By AFP
June 15th 2009 @ 9:13am
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Ronaldo millions mask debt-laden English football
Manchester United may be receiving a world-record fee of STG80 million ($A162 million) for the sale of Cristiano Ronaldo, but the amount is dwarfed by the club’s huge debt.
“It’s no wonder they’re getting this sort of money” from Real Madrid for arguably the world’s best player, said Philip Long, football industry specialist at British accountancy [...]
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Pippinu said | June 15th 2009 @ 10:55am | Report comment
I come across plenty of articles like this, sounding warning bells about the massive debt that all EPL clubs are carrying, and it seems the bigger the clubs, the bigger the debt.
It’s unbelievable to learn that Ronaldo’s record transfer fee will make only the tiniest of dents in Man Utd’s debt level.
Is this sustainable? I honestly don’t know.
On the one hand, overall revenues from all sources are at record highs.
On the other hand, I know of no business model that allows debt to keep increasing at ever higher rates with nothing on the horizon suggesting they will be reigned in at any time soon.
True Tah said | June 15th 2009 @ 10:58am | Report comment
Pip
you do not make a motza in professional sports. Ownership of the EPL clubs is a status symbol by guys who have enough cash to indulge in their hobbies.
Slippery Jim said | June 15th 2009 @ 11:01am | Report comment
La Liga is in as much, if not more financial trouble than the Premier League. None of the top four in England are in real danger of going belly up, Man Utd’s debt is not a major concern when looked at as a percentage of their revenue. How many of us have mortgages or other debts that exceed our annual salaries, for instance? No need to panic if the income streams continue at present levels.
In Spain, however, one of the top three clubs (Valencia) is in real trouble of going belly up, and many of their clubs have been financially bailed out by the government, something that is unthinkable in the Premier League.
Besides, question marks arise over where exactly Real Madrids big money injection came from for recent purchases…
Colin N said | June 15th 2009 @ 11:03am | Report comment
I saw somewhere that Manchester United had made a profit of £80 Million last season, but the debt increased by £16 Million from something like £520 to £536 Million, meaning that the interest raised on the huge debt had amounted to £96 Million, an incredible statistic.
True Tah said | June 15th 2009 @ 11:06am | Report comment
Slippery Jim
Im no expert on Spanish futbol, but in Spain dont the individual clubs negotiate separate pay TV contracts? Therefore it doesnt surprise me that outside the duopoly, a lot of the clubs may be struggling financially.
In the UK, the windfall from Pay TV is spread a bit more evenly, and I highly doubt you will ever see another EPL go out of business, if anything the FA/UK government would probably step in and prop them up.
Pippinu said | June 15th 2009 @ 11:19am | Report comment
sj
the analogy with homes and mortgages is a good one, but one can flip that around.
As average home owners we want to be in a position where the mortgage is declining over time rather than increasing – because if the latter is happening for too long a period, there is generally only one outcome, the house is lost.
So with the EPL, the question becomes, for how long can the debt levels keep on increasing? Surely not forever?
tifosi said | June 15th 2009 @ 11:31am | Report comment
Ask the fans of Manchester Utd and liverpool what they they think of their American owners and the massive debt levels they have brought in. You wont get a nice story im sure.
As for Real madrid, they are practically run by the spanish people and the banks have no hesitation in giving them money.
Slippery Jim said | June 15th 2009 @ 11:42am | Report comment
True Tah, that’s right, La Liga clubs negotiate individual TV contracts, so the revenue is less evenly distributed.
The latest figures available show €3 billion debt for La Liga clubs (since the report was published five of the Spanish clubs in La Liga have been relegated, which will likely exacerbate their financial problems).
So La Liga has €3 billion in debt and the Premier League the equivalent of €3.2 billion at current conversion rates. The Premier League has about £1 billion higher revenue than any other league. The Premier league last season also enjoyed a 26% increase in revenue (La Liga had about a 15% increase). It should also be noted that Chelsea’s debt (currently £339.8 million) are interest free, and most Premier League clubs have substantial assets.
