Real Madrid: Phenomenon or Competent Management?

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Table of Contents

Introduction
Revenue Ways
Worldwide Soccer Politics
Transfers
The Galacticos
Real Madrid Sport Franchise
International Expansion
Player Strategy
Conclusion

Introduction

Real Madrid is one of the world’s most prominent clubs with such distinguishing factors as fan quantity and budget amount. Compared to other clubs, Real Madrid has more than 93 million fans, who are loyal and passionate about the players and the overall performance of their favorite soccer club. Such beneficial support from followers is supplemented by the second factor of success – budget for player contracts, which allow attracting the most effective players like Bale or Ronaldo. In turn, these contracts engage even more soccer viewers, which make Real Madrid successful and well-known all over the globe.

Revenue Ways

The revenue stream of Real Madrid is primarily ensured by TV broadcasting rights since this source provides the club with a multi-million audience. The majority of fans view matches and search for related information via the media as it is much more convenient and accessible. For people living outside the cub’s country, it requires many efforts to visit stadiums, and they prefer watching TV. Another income point for clubs is a match day that is always a sports show. The sooner a spectator arrives at the stadium, the more money he or she is likely to spend. Food, souvenirs and clothing give the club more than five percent of annual profits. If the stadium has infrastructure for children, the club increases its audience, which means it sells more tickets. In general, the financial success of Real Madrid depends on how well management uses revenue streams and obtained money that can be spent on the contracts with players, an advertising campaign, et cetera.

Worldwide Soccer Politics

Real Madrid belongs to the European soccer league that controls this game, while the United States Soccer Federation is responsible for this in America. The key difference is that the European leagues act likewise companies do in a free market that does not have strict rules or limitations. The governing body gives autonomy to sports clubs so that they can independently establish their policies and strategies in consistence with the environment. In contrast, the US governing body follows a centralized approach to manage individual teams. One more difference refers to revenue sharing in the US, which is not characteristic to Real Madrid. In addition, it should be stressed that effective players are distributed via drafts in the US, but European clubs are encouraged to operate in a free market with strong competition.

There is a range of points that should be identified with regard to expenses of soccer clubs, including player salary, stadium maintenance, and merchandise expenses. Payer fees compose the largest expense item since top players require good remuneration. In case of Real Madrid, 85% of revenue in Spain and 125% of revenue in Italy are reported, which is not solid in a long-term perspective. The fierce competition between clubs causes the increase in salaries, which is selected by them as a talent attraction and retention strategy. Although there are agreements between clubs, their impact remains low. The maintenance of stadiums is another essential issue, and clubs can either rent them or build on their own. Merchandise expenses present the least significant point of costs since they partially pay off.

Transfers

Speaking of transfer fees and their impact, it should be stated that they are paid to the clubs that has contracts with players, making them fee-paying team members. However, when the contract expires, the club loses its rights to receive fees, and a player may become a free agent. In case a soccer club turns to be public and receive some revenue from shareholders, it does not create value for them as expected by investors. Instead, the clubs are likely to use this money to pay the best players, thus strengthening their team. More to the point, it is possible to sell players for transfer fees to be reinvested in the team.

The Galacticos

Galacticos refers to the famous definition of the purchases of Florentino Perez, the ex-president of Real Madrid from 2000 to 2003, including Luis Figo, Zinedine Zidane, Ronaldo, and David Beckham. The members of the first composition of the Galacticos did not achieve great results, and the spending did not justify itself. The second attempt was much more successful: in 2004-2006, Real Madrid won several championships and took the leading positon in the market. Later, the strategy of the club changed, as suggested by a new director, Miguel Angel Arroyo. Instead of hiring players aged near 30, the management focused on 20-year-old players and developing their talents to cooperate with them in a long-term and have more chances for succeeding. The impact of the Galacticos on the bottom line of the club can be regarded as beneficial since they attracted more fans and sponsorship. In addition, the increased attention from the media also promoted an increase in the bottom line.

Real Madrid Sport Franchise

Branding, market positioning, and content are important to the Real Madrid franchise as they provide the basis for communication with fans. This club is successful, it regularly plays in the Champions League and usually comes to the semifinals, which ensures authority and fan loyalty. Among other things, Real Madrid is a brand, so this club earns, perhaps, most of all in the world from the sale of commercial rights, such as T-shirts, club attributes in general, which is a serious amount of the budget. The club’s market positioning leads to the fact that these T-shirts are being sold out actively not only in Spain, but also in completely different areas of the world. Creating and supporting a brand and keeping its media presence active, Real Madrid exists as a business structure. Along with developing talents, it is focused on making money by the work with fans, raise players who can be sold at a high price, and organized merchandising. In addition, the club offers online content via its official website as well as various membership options to its customers.

International Expansion

The international expansion of Real Madrid is likely to significantly increase the club’s brand equity and economic returns. In particular, by entering the markets of the US and Asia, the given club can take advantage of engaging more fans and revenues from matches and merchandising. It is anticipated that approximately 45% of the worldwide sports merchandise returns can be gained via the operation in the US market. As for Real Madrid’s plans to implement the identified goals, one should stress that there is a four-step plan for the US market. Namely, enhance global brand equity, capitalize on the club’s assets through the generations of returns, the creation of a transparent cycle reinforcing the brand in America, and establish the foundation for further expansion at the grass-roots level. The Asian tour was prepared in 2004 to enter the corresponding market.

Player Strategy

During the past decade, Real Madrid’s player strategy shifted its focus from star players to younger people. With the election of Ramon Calderon as the president of Real Madrid, the club started to pay attention to the team potential rather than individual sorcerers. This strategy proved to be effective as the club remains one of the global leaders for many years. The increasing interest in soccer all over the globe allows for expecting that the future of international clubs is bright. Barcelona, Arsenal, Real Madrid, and other clubs are likely to move away from the Galacticos strategy and have more opportunities in sports and business areas. Nevertheless, it is still unclear whether the global expansion would limit sponsorship revenues or boost them.

Conclusion

Real Madrid’s sports franchise is thought of as one of the most valuable decisions in the club’s history. In Latin America and Asia, TV matches as the most wanted sports allowed for entering the market and improving content revenues. Interactive applications, video games, and films related to the club are seen by Real Madrid as the ways to spread its franchise through controlling all the content sold. The media presence that is expressed in various interviews, publications of player transfers, and any other information of interest are critical for fun loyalty. The openness to fans and customers as well as their needs demonstrate that Real Madrid strives not only to create its brand value but also continuously enhance it. Thus, it becomes evident that the club understands the role of the media in supporting their image and remaining the leading soccer club on the global arena.

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