Real Madrid and Barcelona's debt

[Trizy]

I've read a lot of articles of the past few years claiming that Real Madrid's debt is a lot higher than Perez claim it to be and the same with Barcelona but on top of all that they are reported to owe a shit load of taxes too. Below is the newest apparent figures for the top 10 richest clubs and their debt.

Here is the top ten and what they are worth:

1. Real Madrid £2.18billion
2. Manchester United £2.09billion
3. Barcelona £1.72billion
4. Arsenal £880million
5. Bayern Munich £860million
6. Ac Milan £624million
7. Chelsea £595million
8. Juventus £458million
9. Manchester City £455million
10. Liverpool £430million

Now here is the debts those teams seem to have:

1. Real Madrid £600million
2. Manchester United £359.7million
3. Barcelona £369.5million
4. Arsenal £104million
5. Bayern Munich- NO DEBT they have been in profit ever since the 2011-12 season.
6. AC Milan £298.8million
7. Chelsea- NO DEBT they made a profit of 1.2million dated April 10th 2013
8. Juventus £48.65million
9. Manchester City- NO DEBT but have yet to release their profit margins
10. Liverpool £237million

I don't understand how they can continue to sign players for outrageous fees and give them buckets of money if they're in much more debt than us.

1. Why does it not breach the FFP rules?
2. How are they even in debt if they make more profit than us year in year out?

I honesty cannot make sense of it, we've clearly had to cut spending to fund the Glazers debt and are in a strong position now to spend whilst still repaying our debt but how is theirs that high..

 

[Oneunited26]

It is like the government, they will never run out of money

 

[rcoobc]

I'm confused why you're/the figures are telling us the profit only from the clubs with no debt. Have those figures just been omitted or is there some confusion between debt and profit

 

[Kentonio]

Don't Madrid city council just usually end up forking over taxpayers cash whenever the situation at the club gets a bit tight?

 

[bishblaize]

Think you're confusing debt and losses.

 

[Brightonian]

I'm confused why you're/the figures are telling us the profit only from the clubs with no debt. Have those figures just been omitted or is there some confusion between debt and profit

This. Lots of the teams with debt made profit too.

 

[paceme]

People keep looking at clubs as if they are individuals and not businesses. The amount of debt is irrelevant without looking at its context and terms.

 

[amolbhatia50k]

Looking at those figures, despite their debt, the "big 3" still have am enormous gap between their worth and their debt as compared to the rest. To be honest, I know it's not ideal not a necessity in football, but huge businesses do tend to have some debt.

 

[Trizy]

I'm not saying that they're gonna go bankrupt over or that they make more losses than profit. I just don't understand how their debt is so high when they profits are so high too.

 

[rcoobc]

People keep looking at clubs as if they are individuals and not businesses. The amount of debt is irrelevant without looking at its context and terms.

The amount of debt is pretty irrelevant if they were people too. In fact, I'm sire if you looked at a scale of debt/wealth in the UK or US, the most indebted would be the richest.

I have a credit card and no mortgage so am pretty poor. Others have a mortgage and a credit card and are far wealthier. Others have no credit card, no mortgage, and are very poor.

Sure, some people have so much debt they are going broke but in general debt and wealth probably have a linear relationship.

 

[amolbhatia50k]

I'm not saying that they're gonna go bankrupt over or that they make more losses than profit. I just don't understand how their debt is so high when they profits are so high too.

Why not? It's the case with us. There's no correlation between the two other than the interest expense. If Apple acquire a big loan tomorrow, their profits should still be pretty great albeit being eaten into depending on the size of the loan.

What's more interesting to me is that their debt is not made a big deal out of whereas ours is. Probably has to do with that government backing very gone talks about.

 

[Trizy]

Why not?

Because our debt came from a club take over so where has theirs came from? Surely its not players or wages since they weren't flagged by FFP.

 

[Bob Loblaw]

Can't be arsed looking into the detail of Barça/Real Madrid's debt (and I'm sure more knowledgeable people have done it already) but too many people complain about debt without understanding it properly. It's normal for companies to have debts and it's possible to owe tax without it being illegal.

