Why Real Madrid think that even €100m for Gareth Bale is not silly money
At the end of a summer in which more media space has been lavished on his next career move than on Britain's economic agonies or the conflagrations of Syria, a one-time skinny kid from Southampton looks like he is indeed moving to Spain. Gareth Bale, an ordinary Welsh name for a level-headed young man with a blossoming football talent, is set for Real Madrid, who are expected to pay a world-record transfer fee, €100m, to Tottenham Hotspur for releasing Bale from his current contract.
It is not only observers of what used to be called "the people's game" who might think the sport has gone mad, with the payment of so much money for a 24-year-old human being who could tweak a tendon, lose his form or fail to settle in Madrid. Spain's secretary of state for sport, Miguel Cardenal, last week told Sid Lowe, Spanish football correspondent for the Guardian, that Real Madrid ought to explain how this extravagant acquisition can possibly make sense in a country suffering economic depression and 26% unemployment.
The club itself declined to comment until the deal, mooted and negotiated all summer after Bale's sensational last season for Spurs, is concluded. A spokesman told the Observer: "Bale is not a Real Madrid player, so we don't talk about it."
Yet Real Madrid's president, the construction magnate Florentino Pérez, who has a policy of signing galácticos (hugely expensive players) has long argued that fielding these massive stars makes sense, and that they justify their outlay in earnings and "brand" status for the club. Many in football, watching Real dominate this summer's football media, believe the club wants as much to make an emphatic statement about its scale and power as have Bale in the actual team, Kazinform has learnt from the Gaurdian.
In Bale's projection from youth team colt at Southampton to football's most valuable modern commodity lies the story of the sport's modern commercial development, which almost exactly spans his 24 years. The single most important boon since the early 1990s to what was already the world's best-loved and most popular spectator sport has been the advent of pay television. In England, Spain and Europe's other major football leagues, subscription TV managed not only to multiply the biggest clubs' incomes overnight by having their own country's fans paying to watch live matches; crucially, satellite began to broadcast European football live around the globe.
It has taken some years for Europe's top clubs to reap the financial fruits of that expansion, and more recently the money has grown exponentially. The English Premier League, boosted domestically by BT's sudden television ambitions, and internationally by increasing audiences in more countries, has sealed a three-year deal covering the 2013-2016 seasons for an unprecedented £5.5bn for its 20 clubs. In 1992, the first deal granting live rights exclusively to BSkyB, breaking the free-to-air duopoly of BBC and ITV, was transformational at £305m over five years.
The biggest European clubs, prompted by the Premier League's early unembarrassed dash for cash, have begun more zealously to exploit football's global exposure and popularity, principally with massive sponsorship deals. Manchester United, bought by the American Glazer family in a leveraged buyout burdening the club with £525m of debt in 2005, have sliced their sponsorships by product category - Aon, an insurance company, on the United shirts; Singha, a global beer sponsor; the Malaysian Mister Potato as "global snack partner" - and by world regions, to earn commercial income in 2011-12 of £118m.
Real Madrid, an institution of vast size and presence in Spain, is still a member-owned club, like its great rival Barcelona. These are not companies that can be bought and sold as tradeable commodities, like those in the Premier League. Yet the Spanish greats are increasingly capitalising on this modern surge of commercialism, and both clubs make more money than United. Barcelona, fierce Catalan rivals of Real, the club of the Spanish establishment, made £391m in 2011-12, then emblazoned commercial sponsorship on their shirts for the first time - a £25m-a-year deal from Qatar Airways, breaking many football purists' hearts.
Real Madrid make even more money than Barcelona; the most in Europe, and therefore the world. The club's sponsors include the almost ubiquitous airline Emirates, Audi and Coca-Cola. Real's commercial income dwarfed United's in 2011-12, at £151m. The club's famed stadium, Santiago Bernabéu, named after the club president who strove for its construction, seats 85,454 supporters and made the club, via many-layered ticket pricing, £102m in 2011-12.
Pérez, whose marquee statement Gareth Bale is intended to be, announced plans at the end of last year to increase stadium capacity to 93,000, with more restaurants and corporate facilities. Pérez unveiled the plans as another way Real will make a grand statement: "The Bernabéu has to become a unique stadium, the best in the world, and the crowning achievement of 21st-century stadium architecture," he said.
The largest segment of Real's booming earnings comes from television; a total of £161m. Close to £33m was earned from the Champions League, but most of it comes from home matches in the Spanish league, La Liga, on pay-TV. This is deeply resented in Spain, because unlike in the Premier League, which sells its TV rights centrally then pays the money to the 20 clubs according to a relatively redistributive formula, La Liga has no centralised selling. The clubs sell the rights to their matches themselves, so Real Madrid and Barcelona, by far the greatest attractions, make far more than any other club, currently 42% of La Liga's total between them.
Football, the great and simple game played by clubs with working-class roots and deep local attachments, has been turbocharged by pay-TV into a globally expanding and increasingly consumerist sport, viewed by many of those who now work in it as a branch of the entertainment industry. This transformation has not happened without resistance from opponents, including the Football Supporters' Federation, who argue that football should have been more restrained in its zeal to make money out of loyal fans and shared the new fortunes more evenly so the biggest clubs would not dominate so much.
As things stand, however, Real Madrid will argue the signing of Gareth Bale, even at €100m, is far from madness. Real, as modern football's richest club, made a total of £415m in 2011-12, almost £100m more than United. Contrary to some assumptions about Real Madrid and Barcelona, due to the financial difficulties of most other Spanish football clubs, they have manageable debts - £125m in bank loans in 2011-12 - and wages, even for their galáctico stars, stand at 46% of income. That is considered respectable in football, according to Alex Thorpe, of the Deloitte Sports Business Group.
"In isolation, €100m for Gareth Bale looks huge," says Thorpe, "but it must be seen in the context of Real Madrid's expanding commercial operation, which is being managed sustainably. They have sold players [most notably Argentinian striker Gonzalo Higuaín for £32m to Napoli in July] and have said they are aiming for more 'cost containment'. But Real have a tradition of making big money signings, so the signing of Bale fits with that."
Since they won the European Cup in the competition's first five years from 1955, with great international strikers - Argentinian Alfredo di Stefano and Hungarian Ferenc Puskas - Real have been associated with galáctico signings. Pérez has conducted this as a policy in modern times, spending hugely on David Beckham and the French maestro Zinedine Zidane in his first presidential stint between 2000 and 2006. He continued in this vein on his return in 2009, although the £80m signing of Cristiano Ronaldo from Manchester United, the current world transfer fee record, had already been prepared by the president he supplanted, Ramón Calderón.
Now Bale. Real Madrid want him because he scored wondrous goals for Spurs last year and became the Premier League's most thrilling player. But they also want to spend so much money on him because in this global entertainment industry, securing the world's biggest transfer is also about building the business. Pérez said at the beginning of the saga this summer: "Regarding the figures spoken about Bale, players are neither cheap nor expensive, but an investment. Most expensive players are those that can be classified as an investment because, if they are very good, they produce a return."
By this he did not mean that Real would recoup €100m, plus Bale's galactic wages, in direct sales of replica shirts with his name on, or in media exposure, but in great performances, which would sustain Real's position among the elite. Modern football is more complicated than that, though. Bale's arrival may strengthen the team, but it will also trump Barcelona and cement the name and the value of the brand worldwide.
Florentino Pérez believes that for clubs like Real Madrid, expensive footballers such as Gareth Bale pay for themselves, both on and off the pitch.
