When the global recession hit in 2009, many people predicted that football would be untouched. With transfer fees in their millions, interest in football at an all-time high and multiple revenue sources from advertising, TV and merchandising, how could the world’s most favourite game ever be effected? Analysts predicted that Europe’s top clubs were recession proof and that the beautiful game would continue as is. The English Premiership was cited as a good example where football TV rights provided enough money to keep its top clubs afloat alone. With the rights recently selling for an amazing £3 billion for the next three years, even the bottom clubs are likely to receive a minimum £40 million a year, which is enough to cover the wages of their playing staff and general costs of running the club. But the Premiership is an enigma and the story is vastly different across Europe.
In Spain, there is no central agreement for TV rights with each club having to negotiate their own deals. But with Barcelona and Real Madrid, the two biggest draws for TV companies, the money given to the other clubs is significantly less. In 2011, Barcelona and Real Madrid negotiated separate deals that saw them take just over half of the TV revenues (€600m), with Barcelona raking in a whopping €180m and Real Madrid with €160m. The remaining eighteen teams were left to negotiate how the leftover €260m would be shared. The bottom clubs in the divisions were walking away with as little as €9m. As clubs battle to keep their best players and wages increasing every year, this low revenue from TV rights is being stretched to its fullest.
(Image from The Economist)
Clubs like Deportiva La Coruna, who filed for bankruptcy protection on Thursday, are suffering in the recession, not just because TV money is low but because other sources of revenue have been hit as well. Advertising dollars have been cut as companies look to save cash to protect their bottom lines while merchandise sales and ticketing are down as fans cut back on non-essential spending. Player transfers are also at risk as richer clubs in leagues like England, France and Germany take advantage of the financial perils that the Spanish clubs now find themselves in. Deportivo, who in the last 15 years have been one of the more competitive challengers to Barcelona and Real Madrid’s dominance, join a growing list of Spanish top flight clubs that are at risk of going out of business altogether. As many as eight clubs face a similar situation to Deportivo, filing for protection or restructuring their debts after re-emerging from bankruptcy protection. The scale of the problem is apparent when closer examinations of the tax debts alone owed by Spanish clubs to its government show that their debt peaked at over €750m.
Deportivio’s long-standing president Augusto Lendoiro is devastated that this great club finds itself in the hands of the courts and the banks. He has personally pledged to get the club back on its feet and restructure its finances, but with debts rumoured to be as much as €100m and with the Spanish tax authority embargoing TV money for the foreseeable future, it’s difficult to see how he is going to achieve this. Selling key players like Abel Aguilar and Nélson Oliveira may generate some extra cash, but this would be as effective as putting a bandage over a cut artery. Lendoiro, however, remains upbeat that he can save his beloved club:
“This makes me sad and ashamed, but there was no other option. Between 85% and 90% of the debt is with the government and banks. This is a different stage, but I see myself with the strength to continue. The club is viable”
(Image from Mundoseportivo.com)
Viable or not, Deportivo is in a crisis, but they are not alone. With the number of clubs in Spain facing financial ruin and unemployment in the country is on the rise, it may not be long before we see the collapse of La Liga in its current format. With the recession no closer to the end than it was a year ago, Spanish clubs are living proof for now that football is not and will not ever be recession proof.
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