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Pratyush Peddireddi

ME08B026

HS 201

25 November 2009

MONEY IN CLUB FOOTBALL: FOR BETTER OR FOR WORSE

Abstract

This paper explores the increasingly important role being played by financial power in the game of football. It

follows the progression of the sport from being The Beautiful Game into a glamorous investment avenue for

people from all over who have cash to splash. It points out the ways in which money has changed the face of the

game forever, before bringing to your attention some concerns that have arisen due to ridiculously high

spending by some rich investors. Finally, it tries to answer the age old question whether money can buy on-field

success.

The world of football today is abuzz with talk of takeovers, investments and cash-injections.

Rich businessmen from all over the world, many of whom do not have a basic idea about the

sport, are investing in European football clubs, viewing them as exciting new business

ventures, rather than out of love for the game. To compete with them, other clubs have

become desperate to find some Sheikh from the Middle East, with his oil-riches, to buy into

them and provide an investment of hundreds of millions of dollars so that they can become

“the biggest club in the world”.

This paper shall analyze the effects of the huge influx of money into football. It will examine

both sides of the coin; how money has transformed the fortunes of English football in

particular while at the same time, all this money has led to some alarming new practices

which do not set a healthy precedent for the future. The money factor has gained so much

importance in the sport today, is this a positive or negative change for the welfare of football?

Does money guarantee success on the field? Will teams that are not able to find investors fall

by the wayside? This paper will try to answers to these questions.

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THE RISE AND RISE OF COSTS IN FOOTBALL

No turnstiles, no tickets, no huge wage demands. Late 19th-century football was a serene

place… until money came along and turned it into the monster we love and loathe today.

The Football Association, founded in 1863, is the governing body of Football. In its early

years football was mainly played on an amateur basis. This changed with the inauguration of

the FA Cup competition in 1871. To do well in the competition, clubs started to compete with

each other to attract the best players. The players would be offered financial inducements to

play. Although inducements were paid they were not official payments because initially the

FA was completely opposed to professionalism.

By the mid 1880s this position was no longer reasonable and professionalism was legalised in

1885. In 1888, with to the introduction of professionalism, a new format for competition

between the clubs was possible and The Football League was introduced to help promote the

commercialisation of football.

A transfer is the action in which a player moves between clubs. In general the players can

only be transferred during a transfer window and according to the rules set by a governing

body. When a footballer is under contract with a club, he can only leave if the club agrees to

terminate this contract. The club to whom the player is transferring will usually pay a capital

sum known as the 'transfer fee', as a way of compensation.

Until the 1970s, footballers had earned the same as ‘normal’ people. But with the advent of

commercial sponsorship, especially from beer companies, footballers turned into superstars

for the first time, doing brand endorsements, etc. Once ordinary folk, they had become high-

society celebrities, living a life of luxuries.

In 1978, Liverpool became the first British club to have a shirt sponsor in Hitachi. The

following year Trevor Francis joined Nottingham Forest for an unheard of £1m, but it was

1988 before the first £2m transfer with Paul Gascoigne’s switch from Newcastle to Spurs. As

transfer fees rocketed between 1994 (Chris Sutton £5m, Norwich to Blackburn) to 1996

(Alan Shearer £15m, Blackburn to Newcastle) and on to 2002 (Rio Ferdinand £30m, Leeds to

Man United), so wages went through the roof.

In 2000, Roy Keane became English football’s leading earner with a new £52,000-a-week

contract. At the time, £52,000 a week seemed ridiculous. These days pretty average Premier

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Leaguers rake in that much in while the top players have long since crossed the £100k-a-

week barrier. In September 2009, John Terry signed a new contract with Chelsea for a

reported £160,000-a-week, making him one of the highest paid players in the English game.

The bottom-line is that this is all simple economics. When a team wants to compete with the

best teams in the world, it wants to buy the best players in the world. So demand for the best

players rises, thereby increasing their market prices. Taking a pay cut is not an option,

because there will always be someone else ready to give the talent the big money. Off late,

due to some extravagant spending in the transfer market by some individuals, these market

prices have become inflated to ridiculous heights.

