The column ‘Finance Football’ tackles the economic aspects of the world’s favorite pastime, taking a closer look at the commercial side of the game. In the Forth edition we look at Barcelona Joan Gaspart, Joan Laporta who had/have to contest with Florentino Perez’ Real Madrid and his successor Ramon Calderon who was in charge of the Spanish capital outfit before the former returned in 2009.

Read “Financial Analysis On Perez’s Galacticos Policy And FC Barcelona’s Rise | Part 1” here

Even though Premier League sides Manchester City and Chelsea FC are set to lock horns this weekend, it’s La Liga face-off between Spanish giants FC Barcelona and Real Madrid that truly deserves the tag “Billion Euro Match”. While the ascension of the English pairing more or less has been financed by the generosity of very wealthy individuals, Barcelona and Madrid success hasn’t found its origins in the bank account of a billionaire owner. For better or worse these clubs were forced to formulate policies that allowed them to stay competitive within their means, with means being the keyword here.

By the most traditional interpretation “within means” alludes to not spend more than the available budget, or at least it should. Easier said than done when even the average person is encouraged to spend, spend, and spend some more.

Whereas Florentino Perez and Real Madrid benefited from a favorable training ground sale that provided Los Blancos with a much needed cash influx to execute their Galactico policy, Barcelona on the other hand had to endure 3 years of Joan Gaspart whose strategy – if he had one – was more reactionary than planned. Even if Madrid’s Perez has smashed the transfer records numerous times throughout his tenure as Merengues president the high price tags of his signings are actually essential to the Galactico policy. A Galactico by definition has to be expensive to qualify as such.

Real Madrid has positioned itself as the football equivalent of a high-end luxury brand: Expensive, lavish, and exclusive. Conversely, Barcelona has successfully rebranded itself as home-grown team with strong Catalan roots. However, in La Blaugrana’s case it was less by design than circumstances.






Perez v Gaspart

Perez v Gaspart

At first glance it appears as if Barcelona and Madrid spent similar amounts of money on new signings from 2000 – 2002. In Year One of Perez presidency Real Madrid spent €119,3 million. Never ones to be outdone Gaspart and Barcelona responded by committing almost €100 million (€99,5 million) on new recruits, or 17% less than the Merengues. The Blaugrana even had a better coverage ratio than their Spanish counterparts with 72,3% to Madrid’s 51%.

But the majority of the €72 million Barcelona generated in transfer revenue (€60 million) came from the sale of Luis Figo to Madrid. In other words, Los Blancos Figo purchase account for 86% of Barcelona’s transfer revenue that year. The aggravations, hostility, and pig head that came in the aftermath of this highly controversial switch were gratis.

To be fair, Gaspart just assumed office in the latter weeks of July 2000. Nonetheless, once he did take control of Barcelona he spent €99,5 million on 5 players, or €19,9 million per player on average. Madrid spent €119,5 on 6 players, also averaging €19,9 million per player. But unlike the Blaugrana whose most high-profile signing that year, Marc Overmars, would retire within 4 years of making his debut at the Camp Nou, Madrid signed aforementioned Figo and Claude Makelele. Sure it’s easier to assess the impact of a transfer in retrospect, but Figo and Makelele were undoubtedly inspired signings whereas Overmars, Emanuel Petit, Alfonso nor Gerard were never worth their outlay.

Believe it or not, during the first 3 years of Perez presidency Barcelona spent less on new players €201,6 million to Madrid’s €237,8 million (-15%), and generated more transfer revenue €108 million to €60,8 million (+56%), while Los Blancos net expenditure during that time frame was a whopping 89% higher than that of the Blaugrana’s, €177 million to €94 million. But it’s Barcelona that bought more players, adding 11 to Madrid’s 8.