Plus there is more than one definition of debt which could explain why Pérez's figure is lower than what others say.

 

[Interval]

Why not? It's the case with us. There's no correlation between the two other than the interest expense. If Apple acquire a big loan tomorrow, their profits should still be pretty great albeit being eaten into depending on the size of the loan.

What's more interesting to me is that their debt is not made a big deal out of whereas ours is. Probably has to do with that government backing very gone talks about.

Mr. Accountant to the rescue. Certain amount of debt is recommended since it accentuates shareholder returns.

 

[amolbhatia50k]

The amount of debt is pretty irrelevant if they were people too. In fact, I'm sire if you looked at a scale of debt/wealth in the UK or US, the most indebted would be the richest.

I have a credit card and no mortgage so am pretty poor. Others have a mortgage and a credit card and are far wealthier. Others have no credit card, no mortgage, and are very poor.

Sure, some people have so much debt they are going broke but in general debt and wealth probably have a linear relationship.

The way I see it is that it the threat of the debt is reliant on the ratio of your debt to your net worth and interest burden to your profits. With United, our worth has only been increasing (not sure about since last season), and the debt has been decreasing steadily, so it's under complete control.

 

[amolbhatia50k]

Mr. Accountant to the rescue. Certain amount of debt is recommended since it accentuates shareholder returns.

Yup.

 

[Nanook]

Your numbers are misleading, the debt of Real Madrid and Barca in your list is using the total liabilities definition, using the same definition Manchester United would have had a €1billion of debt in 2012. If you use the same definition as what United's debt is worked out in (£350m) Real and Barca both have around only €150m in 2012.

http://swissramble.blogspot.co.uk/2012/04/truth-about-debt-at-barcelona-and-real.html

 

[Midnight1811]

This is an area I'm fascinated to read into more. Has anyone actually done an in-depth study into the dealings of the big 2 in Spain?

 

[amolbhatia50k]

Your numbers are misleading, the debt of Real Madrid and Barca in your list is using the total liabilities definition, using the same definition Manchester United would have had a €1billion of debt in 2012. If you use the same definition as what United's debt is worked out in (£350m) Real and Barca both have around only €150m in 2012.

http://swissramble.blogspot.co.uk/2012/04/truth-about-debt-at-barcelona-and-real.html

That changes the basis of the thread completely. Their debt is puny in that case.

 

[Bob Loblaw]

That changes the basis of the thread completely. Their debt is puny in that case.

Common mistake by people who aren't financially knowledgeable really. Not the first time I've seen it.

 

[amolbhatia50k]

Because our debt came from a club take over so where has theirs came from? Surely its not players or wages since they weren't flagged by FFP.

You're assuming that any debt is a bad thing, though.

I'll admit I'm not that well versed with ffp.

 

[Trizy]

Your numbers are misleading, the debt of Real Madrid and Barca in your list is using the total liabilities definition, using the same definition Manchester United would have had a €1billion of debt in 2012. If you use the same definition as what United's debt is worked out in (£350m) Real and Barca both have around only €150m in 2012.

http://swissramble.blogspot.co.uk/2012/04/truth-about-debt-at-barcelona-and-real.html

Well that actually changes everything then.

 

[The Taurean]

Madrid's profit margins are huge i believe.
Is it true that la liga is moving towards a collective tv deal?

 

[Trizy]

Madrid's profit margins are huge i believe.
Is it true that la liga is moving towards a collective tv deal?

Not sure but Madrid made somewhere around £120 million last year from TV rights and Granada £8 million, where as if they had a Premier League style deal they would get £45 million and £25 million, what's a massive loss of profit lost per year. What did we earn last year, £80-90 million?

 

[jojojo]

Yes, their debt is a bit of an urban myth, they don't need subsidies. They've got United type income and they spend it on themselves. Perez phrased it something like - we're a football club not a bank.