HOW MONEY HAS TRANSFORMED THE FORTUNES OF ENGLISH FOOTBALL

Money has transformed football from a simple game to a money-minting goldmine. There is

no better example to illustrate this fact than the meteoric rise of the English Premier League,

which resurrected the declining fortunes of the sport in its motherland.

During the late 80s, the Football League First Division, which had been the top level of

English football since 1888, was well behind leagues such as Italy's Serie A and Spain's La

Liga in attendances and revenues, and several top English players had moved abroad.

 As stadia improved and match attendance and revenues rose, the country's top teams again

considered leaving the Football League in order to capitalise on the growing influx of money

being pumped into the sport through various avenues.

In 1992 the First Division clubs resigned from the Football League and the FA Premier

League was formed as a limited company. The newly formed top division would have

commercial independence from the Football Association and the Football League, giving the

FA Premier League license to negotiate its own broadcast and sponsorship agreement. The

argument given at the time was that the extra income would allow English clubs to compete

with teams across Europe.

Where does the money come from?

Television has played a major role in the history of the Premier League. Television rights

have been a vital source of income, helping to create excellence both on and off the field. The

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League's decision to assign broadcasting rights to BSkyB in 1992 was at the time a radical

decision, but one that has paid off. At the time pay television was an almost untested

proposition in the UK market, as was charging fans to watch live televised football. However,

a combination of Sky's strategy, the quality of Premier League football and the public's

appetite for the game has seen the value of the Premier League's TV rights soar.

The first Sky television rights agreement was worth £304 million over five seasons. It rose to

£670 million over four seasons. The third contract was a £1.024 billion deal and in August

2006, Sky and Setanta paid a total of £1.7 billion, a two-thirds increase which took many

commentators by surprise as it had been widely assumed that the value of the rights had

levelled off following many years of rapid growth. Overseas television rights fetched

£625 million, nearly double the previous contract. The total raised from these deals is more

than £2.7 billion. Revenue from stadium attendances is another significant source of regular

income for Premier League clubs, which with the 2005–06 average attendance of 34,364 for

league matches, is the fourth highest of any domestic professional sports league in the world.

Finances

The Premier League is the most profitable football league in the world, with total club

revenues rising 26% to £1.93 billion ($3.15bn) as of 2007–08. Eleven of the twenty Premier

League teams made an operating profit in that year. Wage costs also reached €1.51 billion in

2007/08, significantly higher than that of the next highest-spending league, the Italian Serie

A (at €972m). Individual salaries are on average £13,000 per week. The Premier League's

gross revenue is the fourth highest of any sports league worldwide.

In terms of world football, the Premier League clubs are some of the richest in the world.

Deloitte, who annually release figures on club revenues through its "Football Money

League", had eight Premier League clubs in the top 20 for the 2005–06 season. No other

league has more than four clubs in this table, and while La Liga rivals Real Madrid and F.C.

Barcelona take up two of the top 3 places, no other Spanish clubs are listed in the top 20.

Premier League teams have dominated the list for many years. Manchester United topped the

list for almost a decade until the 2004–05 season when Real Madrid took top spot.

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Stature in world football

 Promoted as "The Greatest Show On Earth", the Premier League is the world's most popular

and most watched sporting league, with collective club revenues of £1.93 billion ($3.15bn) in

2007–08, followed worldwide by over half a billion people in 202 countries, frequently on

networks owned by NewsCorp who also own Sky Sports. It is also ranked first in the UEFA

coefficients of leagues based on performances in European competitions over the last five

years, ahead of Spain's La Liga and Italy's Serie A. The Premier League is particularly

popular in Asia, where it is the most widely distributed sports programme. In China, matches

attract television audiences between 100 million and 360 million, more than any other foreign

sport. Due to this popularity, the league has held three pre-season tournaments in Asia, the

only Premier League affiliated tournaments ever to have been held outside England.

INFLUX OF FOREIGN INVESTORS INTO EUROPEAN FOOTBALL

People from all over the world are now pumping money into European football clubs, as they

are money-spinning ventures and also glamorous avenues to invest their “pocket-change” in.

