How to End Real Madrid and Barcelona's Sporting and Financial Duopoly?

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How to End Real Madrid and Barcelona's Sporting and Financial Duopoly?
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Never has La Liga been so split in its history as the point gap between the top two and the third and fourth teams is a prime indicator. It is making the competition uninteresting, dull, and is also hurting the image of La Liga as a prominent soccer league.

Many voices within and outside of La Liga have been raised for some time and now there is hope that something will be done to address this situation.

La Liga’s CEO, Francisco Roca Pérez, in March contributed to the voices saying "It's not a question of having two teams very dominant, it's a question that this dominance is getting too big…We have a low degree of competitive balance across the board. Spain is probably the worst example right now.

Barcelona and Madrid will always be dominant but I'm not happy that their dominance is so big that right now we still have one-third of the competition ahead of us and they are 13 points ahead of the rest. That is not good for anybody.”

Issue of TV rights for broadcasting of La Liga games live has been the core of all criticism, discussion, and evaluation aimed at bringing equality and relative financial balance.

This erosion of competition hurts both teams as well, in the words of legendary former AC Milan coach Arrigo Sacchi, “The standard of La Liga, the same as the Italian league, has fallen a long way in recent years. Barça and Real get used to a particular way of competing and later, in Europe, they find themselves in situations they are not used to”.

This duopoly (i.e. death grip on the league) is killing the competition and if the Big Two continue to be short-sighted in their objectives then a long term future is going to be at stake for smaller clubs as well as the league in itself. However despite immense significance of TV revenue, other important issues also factor in to affect the state of La Liga and the health of clubs.


TV Rights Centralization and Revenue Sharing

It was again highlighted on 10th May what may become an important step in the history of Spanish Primera División.

At the headquarters of Liga de Fútbol Profesional in Madrid, statements were made by general secretary Carlos Campos that "The La Liga clubs have decided to initiate a debate aimed at creating new rules of organization and development exclusively for the La Liga which will allow it to compete in the same conditions as the big European leagues, where the Liga and Segunda División are separated (England, Italy)…The new rules of organization and development will allow a much more attractive and better-run competition than the current one."

As of now, twenty seven clubs from Primera División and Segunda División combined have agreed to formulate a decision to collectively negotiate TV rights in future. The next meeting is scheduled for 21st June to decide the administrative, financial, and sporting regulations for a separate league from Segunda División and to finalize the date of implementation.

The objective was and is to tackle the financial odds that so overwhelmingly lie in the Big Two’s favor. Currently the Big Two get more than 50 percent of annual TV income of 520 million Euros.

If achieved, it will make La Liga more competitive but will severely affect Real Madrid and Barcelona’s domestic domination and their European aspirations in future. For the La Liga and its Big Two to be competitive in Europe, income will have to be increased, additional means explored, global image, popularity, and TV viewership enhanced.

Therefore such a step may take some time to become reality in the face of stubborn and selfish opposition, entrenched power and interest by the Big Two. But nothing will or can stop its advance for long.

Barcelona has voiced its opposition already against such a proposal and to this effect President Joan Laporta and director general Joan Oliver has made comments. Oliver suggested that smaller clubs should be better fiscally managed.

Laporta sounded completely opposed because he thought Barcelona wouldn’t be able to compete at the continental stage when he said "I don't want to damage the interests of Barcelona Football Club, because we have to compete with teams in other countries…In England, we are talking about two billion Euros for Premier League rights so we have to compete against clubs that are making more money than us."

Emilio Butragueño, Real Madrid director, said in March, Real Madrid is willing to consider the proposals and Florentino Pérez in his words “is a great strategist and I’m sure he’ll find a way to make everyone happy.” Still that is not a clear-cut statement declaring unambiguous intent to accept revenue sharing.


How to Share the TV Revenue

If revenue sharing deal is reached and La Liga is separated from the Segunda División then the biggest devil would surface in details. The main question would be as to how to distribute the income and how, if any, parity is achievable?

Clearly Premier League is the model that is expected to be followed so what will be the Spanish formula of sharing TV revenue? How much or what percentage of money will be shared equally amongst clubs as fixed base amount? And then how much based on final league standing, TV appearances, facility fees for live games, overseas TV rights, banner sponsorships, and licensing deals?