Madrid did spend more on a per player basis €29,7 million to Barcelona’s €18,3 million (+60%). The figures suggest that Madrid spent more money for players of higher quality to Barcelona’s, which is hardly disputable. The Spanish capital side bought 3 Ballon D’Or Winners in three successive summers (Figo, Zinedine Zidane and Ronaldo). Barcelona on the other hand spent close to €80 million on Overmars and Javier Saviola alone.

Perez v Gaspart2

It’s no exaggeration to label Barcelona’s scouting department and administration ineffective if not incompetent.

But the fortunes would soon turn around for the Blaugrana, thanks in no small part to Perez increasing obsession with Real Madrid’s commercialization. Allegedly Perez passed on the signing of Ronaldinho because he wasn’t convinced the Brazilian could boost the merchandise sales in the manner David Beckham could. In the end Perez was right and wrong about Ronaldinho. Beckham acquisition did propel merchandise sales through the roof but Ronaldinho guided Barcelona to back-to-back La Liga titles and the Champions League trophy in 2006.

Furthermore, Ronaldinho’s spectacular performances also boosted Barcelona’s off-pitch earnings. Perhaps not as much as Beckham, but then again, the Englishman is an advertising juggernaut, the Michael Jordan of football if you will. According to Forbes Beckham earned €35,4 million in the 2012/13 season, with 89% (€31,5 million) of that total coming from sponsorships.

Football goes in cycles; Madrid won 2 Champions League trophies within the span of 3 years (1999-00; 2001-02). A cycle in football is about 3 to 5 years. So when Perez was elected president Madrid still boasted a strong fundament for a successful project. A dominant team doesn’t need much wholesale changes, perhaps very few necessary additions. Accordingly Perez only signed few players for the first 3 years of his presidency (6-1-1).

No matter how successful Beckham’s signing was to Madrid’s greater commercialization, it was a mistake because he was Los Blancos sole acquisition that summer. Also not helpful was Makelele’s sale to Chelsea. Perez Galactico policy was a big factor for his successful election but also his undoing as it allowed Barcelona to regroup after spending a few years in wilderness.

Perez v Laporta

Perez v Laporta 03-05

During Laporta’s first 3 years in office Barcelona signed 10 players (all in the initial 24 months of his presidency) while Perez acquired 11. But the Madrid supremo bought them a year or two too late (1-4-7), suggesting be began rebuilding his squad when Barcelona had already closed the gap as evidenced by the Catalan’s La Liga titles in 2004-05 & 2005-06, in addition to Perez’s other obsession: the 2005-06 Champions League trophy.

Even more fascinating is the fact that the Laporta administration spent the money wisely. The 10 players Laporta signed cost a combined €122,3 million (€94,6 million net), or €12,3 million gross (€9,46 million net) on average. Almost 50% less than the previous administration had paid on average, further hardening the suspicion that Gaspart was something of a reactionary president as opposed to being proactive.

Perez 11 signings cost a total of €183,7 million (€97,7 million net). As far as gross spending is concerned Perez outlay eclipsed Laporta by 66,6%. But adjusting for transfer revenue Madrid’s expenditure is just 3,3% higher than Barcelona’s. Compared to his spending habits during the Gaspart era it’s almost modest, €16,7 million gross (€29,7 million gross; €8,8 million net; -44%). Though Perez has spent more gross than Laporta (+35,8%), he ultimately paid less for his players (-7%).

Perez v Laporta 03-05 02

Among the players Laporta gathered for Barcelona’s revival were Ronaldinho, Rafa Marquez, Deco, and Samuel Eto’o. All of them would prove crucial to Barcelona’s ascension back to the pinnacle of Spanish and European football, especially the latter. Eto’o, a former Madrid youth player, who found playing time hard to come by during Perez reign, would later score in 2 Champions League finals that the Blaugrana won.

What goes around comes around, no? Well, Eto’o signed the dotted line for Barcelona in the end by way of RCD Mallorca.

Amidst a series of incomprehensible signings like Thomas Gravesen (?), Jonathan Woodgate (?), Perez did manage to acquire a genuine, if temperamental, world-class talent Sergio Ramos before resigning in 2006.

