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 How Real Raise their transfer fees

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PostSubject: How Real Raise their transfer fees   Mon Jun 08, 2009 1:44 pm

I am not one for cutting n pasting, but I thought this would be something you all would be interested in.

How can Real Madrid afford these obsene transfer fees?

For a start, Real are a massive club, with possibly the biggest footballing brand name in the world. Not coincidentally, they have topped Deloitte's Money League for each of the past four seasons and they've done so despite doing poorly in the Champions League.

They have the third-highest average attendance in Europe and while their stadium revenue cannot compete with Manchester United, it still packs a punch. They have been extremely aggressive in pursuing sponsorship opportunities, including overseas tours (on several occasions they have held pre-season training camps in places such as Vietnam and China).

Anything else going for them? Oh yes. Their domestic television contract is by far the richest in the world. They are also helped greatly by tax legislation - originally intended for overseas bankers and executives - that allows their foreign players to pay tax at about 23 per cent for the first five years that they are in the country.

This means that, in headline figures, if they want to pay Kaká £8 million after tax, it would cost them less than £10 million a year, whereas it would cost United £16 million (thanks to the new 50p top marginal rate introduced at the last Budget). Over five years, that's a difference of £30 million.

Finally, there's Real's status as, effectively, a non-profit social trust. This means they do not need to generate £30 million a year just to service their debt (like United).

Whatever debt they hold (and detail here is murky) is with local banks, many of whom are under political and social pressure not to tighten the screws. Real are too big and too important to fail or to come under the kind of debt pressures that affect traditional clubs. The club's social, political and economic significance dwarfs that of any other club in the world, with the possible exception of Barcelona. In that sense, they play by a different set of rules.

Just how much is their TV contract worth? Well, according to the club, in 2006 they signed a seven-year deal with MediaPro guaranteeing €1.1 billion (now about £956 million) for their domestic league TV rights. At least, that's Real's version of events: MediaPro has never disclosed the figure and some dispute the amount. But, if it is true, they earn £135 million a season from their domestic league rights, more than twice what United receive.

How does the structure of the club differ from other leading sides? Real are one of four Spanish clubs - the others are Barcelona, Osasuna and Athletic Bilbao - who were exempted from a 1991 law forcing teams to become plcs. This means they hold regular elections to determine who will lead the club. The president then selects his board and appoints his men to key positions within the club.

So what do you need to do to get elected? To stand for election you have to be a Spanish citizen who has been a club member for at least ten years. And, crucially, you have to submit a deposit equal to 15 per cent of the club's budget, or about £50 million. (But you don't need to come up with the cash yourself, you just need a bank to vouch for you.) Once that's done, you campaign, just like in any other election, and, ultimately, it's the members who decide.

Now that Pérez has been elected, does he have to fund the club? No. In fact, he's not allowed to. He simply runs the club. Of course, Pérez is one of the wealthiest men in Europe, with wide-ranging business interests. No doubt he can leverage them to help the club, particularly when it comes to their relationship with banks and sponsors. Ultimately, though, he cannot finance the club. And, of course, he's not supposed to benefit from it financially.

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After reading the advantage they have over tax to players wages - we can see why so many choose Spain over the rest of us.

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PostSubject: Re: How Real Raise their transfer fees   Mon Jun 08, 2009 2:14 pm

Being able to negotiate their TV rights independently is a big plus for Real Madrid, it helps them keep at or near the top of the revenue table.

Spanish clubs also have a special relationship with their municipalities that doesn't exist in England. In 2001 Real Madrid's had huge debts of €270m. Madrid city council and regional government bought Real Madrid's training ground for office buildings which cleared their debts and enabled the club to embark upon an unprecedented spending spree which brought big-name players to the club. Similar relationships exit in Italy where the stadiums are owned and up kept by the local municipalities, freeing the clubs to spend money that in England clubs use to buy and maintain their stadiums on players. Seems to be something Platini conveniently forgets when he attacks the debts of English clubs.

Regarding the taxes players have to pay, it's not just that they are lower, in Spain you are allowed to be more creative with tax planing. The big advantage is to defer their income for years when they don't make the big wages.

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PostSubject: Re: How Real Raise their transfer fees   Tue Jun 09, 2009 8:00 am

Well that certainly makes it clearer, i didn't know all that, however i had an idea of some of the things mentioned. They are always loaded!
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PostSubject: Re: How Real Raise their transfer fees   Tue Jun 09, 2009 2:19 pm

they had topped the european rich list...by revenue... for 4 years straight up till last season i think
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