Would a club’s popularity in foreign markets entitle it to any extra payment? That is another critical question because here Real Madrid and Barcelona are the two driving forces behind La Liga’s TV income. But conversely it will strengthen their hands to maintain their hegemony at the top of La Liga.

Will there be a mechanism of parachute payments to the relegated clubs? If so, then how much or what percentage of the total revenue?


Criticism of Separation of Top-Tier for TV Revenue

Critics say that separation of top division severely affects clubs in lower divisions. At one hand it increases the financial gap, inequality, and grass root youth development but on the other it takes away local supporters of lower league clubs. Long terms effects also include decline in performance and attraction of national soccer teams.

Parachute payments have also been heavily criticized for promoting and propagating inequality and killing competition in the lower leagues. It is another critical point in the deal because while parachute payments are touted to soften the impact of relegation but others charge that these only serve to make relegated clubs stronger to bounce back to the top division soccer at the expense of poor clubs.

Quality and beauty of soccer on display is also said to be adversely affected as clubs resort to negative sometimes tactics to stay up and avoid losing financially. Premier League, from where this concept is being borrowed, has lowest goals per game ratio for 2008-2009 season of the top three European leagues with La Liga on top.

If Premier League is any indicator then financial windfall has made soccer ugly in that many clubs are almost always preoccupied with stay up instead of engaging in a meaningful, entertaining, and fan-oriented competition.


Would Defensive Play Make La Liga Title More Competitive?

For good or for ill, La Liga’s style of soccer also plays in the hands of stronger and richer teams. Open and offensive play even by the smaller clubs perhaps makes them predisposed to lose because big clubs with top talent can exploit that kind of philosophy in their favor.

Would La Liga clubs be willing to sacrifice their offensive soccer philosophy and start on the road of defensive, organized, and maybe functional game, attacking more on the break game so they could become less susceptible to be scored against and at least look to gain a single point by playing for a draw against top clubs like Real Madrid and Barcelona?

It is an extremely difficult, controversial, conflicting, and tricky question. It may make the league more competitive but will also hurt the image of an artistic, technical and entertaining league that it has earned over the years and is its hallmark.

However, as Barcelona’s Champions League semi-final loss so starkly made clear is that La Liga clubs will have to adapt and learn how to live at the continental stage and deal with closed, organized, and physical defenses. Ball possession does not always work and necessarily translate into penetration as it was demonstrated by the Inter Milan at the Camp Nou. There was nothing surprising or unexpected to be expected from Barcelona and that is where Inter Milan won.

Offense at the cost of lapses in defense is just not the way to play in European competitions. Teams should be able to change, adapt and adjust to tactics especially in Europe. Adaptability should replace rigidity and one-dimensional nature of style. Fans will also have to accept.


Salary and Compensation Caps

To enable clubs to become more stable and stave off insolvency, fiscal measures like capping salary payments, compensations and player purchase amounts to a percentage of income, La Liga can save itself from the disaster in waiting because clubs overspend and outspend their income to compete with the top clubs and also fueled by fan pressures.

German Bundesliga is the best example of its positive effects though on the flip side it may and will hamper efforts to lure highly-paid big players to Spain.


Youth Development Programs

One positive step could be to force all smaller La Liga clubs to establish and run academies as a precondition of TV revenue sharing. This will in turn help in developing local talent for club and national sides instead of importing expensive players for the league.


Restrictions on Player Recruitment

In Europe, money attracts and buys best talent and smaller clubs have to live off on scraps. No step is being considered in any country to change or at least alter this situation.

American NFL is the best success story in how draft system works and how teams are allowed to pick players depending on their league position. This has contributed greatly to the appeal and equality of NFL and it is manifest in the fact that there have been 14 different Super Bowl champions during last 25 years, such is the strength and unpredictability of competition. NFL also has a same salary cap system for all teams.


Earlier Match Times for Foreign Audience

Spanish weather is hot, making it difficult to play in the afternoon or early in the evening like the Premier League but it also has one hour difference on the GMT in England.

Florentino Pérez, Real Madrid president, has in the past said that La Liga matches should be played at midday so Asian viewership could be raised to 1.8 billion. But this proposal will have to be accepted by all the clubs and broadcasting corporations. Barça coach Josep Guardiola commented that "If it suits Florentino Pérez to play games at this time then we will play them…If it benefits all clubs then it is very welcome."