Calderon v Laporta

Calderon v Laporta

Perhaps sensing that Madrid were in danger of being left behind by Barcelona Perez successor, Ramon Calderon, signed no less than 18 players during his tenure that was cut short prematurely, for a total of €302,7 million gross (€177,8 million gross), or €16,8 million gross (€9,8 million net) per player on average.

He may be one of the more controversial presidents in Real Madrid history but Calderon did sign his fair share of top quality players such as Gonzalo Higuain, Marcelo, Fabio Cannavaro, Pepe, Wesley Sneijder or Arjen Robben.

Laporta’s bill of €195 million gross (€113 million gross), or €15 million gross (€8,7 million) per player on average, is largely inflated because of Pep Guardiola’s erratic spending (which is a recurring theme). The now Bayern Munich manager asked for recruits worth €96 million gross (€41 million net), of which at least 3 players (Aleksandr Hleb, Martin Caceres & Henrique) spent much more time being loaned out than even on the Barcelona bench. Nevetheless, Laporta’s administration still oversaw the arrivals of Yaya Toure, Dani Alves, Thierry Henry and fan favorite Eric Abidal.

The differences between Calderon’s and Laporta’s spending were marginal, €16,8 million gross to 15 million gross (11%), €9,8 million net to €8,7 million net (11%).

Calderon v Laporta2

This time it was Laporta who missed a trick when he just signed 7 players after adding none in 2005-06. Madrid reclaimed La Liga from Barcelona during Calderon’s first year in charge, even if under very lucky circumstances. Barcelona imploded towards the end of the 2006-07 campaign and lost the league title on head-to-head superiority. Yet the Blaugrana assembled by Laporta, Frank Rijkaard and then sporting director Txiki Begiristain had a strong spine, it just need a new leader and the removal of unmotivated stars such as Ronaldinho who flamed out sooner than one might’ve expected.

Even if Pep Guardiola’s track record in the transfer market is so so at best, he did whip Barcelona’s stars back into shape and the Blaugrana back on top, accomplishing perhaps the greatest debut season (2008-09) for a manager in football, and without a shade of doubt the most brilliant campaign in the history of the club.

Perez v Laporta Part 2

Perez v Laporta 09-10

Every time Barcelona outperforms Madrid the inevitable will happen, the Spanish capital will buy more players than the Blaugrana – at a premium of course. As if the wounded pride triggers an automatism somewhere inside the Real Madrid offices that submits world-record bids for all players on the Ballon D’Or shortlist (available or not).

Perez came, saw, signed and yet again win nothing at the end of the season. After spending €257,4 million gross on 8 players, or €32,2 million gross (€21,3 million net) on average per player, his much touted Galacticos 2.0 project were left empty handed at the conclusion of the 2009-10 campaign.

Though Laporta’s Barcelona did retain their league crown, the Blaugrana couldn’t replicate their Champions League triumph. Largely in part because they were busy subsidizing their opponents at semi-final stages, and eventual winners, Inter Milan, through the Zlatan Ibrahimovic/Samuel Eto’o swap and cash deal worth €69,5 million.

Indeed Madrid spent the most money on new transfers during that particular shop window, but as far as the gross/net ratio is concerned Barcelona were guilty of being wasteful.

Barcelona spent €113 million on 4 players, or €28,5 million gross (€22,8 million net) on average. Just to give some perspective, Madrid shelled out €94 million on the acquisition of Cristiano Ronaldo, yet their accumulated average per player is just 12% of Barcelona’s.

That summer La Blaugrana’s net spending accounted a massive 81% (Madrid 66%) of their total expenditure, meaning the club acquired excessive new debt. Even worse, record signing Ibrahimovic who accounts for 54% of that bill only lasted a season.

Perez v Laporta 09-10 02

Madrid’s obscene and excessive expenditure once again proved great teams aren’t built over night, especially when the opponents can rely on golden generation of footballers nurtured at its own academy, La Masia.