Real Madrid had €527 million in debt when the latest report was published, and in view of their lack of success over the last season, and their record breaking signings in the current transfer market (with more likely to come) it is frankly unbelievable that they are spending such incredible sums of money on recent signings. Having said that they do currently have the highest revenue in club football at €365.8 (Man Utd are second with €324.8).
Concerning La Liga debt levels, one recent report stated:
“Some clubs are even in a technical situation of bankruptcy, that is to say that their assets are lower than the existing debt and, consequently, with all their assets and investments, are not in a position to pay off their debts.”
http://www.goal.com/en-us/news/722/la-liga/2009/1/7/1048072/new-report-reveals-massive-debts-in-la-liga
Towser said | June 15th 2009 @ 12:02pm | Report comment
Seem to remember Real Madrid always in debt.
Mice said | June 15th 2009 @ 12:52pm | Report comment
Interesting link on the Guardian website discussing this topic.
http://www.guardian.co.uk/football/blog/2009/jun/10/andy-burnham-football-association-david-conn
whiskeymac said | June 15th 2009 @ 3:49pm | Report comment
Man Utd are only in debt because the Glazers put them there. beofre they turned up they were doing quite well i think. Same with Liverpool. Chelsea have a benefactor as a hobby, the others I think are in it for business related concerns. As for Arsenal – well once we sell off highbury we’ll be alright so long as Kroenke and Usmanov can be kept away… the board members are spun as being guardians f the club. will wait and see on that front – i think they would sell to an oligarch given the right price.
The loss of Valenica is tragic. Especially when you read Real Madrid are going to nab D Villa for a smallish (in comparison) fee, claiming the debt ridden club’s asking price for their only true asset was “high”… Real arent doing any favours for their La Liga brothers. i guess it’s not in their interests to share out some of the money, despite the competitions duopoly being more boring than EPL’s 4 way horse race. Partly explains why, morally, Platini condemns the sort of spending which will destroy clubs.
But what of good ol’Sepp Blatter’s philosophical take on it all? In relation to the absurd fee for Ronaldo he said that: “I heard yesterday that you could buy millions of pieces of bread to give to the people for that amount, but entertainment is also food for the people.” slightly missing the point of “needs” versus “wants” or football and subsistence, especially in famine prone Africa where he made the comments. Would be funny if he wasnt i/c of the sport.
JR said | June 15th 2009 @ 5:50pm | Report comment
True Tah – I take your point, but cannot see why owning ManU would be much of a status symbol to the Glazers, given that they just don’t move in soccer circles or live in a soccer culture (I presume!). My guess is that they had some cunning plan to make money out of it.
According to their auditors, they are in trouble when they need to refinance their debt, which happens shortly. Yes, that could mean bankruptcy or selling the club – or, they might get a deal done.
There are many EPL clubs in serious trouble – West Ham went bust the other day but were picked up by the Iceland government (?!), Newcastle, Liverpool, the list goes on. Football fans tend to say ‘It couldn’t happen here’ but I cannot see why not. Look at Leeds.
This is a bone of contention with UEFA – they think English clubs are effectively cheating by allowing such huge debt levels.
Yes, many Spanish clubs are in dire straits too; as we see with Valencia. Interestingly, the Italian clubs are relatively well off – I guess they had their financial Armageddon a decade ago.
Spencer said | June 15th 2009 @ 6:38pm | Report comment
Whiskey – That is a truly astounding comment from Sepp Blatter.
Having lived in Africa for 6 years and seeing the poverty first hand, it is unacceptable that FIFA doesn’t do more for the poorer people of the world. Maybe they do and I don’t hear about it.
FIFA should enable a donation of 5% of all transfer fees to UNHCR (or other trusted humanitarian organizations). Considering how many of the dirt poor Africans are playing football in Europe that would be only fair.
MVDave said | June 15th 2009 @ 7:07pm | Report comment
Spencer
“Having lived in Africa for 6 years and seeing the poverty first hand, it is unacceptable that FIFA doesn’t do more for the poorer people of the world. Maybe they do and I don’t hear about it.”