In September 2009, director of LFP, Francisco Roca Pérez, appeared willing to the idea saying "The short-term aim is to give games a time slot that allows for maximum exposure in Asia. This season we can begin to have games in Spain at 3pm local time, which will be 9pm prime time in China."

Emilio Butragueño, acknowledges the fact that the only way to compete with Premier League in Asia is to start games early, "We have to understand that there is tremendous potential to make our league universal by exporting it in this way…In the past we have had games at 4:30 local time. I don't think there will be a problem because it is a good time for families."

Smaller clubs will also favor such a step as it will be financially beneficial because of additional TV revenue and are willing. Getafe's president Angel Torres said "This is something that we should have done a long time ago... The English league has stolen a march on us because they play games at a time of the day when there is a clear demand."


Foreign Investment and Better Marketing

Because of globalization of the sport requiring enormous financial power to maintain and become a brand, local entrepreneurs may have to find partnerships or selling controlling shares to foreign investors. 

La Liga’s CEO, Francisco Roca Pérez, in March expressed his desire to attract foreign investment, “We want to get to the position where potential international investors see the league as a place to do investment in the right way.”

But again there is a problem that two biggest and richest names in La Liga, Real Madrid and Barcelona, are owned by the members and while attractive because of rich history, cannot be purchased.

Better fiscal management and financial curbs to ensure stability and solvency will make clubs more attractive to foreign investors. Current situation is not helpful at all because according to UEFA chief Michel Platini, five to six Spanish clubs are under severe threat. Sevilla vice president, Jose Maria Cruz Andres, also confirms that many “are in a bad financial position”. Valencia CF isn’t any better either.

On the marketing side, La Liga can use the plethora of superstars like Cristiano Ronaldo, Lionel Messi, Kaká, Zlatan Ibrahimovic, and David Villa to attract foreign viewers as many viewers and fans follow their favorite stars wherever they might be.

Butragueño wants separate and better administration, “We want a deep reflection on what type of league we want so we can create a brand like the Premier League… The best players in the world are here in Spain and we have to profit from it.”


Other Possible Sources of Income?

Spain has the lowest per capita income of all the top five European leagues so it is difficult to enlarge income base.

Barça can sell its shirt space, as Sandro Rosell presidential candidate has talked about, and may earn up to €20 million in annual income but it can be expected to be strongly opposed by the fans. Barça is the only top European club which has not sold its shirt space to advertisers.

Real Madrid has also last year talked about building a 60-110 hectare theme park at club’s training facilities at Valdebebas by 2013 costing €150 million. Ride, restaurants, multi-fuctional amphitheater hoping for up to two million visitors each year. And what’s more, Pérez is also discussing plans to build similar theme parks in Beijing and Miami.

The so-called Beckham Law had also helped in the past to buy foreign talent on handsome wages due to lower taxes but after being repealed in November 2009 Spain no longer has that pull.

Stadiums are primary generators of income and Spain has a couple of the best soccer stadiums in Europe but there is a sad reality underneath all that glitter. Many clubs, as many as seven, do not have their own stadiums but call city owned stadiums their home and many stadiums are small in capacity. This means smaller match-day revenue (plus rental payments to city councils) and potential loss of income from other uses like corporate hospitality, shops and shopping malls.

In February this year, LFP asked Spanish government to reduce VAT rate on tickets so clubs could enjoy better attendance and so could have more revenue generation. LFP president Jose Luis Astiazaran advocated for a 7 percent VAT (as on other entertainment products) on tickets instead of present 16 percent.

He implored, “It is not our intention to bleed money from state coffers but it must be acknowledged that the future of Spanish football could be at risk if we do not take the necessary steps.”

While dismissing TV revenue sharing, Laporta was willing to consider other options to help other clubs, "…if there is a change in the system we will face that. I'm open to look for other systems to balance what every club represents in this business. I'm open to discuss other possibilities to make money (for) all of us."

Whatever that means and possibilities are, no one knows or understands. And if there ever were any possibilities then why have they never been thought of or explored earlier. The bitter truth is that there may be no other economic possibilities to dramatically and substantially increase revenue but to share TV rights amongst the clubs.

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