The 2009-10 serves as wonderful example for both, wasteful spending and the rewards of placing a great emphasis on youth development. Under Laporta the promotion of youngsters was born out of necessity due to gross financial mismanagement of the previous administration. The policy to maintain one playing system throughout the club also paid rich dividends. Youngsters who were given a run of minutes in the first team didn’t need any or very little time to acclimate whereas new signings always need an adaption period.

That’s how a relative unknown such as Pedro was able to make such an impact in his debut season. Sure, he debuted with Rijkaard, but it wasn’t until Guardiola took charge of the Blaugrana that Pedro really established himself in the first team – in stark contrast to Perez’s policy that until very recently all but neglected homegrown talent.

Perez v Rosell

Perez v Rosell

In the 2 years leading up to Real Madrid’s 2011-12 La Liga success, Perez sanctioned the acquisition of no less than 10 players in addition to the 8 from the 2009 summer shopping spree, almost a full squad worth of talent. The bulk of his signings were made in 2009 (8), with 10 further additions over the next 24 months. Were it not for Guardiola’s Barcelona side, Madrid probably would’ve won the titles now at display in Catalunya. Therefore, one cannot accuse Perez for being reactionary in the manner Gaspart was during his days. Perez certainly did buy the best money could buy.

The 10 players he purchased cost a total of €144 million gross (€128,5 million net), or €14,4 million gross (€12,9 million net) on average. Perhaps taking a cue out of Laporta’s later days in office, Perez elected to literally go for broke as 89% of the fee was not covered by outgoing sales.

His counterpart in Barcelona, Sandro Rosell, on the other hand acquired 6 players for €132,5 million gross (41,3 million net), or €22 million gross (€6,9 million) – among them Cesc Fabregas and Alexis Sanchez. Rosell accomplished that by covering a remarkable 69% (€91,3 million) of Barcelona’s expenditure through player sales.

La Blaugrana rather swiftly disposed of Madrid in the 2012-13 season, when the Catalan side only signed two players for €33 million. This time, however, without the benefit of transfer revenue of any kind. Madrid too did buy two players for €33,5 million gross (+1,5%, €6 million net), or €16,8 million gross (€3 million net; -90%) per player.

The most recent transfer window is vintage Perez. Judging by his standards the last few summers were subdued, low profile if you will. Madrid purchased 5 players worth €163,5 million gross (€49 million net), or €32,7 million gross (€9,8 million) net per player on average.

Perez v Rosell 02

For the second successive season the usually frugal Rosell opted to sanction a transfer whose operation isn’t at least covered by 50% in sales. The acquisition of Neymar has cost Barcelona €57 million gross (€41,9 million net), or in other terms, only 26% of the transfer was covered by sales.

But credit where credit is due, Rosell has yet to sanction a crazy spending spree like Laporta, nor has he given any inclination that he’ll do so in the future. Additionally, Rosell has secured one of the most promising prospects in Neymar, who alongside Cesc, Alexis and various others can provide Barcelona with long-term stability once Xavi and Iniesta retire.

Unlike Laporta who was a bit too forthcoming with his stars, Rosell maintains a good balance, in the squad and the accounts. However, although Rosell is more competent in economics than his predecessor Laporta, he lacks the charisma and political acumen to take advantage of his improvements. He certainly has a way of alienating fans, former players and Socios alike.

Perez, well, he gave birth to one of the more fantastic concepts in sports, the assembly of an all-star team under one banner. Nonetheless, it never really worked out because the biggest football stars are forwards, or attacking players. By designing the transfer policy to focus on them Madrid’s team was/is bound to be unbalanced as there only is a finite number of positions available in any given formation. It’s the reason why a wonderful attacking talent such as Mesut Özil had to make way for Gareth Bale.

Time will tell whether Perez is right or the Galactico policy inherently flawed. At this moment in time though Barcelona and Madrid are well equipped to face on another on equal footing for the foreseeable future.