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Make the most of this Barca game: they are almost as bankrupt as Liverpool

Tony’s confession

I made an absolute howler in the original headline of this piece with a grammatical error the size of Real Mad’s overdraft.   It has been pointed out in correspondence, quite rightly.   Normally I don’t go back and change a site once published, but this error was so bad I just couldn’t live with it.   I blame having to write 3 press releases in one morning.  What sort of life is that for a grown man?

The Spanish League is the best in the world.  The clubs are owned by the fans, the football is wonderful, the stadia are exquisite – and full, and this is the model for how football in England should be run.  The top two teams on the annual rich list are Spanish.  Life is good.

Well, up to a point (which in case you have not read Evelyn Waugh’s most brilliant tale of journalism “Scoop” means, “like hell it is”.)



Reporting on football off the field from foreign parts can be difficult because although people say things one never quite knows if the person is a serious commentator of a Harry Redknapp.   So, I might well be shot down on some of this, but here’s a couple of quotes that the Guardian ran recently.

José María Gay, apparently a leading expert on football finance in Spain and an adviser to Uefa said, “La Liga is dying.”

The Osasuna president, Patxi Izco, said: “I fear a financial meltdown.”

The point is that Spain, like England, spends loads of dosh that the clubs don’t have on transfers, and then defends what is going on by saying “we’re a big organisation, so we spend big money.”  Which is a bit like saying, “I have a big house, so of course I have a big mortgage.”

The one has nothing to do with the other.  The issue in both cases is, “when are you going to pay off your debts?”

The answer is, silence.

Last year, as you may recall, Barcelona won all the big trophies they went in for.  Barca have debts of €350m.  So you might think a year of utter triumph might result in paying off some of the debt.  I mean, if you can’t pay the debts down when you have won everything, when do you?

Unfortunately despite winning everything they only made a profit last year of €8m.  Which is good but not that good when you have done everything right, and can’t do any more.   If it is 8 million in your best possible year, what do you do when the other guys win?

And Barca, remember, are the good guys.   Real Mad, are, well, Real Mad.   They signed players to the value of over €250m last year and justified some of it with the most insane comment in the history of football finance.   They would, their president said, pay for it in shirt sales.

What President Pérez didn’t add was that what he actually did was to take out another €150m worth of debt.  And they are running at a loss.  And (according to the Guardian) they are selling fewer shirts than Liverpool and Chelsea.  The crowds are down 7%, and the debt although not on the Man U scale, is up there with the loonies.  It is  €683m.

In the 1990s, Spain passed a law making clubs become plcs, except Real Mad, Barcelona, Athletic Bilbao and Osasuna.  The idea was to wipe out the insane debts that were destroying football in Spain because the top men in each club would now be risking the company’s money, and mismanagement could bring the company down.  It seems to have had little effect.



Just as with Arsenal, as everywhere else, many fans are not patient, and do not value profit.  All they want, is to win stuff, no matter what the cost.

Valencia’s debt is over €600m and an unfinished new stadium where building work has stopped, and have just set up a new share issue of 95m to try and help themselves through.

Real Mad sold their training ground for €450m to wipe out their debts.   Now they have more debts.   Atlético Madrid have debts of over €300m.  Deportivo La Coruña have debts of over €120m.  Mallorca are on the edge of  administration.  Villareal have not paid their players.   Celta Vigo and Real Sociedad have gone into administration – but there’s no 9 point penalty for this in Spain.  Instead they have had the Beckham Law which means foreigners pay less tax than locals.  (Although there are plans to cut that law).

Overall Spanish football’s debt is reported by the Guardian to be €3.5bn. The Spanish federation owe the players’ union €6.8m and the union says that clubs owe €100m in unpaid wages. Atlético owe Revenue and Customs in Spain €15m.

Platini says there are five or six top-flight Spanish clubs in danger, but they are finding interesting ways of hanging on.  In England we are used to local councils treating their football clubs with contempt – none of us can forget what the local council did to Wimbledon when they were in the first division, and although Everton have been singularly inept in their dealings with the local authority (questioning the right of democratically elected councillors to make decisions about planning applications is not a clever way to curry favour) they still hope and wait and wait and hope to get planning permission.  Getting the council to pay for the stadium is well, not on.  (Unless you are Man City).

In Spain it is not like that. When Sporting Gijón went into administration, the local council bought their “brand image” to enable to club to keep going.

But ultimately the problem in Spain is that they have seen Scottish football, and instead of seeing it as a warning, they have seen it as a blueprint.  “Let’s have two big clubs that always win all the time,” they said, “and let everyone else sink into the quicksand.  That’s a great idea.”