There are financial issues, one of them is that they're preparing to refurbish the Bernabeu.

Madrid's profit margins are huge i believe.
Is it true that la liga is moving towards a collective tv deal?

There's a more collective TV deal coming but Madrid and Barca will still get the lion's share.

The cloud on the horizon, and it's a big one, is around the TV deal. Almost all the TV revenue is generated inside Spain and the pay TV companies are struggling to keep subscribers - prices are similar to the UK but wages are lower and unemployment is high. TV companies are going broke. TV money not being paid to the clubs on time is already a problem.

 

[Invictus]

Not really debt related but since there are financial experts around, something I don't understand is :

What is the "market pool" based on ? Why do Juventus earn more than the winners ? Why do Montpellier earn more than Lille despite both clubs exiting in the group stage ? Why do Kiev have a share of less than 1 million ?

 

[Nanook]

Not really debt related but since there are financial experts around, something I don't understand is :

What is the "market pool" based on ? Why do Juventus earn more than the winners ? Why do Montpellier earn more than Lille despite both clubs exiting in the group stage ? Why do Kiev have a share of less than 1 million ?

I think the market pool is based on the domestic market, because AC and Juve were the only Italian clubs to qualify the Italian TV money is directly split between those two clubs, if Manchester United were the only English team to qualify and we went out in the last 16 we would probably earn far more than the winners. The Ukrainian TV deals for the champions league will be tiny compared with other countries so that's why their share is so small, it's odd that Montpellier earned so much more than Lille though.

 

[Globule]

Not really debt related but since there are financial experts around, something I don't understand is :



What is the "market pool" based on ? Why do Juventus earn more than the winners ? Why do Montpellier earn more than Lille despite both clubs exiting in the group stage ? Why do Kiev have a share of less than 1 million ?

According to the UEFA website, market pool is based on the respective TV deals of clubs' respective countries.

while monies from the market pool were divided according to the proportional value of the national television market allocated to each individual club, among other factors.

I think this means that you have to compare clubs from the same country. AC Milan and Juventus got so much because there were only two Italian clubs in it, whereas we have to split our pot with Chelsea, City and Arsenal. But even then, why did Dortmund get more than Bayern?

 

[Nanook]

According to the UEFA website, market pool is based on the respective TV deals of clubs' respective countries.



I think this means that you have to compare clubs from the same country. AC Milan and Juventus got so much because there were only two Italian clubs in it, whereas we have to split our pot with Chelsea, City and Arsenal. But even then, why did Dortmund get more than Bayern?

It might be which opponents you face, Dortmund got two clubs from major markets in Spain and England in the group stage and a team from Holland whereas Bayern got a Spanish, French and team from Belarus in their group, maybe if you play teams from bigger markets it can add a few million onto your earnings.

 

[Mrs Smoker]

Don't we split with every Premier League team? And not just Chelsea, City and Arsenal?

 

[Globule]

Don't we split with every Premier League team? And not just Chelsea, City and Arsenal?

Not sure about that, but just found out that 10% of the market pool for English clubs go to Scotland. In 2011/12 there were no Scottish clubs in the CL, so English clubs got more than 2012/13 because they didn't have to give that 10%.

Feck Scotland, let them have independence.

 

[jojojo]

Don't we split with every Premier League team? And not just Chelsea, City and Arsenal?

Not on the serious CL revenue.

The CL is the home of the rich get richer.

 

[Mrs Smoker]

I mixed something up. CL is different beast.

 

[Nanook]

Not the champions league TV money, I believe the all the money from each countries TV deal goes into one pot and is shared between all the 32 teams, if the total amount stands at £1bn for example and £100m of that is from the UK tv deal I think 70% of that £100m is shared between the UK teams in the champions league and the other 30% is split between the non UK teams, these numbers are made up but I think that's how it works.

