The journalist of the Financial times and cult author for soccer fans, Simon Kuper, and economist Stefan Szymanski that soccer is a peculiar business. Instead of competing to achieve more benefits than other companies, as is the case in other sectors, clubs compete to win victories and trophies for those who constantly require investments in players, coaches or new infrastructures, they explain in Soccernomics. For this reason, although some teams have doubled their income in the last decade, so have their expenses. And that is not bad management, but the only way to succeed in a world where “no one should pursue the fantasy of profit.” However, what happens when the stadiums are suddenly empty and you have to continue paying, for example, millionaire salaries? That was the uncertain scenario that LaLiga had to face in March 2020 and to which the organization’s corporate general director, José Guerra, has an optimistic response more than a year later: “We are overcoming the crisis because the clubs are they imposed a rule to face these situations with the aim of guaranteeing the long-term sustainability of the competition ”, he says on the phone.
Last week, LaLiga presented its economic report for the 2019/2020 campaign, the first to be impacted by the pandemic, with a record figure. Spanish football, despite the closed-door dispute of the last eleven days, exceeded 5 billion euros in revenue for the first time thanks to the sale of broadcasting rights, player transfers or match day revenue, among others. LaLiga Santander and LaLiga SmartBank together were the only ones among the main national professional football competitions on the continent that managed to finish the previous year in green numbers, registering a favorable balance of 77 million euros, according to the data provided by the organization. Likewise, both leagues are at the top in Europe in terms of revenue. per capita and at the same price level.
Guerra believes that this leadership is essentially explained by one reason: the implementation eight years ago of an a priori economic control mechanism that reviews the balance sheets at the end of the year and conditions the investment capacity of the season that is about to begin. This forces all the groups to present an estimate of income and expenses to determine how much they can spend on their workforce (salaries, transfers) the following campaign, with the aim of not spending more money than they are expected to generate. “We were surprised by the level of spending by the leagues in Italy and England last summer. Our teams, on the contrary, exercised responsibility, minimizing the cost of transfers and even agreeing on salary reductions. Everyone knows that they have to abide by the same rules, that they compete with the same weapons, and that gives you peace of mind ”.
This “sustainable” management that has made it possible to face the impact of the pandemic is reflected in the net worth of LaLiga teams, which has gone from 337 million euros in the 2012/13 campaign to 1,767 million at the end of 2019/20 , an increase of 424%. A figure that should be added to the almost 800 million that are in the clubs’ treasury today and that would almost allow covering the impact of 852 million euros less in results that the consulting firm PwC has estimated for the last season, 2020 / 2021. A course that has been played almost entirely without fans in the stands and where the effect of the covid will be most noticeable.
The image of solidity and credibility of Spanish professional football accounts, Guerra believes, is what has allowed clubs to access financing to overcome the crisis and look to the future. In fact, the LaLiga Santander and LaLiga SmartBank teams have not only adjusted their accounts, but have also continued to make investments to boost their growth in the near horizon. This is the case of Levante UD, CA Osasuna or Real Madrid, which have renovated their stadiums to improve the experience of the fans and increase revenue on match day, or the commitment to reinforce or create new training academies, as is the case of RC Celta. A decision that in the long term can benefit both sports and economics, in virtual transfers to other teams.
“The level of indebtedness is reasonable. The net financial debt / EBITDA ratio would place us in seventh place among non-financial companies on the Ibex 35, ahead of Endesa or Telefónica. We are in a position with a very strong investment capacity for future seasons, ”Guerra said during the presentation of the economic report.
🏟️ El Sadar will be able to host 23,576 spectators after the reform and expansion that is being carried out at the moment and that will conclude at the beginning of the next 2020-2021 season.
– CA OSASUNA (@CAOsasuna) July 6, 2020
Optimism in the face of recovery
The announcement last Thursday of the end of capacity restrictions in stadiums for the next year by the Minister of Health, Carolina Darias, opens a new stage and a growth perspective for Spanish football. The return of the public, according to estimates of Five days, could mean an injection of almost 1,000 million euros.
“Like any company, we know that the effect of the crisis is not going to be removed at a stroke and that we have years to absorb its impact. But we are optimistic because the clubs have adjusted their structures to begin to be profitable from the first moment and, in addition, we perceive the confidence of investors and sponsors ”, assures the corporate general director of LaLiga.
In Guerra’s opinion, the line of responsibility from last season may be maintained in this summer market and, therefore, it will be marked by austerity, although some relevant individual movements may occur. In any case, he estimates that both economically and sportingly, professional football in Spain has a great present and a great future. “I believe that our clubs are and will continue to be competitive. This year, without going any further, we have had a Europa League champion and a Champions semi-finalist. They are doing a responsible management and investing judiciously, ”ditch Guerra.
In an important year for Spanish sport, with the Tokyo Games this summer on the horizon, LaLiga has preserved its financial aid to other entities for the development of non-professional football and other sports. Specifically, the organization has contributed 125 million euros in the 2020/21 season, of which 65.6 were for the Royal Spanish Football Federation (RFEF), 48.8 to the Higher Sports Council (CSD) and 11, 3 to the footballers’ unions.
This figure represents an increase of 13% compared to the previous season and 202% compared to the 2014/2015 academic year.