The recent rush toward foreign ownership is reflected in the large number of foreigners in the

Football Rich List, which is a list of the ten richest people involved in football. The two

countries with the most entries are the USA and Russia. There are five Americans, all

involved at Premier League clubs: Manchester United’s Malcolm Glazer, Liverpool’s George

Gillett and Tom Hicks, Aston Villa’s Randy Lerner and Arsenal’s Stan Kroenke. Arsenal also

have one of the three Russians, Alisher Usmanov, who has joined his compatriots Sacha

Gaydamak (Portsmouth) and Roman Abramovich (Chelsea) in the list. But while Russia and

the US have the most members of the list, they don’t have deep enough pockets, and the two

new entries that top the pile have some serious money in the bank.

Standing 2nd in the list is Lakshmi Mittal, worth $19.3 billion. In December 2007, the Mittal

family purchased a 20 per cent stake in Queens Park Rangers football club joining Flavio

Briatore(former boss of the Renault Formula 1 team) and Bernie Ecclestone(President of the

FIA).

The man that has topped the list is a new face in European football. But when he arrived, it

was anything but a quiet entry. He bulldozed his way through the Premier League's

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established order with a display of financial firepower that stunned Manchester United and

left Chelsea bruised and humiliated. “Trillion dollar man” screamed the headlines as Abu

Dhabi blueblood Sheikh Mansour bin Zayed Al Nahyan took control of Manchester City,

blasting the Blues' bank balance into the stratosphere.

Overnight, City went from Premier League strugglers to the richest club in the world. Within

hours of taking over the club, Robinho, the Brazilian superstar, was bought for a British

record fee of £32.5million from Real Madrid, even as Dr Sulaiman al Fahim, who brokered

the deal, was busy declaring that Ronaldo and Kaka would be at Eastlands sooner rather than

later.

And now, after five years at the summit, Roman Abramovich has been knocked off the top

spot of the Football Rich List. The new No.1 has pockets twice as deep as the Chelsea owner

and has already begun outspending the Russian in the transfer market.

His family’s fortune and that of Abu Dhabi have been interlinked since oil was discovered in

1958, turning a nation of fishermen into a global financial powerhouse. The £200m purchase

of City in September wiped out the club’s £154m debt and turned them into the league’s

biggest spenders. A sport lover, Sheikh Mansour’s personal wealth is estimated at around

£15bn. The previously impenetrable ‘Big Four’ now look nervously over their shoulders. City

look set to have a limitless transfer kitty and with wages good enough to lure Robinho,

rumours of bids for Cristiano Ronaldo, Lionel Messi and Kaka don’t sound so ridiculous.

SHADY INVESTORS AND INEPT OWNERS- but do administrators care as long as they

bring the money?

Thaksin Shinawatra is a Thai businessman who was Prime Minister of Thailand from 2001 to

2006, when he was deposed in a military coup .The Shinawatra government faced allegations

of corruption, treason, conflicts of interest, acting non-diplomatically, and muzzling of the

press. Thaksin was accused of tax evasion and selling national assets to international

investors. Independent bodies, including Amnesty International, criticized Thaksin's human

rights record.

As prime minister, Thaksin had unsuccessfully sought to buy the clubs Fulham and

later Liverpool. On 21 June 2007, now out of office, he bought Manchester City for £81.6

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million. Thaksin's purchase prompted a period of unprecedented transfer spending at the

club, spending around £30 million, whereas over the previous few seasons net spending had

been among the lowest in the division.

However, after internal dispute he sold the club in September 2008. In the months following

the takeover, Thaksin held the position of honorary president, but was removed from the

position in February 2009 after a Thai court convicted him for corruption. The following

month, the club ceased their operations in Thailand.

This is example mirrors the state of affairs in modern-day football. Thaksin, who has a

tainted reputation, was welcomed with open arms to takeover Man City. With the influx of

Sheikhs from the Middle East buying some clubs and providing them with mammoth

financial resources, their competitors have started to panic. Clubs are desperate to find

finances and hence are attracting people with very deep pockets from all over the world,

people whose backgrounds and antecedents are not necessarily spotless. Clubs are only

saying “Show me the money”. As long as one is able to achieve this, clubs don’t bother to try

and answer questions like “Is this person suitable to run this football club?”, “Does he

possess the required footballing mind to uphold the traditions and heritage of the club?” This

in turn is hurting the sport because many of these investors have no clue about the spirit of

the club and what makes it special. These foreign owners are unaware of how dear the club is

to the local community, the proud history of the club and those aspects of the club that are

best left untouched.