Yes, well…

Just as in Scotland the system is there, and you are stuck with it. Short of a multi-billionaire investing in a small club (and why on earth should they?) the system goes on.    The same two clubs  make the news, get the coverage, earn the cash, build up the debts.

The big two do their own TV deals and keep the money and… get into more debt.  Everyone else gets only a fraction of the big two’s money (10% at most) and…. get into more debt.

There is talk of wage limits just as there is in England.  But the chance of implementing it, and then being able to police it, is zero.  The chance of reform is zero.   And the two giants (which utterly dominate every aspect of football in Spain) are as insanely in debt as every other club.

Welcome to the madhouse.

Tony Attwood

Index of other articles

The day that changed the future of Arsenal

29 comments to Make the most of this Barca game: they are almost as bankrupt as Liverpool

  • Phil

    Interesting piece Tony. Makes you wonder how Spanish football would compete without the helping hand of the lower top band of Income Tax.

  • Sam

    And their (as oppose to they’re) much more accomadation work permit rules.

  • Sam

    Note to self. When being a smart-arse always read text for typos before hitting submit.

  • tom

    Make the most of this Barca game: ‘they’re’ almost as bankrupt as Liverpool

  • Sergio

    It seems the people over the pond have an interesting way. I am not familiar with the economic system of the MLS, however I have heard they have nationwide salary caps that deter going into insane debt. If you would be so kind as to give your thoughts on the pros and cons of said system in comparison with the English, I believe it would further educate not only myself, who is at best a financial failure, but to others as well who are not well versed in the finicky fetters of finances.

    Love the blog. Greetings from Japan.

  • John

    Good article as always Tony really like the site…. keep it up 🙂

    One further point unlike Sam and Tom the odd little typo doesnt bother me… I have a life? I also appreciate your efforts in bringing Arsenal news to the fans.

    Thanks

    John

  • guillem

    I’m from Catalunya, although an arsenal fan.

    About the Beckham Law, which first was for scientifics and co, is no more a law, because a couple of months ago was cancelled.

    About the spanish league being as the scottish premier league, this season people is starting to being aware of this, and it’s a usual topic in football discussions on the tv or radio.

    By the way, sorry for my English, just trying to improve every day 😀

  • I made a grammatical cock-up – which is what some of the comments above are quite reasonably talking about. Normally I don’t correct such things, but this one is so basic I couldn’t face leaving it – so I have corrected it in the headline.

    Tony

  • mangetout

    their, their Tony, don’t worry, we all make mistakes

  • Scott

    Sergio: The MLS (American “soccer”) league operates under a salary cap. Right now, the current cap is $2.2 million for each team. However, there is a one player exclusion from the cap. Each team may sign one player and their wages do not count against the cap (i.e. Beckham with LA Galaxy, Blanco with Chicago Fire, Juan Pablo Angel with Red Bulls, etc.). There is also a maximum of 10 non-American players allowed on each team. The truly unique aspect of this system is that the teams do not “own” the player contracts. The league “owns” each player contract and therefore decides transfer fees (i.e. Altidore to EPL), loans (i.e. Donovan to Everton, Beckham to Milan), etc. The MLS (obviously) does not draw the best talent in the world but it is really helping develop the US Men’s National team and is also unearthing some foreign gems. All in all not a bad system and it is at least sustainable and growing. The MLS added a new team 2 years ago and has another starting in the 2011 season (Philadelphia).
    Hope this helps.

  • walter

    If the financial rules are brought in to action, we will be the only club left in the CL with the German clubs I think.

  • AaronGSi

    I was well aware of Valencia’s debt problems, and had heard about Mallorca, Depor and At. Madrid too, but I had no idea about many of the others – wow!!!. I suppose Villareal is not a surprise because they are a very small club and have punched well above their weight for a number of years now. I assume they are suffering now, because they didn’t get CL football this season, and have geared themselves to regular participation in it. Its a shame really because I looked at them as a symbol to all clubs, of what could be achieved, even without big resources. They used a great scouting network to get cheap talent from around South America, they invested heavily in bringing through youth players, and worked on being a proper team.
    I am, however, startled the most by the amount of debt that Barcelona are in. They have spent some big money on transfers these past couple of seasons – 40m euros on Dani Alves, and 45m on Ibrahimovic, 25m on Chygrinski for example, but I thought that because they have spent the last 5-6 years investing in home grown talent, that they were financially sound. It doesn’t look good for Spain either. I feel an era of German domination is just round the corner

  • walter

    In Dutch it would have made sense if Johan Cruyf would have said it like that, Tony. Not a bad reference I would say 😉

  • So what has this got to do with tomorrow’s game? Debt of no debt, Barca is winning the game.

