How were Real Madrid able to afford £80m for Ronaldo, having just spent £56m on Kaka?
For several reasons. For a start, they are a huge brand and have an extremely successful commercial operation, helping them to be placed at the top of Deloitte’s Money League for each of the past four seasons.
They also have a highly lucrative domestic television deal, having signed a seven-year deal with MediaPro in 2006 that Real claim guaranteed them £1billion. The broadcaster has not confirmed this figure but, if true, it means Real make twice as much as United from that revenue stream.
The Spanish taxation system helps them, too. In an attempt to attract foreign multi-nationals to the country, the Spanish Government passed a law that said a non-national in the top tax bracket pays only 23 per cent tax for their first five years in the country. By comparison, as a result of the recent Budget, those in the top bracket in Britain pay 50 per cent.
Plus, Real’s status as a non-profit social trust means that, unlike United, they do not need to generate £30 million a year just to service their debt. Their social, political and economic importance is such that Real will not face the kind of pressure from their creditors that affects most clubs. They play by a different set of rules.
Will Real expect to recoup the £80m through the commercial opportunities that Ronaldo will create?
Whether they can expect to make up all of the money through shirt sales and the like is difficult to say. They claimed to have recouped all of the £45.6m they paid for Zinedane Zidane in 2001 in that way but I doubted the truth of that.
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What is certain is that the club have an excellent understanding of how to use the media to enhance the club’s brand. They will know how best to profit from the player’s acquisition and they will also know that they have struck significant psychological victories by prising the two best players at AC Milan and Manchester United, two huge clubs and their supposed rivals.
Will Real’s summer spending end with this deal?
It’s unlikely. Perez has promised that the signing of at least one high-profile midfielder is imminent. Real have so many big-name players on their books now, however, that they will need to sell some and that could prove difficult.
Up front, they have Klaas van Huntelaar, Ruud van Nistelrooy, Raul and, it seems, Ronaldo among others and they cannot accommodate each of them. Kaka’s arrival means that either Arjen Robben or Wesley Sneijder will lose his place. Rafael van der Vaart has proved a failure and there appears to be no place in the team for Guti. It would make no sense to keep all of these but their wages and, in some cases, their age could prevent the club from offloading them at a reasonable price.
The last Galacticos era concluded with three years without a trophy and left the squad overstocked with attacking players. Do Real fans fear that could happen again?
Even though Real have had some success in recent years, winning La Liga in 2007 and 2008, they have not played the beautiful, flowing football associated with the Real brand. Instead under Fabio Capello in 2007 and Bernd Schuster the following season, they often ground out victories and left some supporters frustrated.
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Perez had promised to bring back the magical football and people have bought into his vision. They will need to have some success, though, not only to appease the fans but also to elevate the status of the brand. That probably means reaching at least the last four of the Champions League but they don’t necessarily need to win it for Perez’s plan to work.