, Switzerland-based organization has the power to ban teams from the Champions League next season if they have annual losses of more than 5 million euros over three previous years. Clubs can have losses of up to 45 million euros if shareholders cover the deficit over this period.
UEFA General Secretary Gianni Infantino said Aug. 30 the rules helped slash combined club debt by 35 percent to 1.1 billion euros in 2012, from 1.7 billion euros a year earlier.
Real Madrid typically has annual net income of 25 million euros, which will allow it to absorb Bale’s fee over the length of his contract without being banned, according to Gay. Real took out a six-year, 152 million-euro loan to sign Ronaldo and Kaka in 2009, and won’t have any difficulty getting bank credit to finance Bale’s signing, Gay added.
Player of the Year
Bale, a 24-year-old Welshman who was voted player of the year by his peers and soccer writers in the Premier League last season, doesn’t yet have a “celebrity” status like past Real signings Ronaldo and David Beckham, according to Liam Wong, an analyst at London-based Brand Finance, which ranks Real as soccer’s third-biggest brand.
The record nine-time European champion will try to recoup as much of the fee as possible -- and the 300,000 pounds a week the BBC said it will pay Bale -- through commercial deals and jersey sales, Wong said.
“Real Madrid is a commercial machine and will do its best to turn Bale into a global star,” he said.
Real Madrid President Florentino Perez has sanctioned more than $1 billion of signings since 2000, favoring star foreign players to boost marketing income and jettisoning Spanish prospects such as Roberto Soldado and Alvaro Negredo, who now play for Tottenham and Manchester City, respectively.
Real fans and executives will have to wait to find out if the investment in Bale, who scored 55 goals in 203 appearances for Spurs since May 2007, works out in footballing and financial terms, said former HSBC banker Eugenio Martinez, who sought to stand against Perez in a 2009 presidential election.
“There’s no doubt Bale is an extraordinary player,” Martinez said in an e-mail. “Only time will tell if he’s expensive or cheap.”