  • Austino – it might not have a lot to do with tomorrow’s game, but Untold isn’t only about today and tomorrow – it is about Arsenal in five and ten years time as well.

    My point is simple: if you have a business that goes on and on making losses, and in its grandest hour makes only a modest profit in comparison to the debt, then the business has no long term future.

    I might be the only one who thinks so, but their stadium is in need of some work, and they have a constant need to buy players. But their debt is mega, and there is no long term plan to deal with it.

    It might not affect tomorrow. It will affect the look of football in 2015.

  • critic

    dude, nice article, just a point though – whenever u give a fact plz give the links and sources thru which person can confirm that u r right and not inventing them to pacify angry arsenal fans……

    u shud write an article on the effects of these debts on country’s economics.

  • goonerfan

    ummm…did you ever consider that if needed..Barca could just sell Messi to save the club to a team like Man City who are stupid enough to incur such high prices…he could literally clear at least 50-60% of barca’s debt…just saying…worse comes to worst

  • Marc

    Crazy crazy situation. It almost makes you want to weep.

  • deejay

    goonerfan… barca players wouldnt go to Real madrid, so leaving Man City as the only club who could afford… messi as well as other top players would NOT go to man City

  • eddie

    Nice article, Tony. Loving your stuff, especially since it largely sidesteps the whole “Arsenal drew – sack Wenger!!” and “Arsenal won – we can win the league!!” garbage we see from most other blogs.

    Critic – why would Tony undertake a study of European football club debt on respective home country economics??? Given current global debt:gdp ratios and the soggy macroeconomic backdrop, I wouldn’t have thought that private sector debt levels in the millions would have much of an overall impact on total public debt or on gdp…especially since high debt levels in football are nothing new.

  • ian the gooner

    eddie mate wtf……… come again dear fellow!!!

  • well-endowed gooner

    Is Barca’s profit the profit of the entire social club organisation, or just from the footballing department? Barcelona the social club have a lot of other enterprises that would drain money.

  • Lady Arsenal

    Free market financial regulation in most of the major footballing countries allows ridiculous company models like that of Portsmouth, and irresponsible management like at Man Utd. Personally I think the sooner the law recognises that football clubs aren’t to be seen merely as limited companies, the better.

    You’re spot on Tony. If you pile up debt that you cannot pay off, the fall is inevitable. For me it’s beyond doubt now that we’re driving off a cliff, and I’m a barrister with zero interest in corporate finance. I listen to sensible people, as you do. And Arsene Wenger, who has a masters in economics, is a lone voice of prudence and is derided for his stubbornness (see Martin ‘Andy Fordham’ Samuel on Wenger this morning). Still, it’s business as usual, we eat up distractions, the football matches, comment and critiques, contentedly oblivious to the looming disaster. Football regulation was never designed with huge international corporations in mind. It has just been left alone in the hope that everything will be fine. Which it definitely no longer is.

    Interestingly, any move by FIFA or UEFA to limit club registration to certain financial models, as has been discussed by Platini and various other football magnates, might in response lead to a lucrative World Super League of the debt-ridden clubs outside the ambit of FIFA or football associations. A sinister thought to accompany my breakfast.

    Keep up the good work Tony.

  • lp

    Nice article Tony and i agree with you. Football is like business, they need to make profit as well as win trophy. Because we don’t want Arsenal to be next victim like Pompey, going into administration and lose all our talented player.

  • Lloyd

    Good article. Just wanted to say that as a Gooner and being over 40 years old, I am aware that Sky did not invent football. I was an Arsenal fan before we were winning trophies year on year and will continue to be a fan in the so-called ‘barren years’. Wenger’s plan will pay off because he has a long-term strategy. English football’s financial lunacy reflects Britain’s ‘buy now, pay later’ mentality perpetrated by the the ‘you can have it all, now’ brigade. All those who villify Wenger now will see his wisdom and vision writ large in the not too distant future.

  • Just in relation to a Barca player never going to Real Madrid, that comment made me think, and resulted in the article “Welcome to the land of the Pigs Head” which is now on the site…

    http://blog.emiratesstadium.info/2010/03/welcome-to-the-land-of-the-pigs-head/

  • ClockEndRider

    Blimey, a gooner blog for those whose critical faculties don’t start and end at the verbal diarrhoea ejected from Sky Sports News. Nice work Tony. Keep it up.

  • All these talks are rubbish.The matter at hand is tonights match.The article in my own opinion has no bearing with the mouth-watering match which i know Arsenal is losing whether Barca is in debt or not.

  • Gunners4ever

    Don’t forget ManU are in the similar debt as well. I just hope that Arsenal also learn to spend some from their profits