Maybe you just dont like football? check out FIFA’s charity work;
http://www.fifa.com/aboutfifa/worldwideprograms/index.html
Spencer said | June 15th 2009 @ 7:35pm | Report comment
MVD – Would you like to comment on Sepp Blatters remarks? “I heard yesterday that you could buy millions of pieces of bread to give to the people for that amount (Ronaldo’s transfer fee), but entertainment is also food for the people.” Or maybe he didn’t say it?
From my previous post “Maybe they do and I don’t hear about it (fund the UNHCR).” Thanks for the link.
MVDave said | June 15th 2009 @ 8:11pm | Report comment
Spencer
Blatter is a politician in effect, who happens to be head of the games world wide administration. As with many politicians he seems to have a perception that he is more important than he really is and a tendency for foot in mouth disease. . Nuff said. Last year he claimed the football transfer system meant Ronaldo was like a slave to it or words to that effect. Wouldnt worry too much about what is said as l’ve always thought actions were louder than words.
whiskeymac said | June 15th 2009 @ 8:57pm | Report comment
spot on mVDave… he upsets a lot of people.. http://www.telegraph.co.uk/sport/football/international/england/2288310/Sepp-Blatter-talks-nonsense-on-Fabio-Capello.html and of course his viewso n woman footballers in 2004 along the lines of the need to wear skimpier outfits… even thoug he is i/c of FIFA the guys a plonker of the highest order.
Slippery Jim said | June 15th 2009 @ 9:48pm | Report comment
Sepp Blatter – don’t make me laugh – Blatter makes me laugh enough already. Ronaldo is a poor slave…female footballers need to wear skimpier outfits…trying to bring in twenty minute half time breaks…the guy is a riot.
And of course he is going to say that it’s perfectly fine to spend £80m on a player rather then feed the hungry, and it’s not because he is a politician either – he is actually an honorary member of Real Madrid. He supported since he was a boy, and was presented by Real Madrid with their gold and diamond club badge in 2006. Explains a lot, doesn’t it.
Blatter had quite a lot to say about that Evil English club named Chelsea when they started spending what now seem to be quite modest sums of new found money on players in 2005 (our most expensive player was £30 mil, and turned out to be a right lemon, fingers burned once, we haven’t splashed the cash that much since)…anyway, getting back to Blatter, he said at the time about Chelsea
“This cannot be the future of our game. FIFA cannot sit by and see greed rule the football world. Nor shall we. The time has come to take action to curb the excesses and ensure that the sport protects its roots. If nothing is done, this new money could suffocate a sport that has no fewer than 1.3billion active followers around the world. The professional game is now shot through with practices that, at best, expose the ugly side of club football and, at worst, threaten its very existence.”
In contrast when it is his precious Spanish club Real Madrid buying players it is actually a sign that all is right with the game he had these positive, nay: gushing, flowery, poetic words to say (complete with allegories and moralistic fairytales about famous artwork being cruelly locked in the dark by evil British museumfolk):
“It is not only a product to sell or to buy, it gives people what they want; and that is emotions and entertainment”
“It means that there is still a demand to have the stars. We are in a [global financial] crisis but football is a fantastic product.”
“you have to put it in context of what football in our society is worth and what other things in our society are worth.”
etc.
There is a blatant disconnect between Blatter’s espoused values and the actions that he condones in relation to his pet club Real Madrid. That disconnect is called hypocrisy. Or is it corruption? Bound to be one of the two.
whiskeymac said | June 16th 2009 @ 12:29pm | Report comment
SJ, I totally agree with the proposition that the “disconnect is called hypocrisy. Or is it corruption? Bound to be one of the two.”
I dont agree with the money at the top but believe if the EPL gets slated for it, why can’t the likes of AC or Bayern or Real or Barca? I was surprised, and pleased, Platini at least was uniform in his criticism of Real.
Slippery Jim said | June 16th 2009 @ 12:33pm | Report comment
Yes, some are seeing it as evidence of a rift between Blatter and Platini.