 

[KingMinger22]

Your numbers are misleading, the debt of Real Madrid and Barca in your list is using the total liabilities definition, using the same definition Manchester United would have had a €1billion of debt in 2012. If you use the same definition as what United's debt is worked out in (£350m) Real and Barca both have around only €150m in 2012.

http://swissramble.blogspot.co.uk/2012/04/truth-about-debt-at-barcelona-and-real.html

This. Real and Barca are absolutely flush despite a horrific Spanish economy.

They will always outspend us by at least double, if not triple, as they are NOT a for-profit business. We are and we will always have a portion of our profits taken out, be it as debt repayments or dividends.

I believe they are entering a period of domination and growth over us that will be stronger than ever as they catch up with our business and marketing prowess. Having the world's best players will continue to win imaginations across the world. We need another class of '92 to continue to compete imo.

 

[Invictus]

I think the market pool is based on the domestic market, because AC and Juve were the only Italian clubs to qualify the Italian TV money is directly split between those two clubs, if Manchester United were the only English team to qualify and we went out in the last 16 we would probably earn far more than the winners. The Ukrainian TV deals for the champions league will be tiny compared with other countries so that's why their share is so small, it's odd that Montpellier earned so much more than Lille though.

According to the UEFA website, market pool is based on the respective TV deals of clubs' respective countries.



I think this means that you have to compare clubs from the same country. AC Milan and Juventus got so much because there were only two Italian clubs in it, whereas we have to split our pot with Chelsea, City and Arsenal. But even then, why did Dortmund get more than Bayern?

Ah that explains a lot. Cheers !

 

[jojojo]

The market pool according to Forbes:

Although part of the distribution is based on wins, draws and how far a team progresses 45% is determined by the “Market-Pool.”
The “Market-Pool” in the simplest form distributes a significant portion of the TV rights fees paid by domestic broadcasters back to the representatives of that country with weighting based on the previous season’s finish in their respective leagues and respective performances in the current edition of the Champions League .
So if you want to win financially here are four rules to follow:
1. Win your league the previous season,
2. Progress deep into the tournament,
3. Represent a domestic market that generates a large TV rights fee (creates a big market-pool)
4. Wish ill-luck on your domestic rivals! The earlier they go out the better for the survivors.

http://www.forbes.com/sites/bobbymc...the-big-clubs-of-europe-can-expect-to-pocket/

 

[Nanook]

This. Real and Barca are absolutely flush despite a horrific Spanish economy.

They will always outspend us by at least double, if not triple, as they are NOT a for-profit business. We are and we will always have a portion of our profits taken out, be it as debt repayments or dividends.

I believe they are entering a period of domination and growth over us that will be stronger than ever as they catch up with our business and marketing prowess. Having the world's best players will continue to win imaginations across the world. We need another class of '92 to continue to compete imo.

I think you're exaggerating things slightly, Barca and Madrid will probably always be able to outspend us but I don't know about double or triple, we only pay around £20m a year now on the interest on our debt, once the Adidas and Chevrolet deals come in we could easily spend £70m a season, Barca and Madrid aren't going to be spending £140m a season each year, Real did spend an insane amount last year but you have to remember they did sell players for something like £90m, Dortmund and Atletico have both competed in the last few years so why can't United when we have far much money than both of those teams?

 

[jojojo]

I think you're exaggerating things slightly, Barca and Madrid will probably always be able to outspend us but I don't know about double or triple, we only pay around £20m a year now on the interest on our debt, once the Adidas and Chevrolet deals come in we could easily spend £70m a season, Barca and Madrid aren't going to be spending £140m a season each year, Real did spend an insane amount last year but you have to remember they did sell players for something like £90m, Dortmund and Atletico have both competed in the last few years so why can't United when we have far much money than both of those teams?

Average net transfer spending for Real Madrid across the past 5 seasons (including the Ronaldo/Kaka/Benzema/Alonso/Arbeloa/Albiol summer of 2009) is just over £60m a season. It's high but it's affordable. Whether it makes football sense is a different matter of course.

 

[Skills]

I don't know much about finance, but is the cost of buying players counted as a cost? Or is that some kind of investment using post tax profits?

Probably a really newbie question.