One of the most alarming examples of mis-management of a club by an incompetent owner is

Mike Ashley. He owns of Newcastle United, one of the biggest clubs of England, with a

proud history and some of the most loyal and passionate supporters in the sport, renowned

worldwide as the Toon Army.

Mike Ashley was originally a sporting goods retail entrepreneur. His purchase of the club

was itself a surprise move. In July 2007, Ashley paid a total of around £134 million to buy

the club. Ashley's ownership of the club was initially popular with fans, as he acted as one of

the fans, drinking in local bars and clubs, and watching the team from the stands with the

supporters wearing the team shirt. Ashley's popularity rocketed with the return of Kevin

Keegan, a legend on Tyneside, as manager to replace the previous regime's relatively

unpopular choice Sam Allardyce.

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But since then, the club has gone on one of its worst spells ever, with Keegan resigning,

leading to fan protests and Ashley has looked to sell off the club on numerous occasions but

has been unable to find a buyer. All of his bumblings culminated in Newcastle being

relegated from the Premier League for the first time in fifteen years. At one point he admitted

that he regretted the purchase of the club and felt he never had the required stance and

knowledge to own a football club.

But what could be the last straw in cementing Ashley’s infamy on Tyneside was the

announcement that the club would attempt to sell the club stadium’s naming rights to raise

funds to clear debts of the club, causing outrage among Newcastle fans across the world who

felt the club would lose tremendous heritage with the name of the 120-year old St James'

Park changed.

UEFA President Michel Platini has stated that he is wary with the foreign owners

proliferating in the Premier League. "I believe [local] players and fans of Manchester and

Liverpool create this atmosphere, this popularity. Identity is the basis of everything in

football. I like people to put their money in their own leagues. The English can put in rules so

you have no more foreign owners, like in Germany where no foreign owner can have more

than 50 per cent of shares in a club. In France, the stadiums belong to the city, who decide

what is good for them. I like the Barcelona model. The fans are the owners and you can never

have a foreign owner. It's great.”

MONEY MATTERS OF CONCERN IN THE MODERN GAME

The ultra-rich people who have bought clubs have initiated some alarming new practices,

which could seriously harm the game of football in the long run.

In January 2009, Manchester City, the club with seemingly bottomless pockets, made a bid

for Kaká, one of the superstars of the game, for over £100 million. They were offering him

wages of around £500,000 per week. In this context, it should be pointed out that until then,

the world record transfer fee was £45 million for Zinedine Zidane’s move from Juventus to

Real Madrid in 2001. Moreover, at that point the highest wages for players were in the region

of £160,000 per week. This shows how ridiculous the bid was. Credit must be given to Kaka

for rejecting this bid as he stated that money was not of paramount importance to him. How

many other professional athletes in any sport across the world would spurn that much

possible cash?

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This set the precedent for inflated transfer fees and obnoxious demands from players and the

summer of 2009 will go down in history as one of the craziest ever. The world record transfer

fee, which had stood for eight years, was shattered four times (technically) in the space of

two months. Carlos Tevez was transferred from Manchester United to Manchester City for

£47 million in July. The second Galacticos era under Florentina Perez at Real Madrid arrived

with a bang when Kaka was transferred from AC Milan to Real Madrid for a then world-

record fee of £56 million on 8 June. Three days later, this record was obliterated by Cristiano

Ronaldo’s transfer from Manchester United to Real Madrid for a massive £80 million. In

July, Zlatan Ibrahimovic was transferred from Inter Milan to Barcelona. He signed a 5-year

contract, for €46 million ($65 million) and the exchange of Samuel Eto'o (valued at €20

million) and loan of Alexander Hleb, making Ibrahimović worth €66 million ($94 million).

As Inter received a top goal-scorer in the form of Eto’o, many consider this to be the most

expensive transfer ever. In this way, the influx of rich investors has distorted the transfer

market, driving up prices of mediocre players who in reality are not worth as much as they

are being sold for.

On Ronaldo’s transfer, UEFA President Platini said to Florentino Perez, President of Real

Madrid: “Florentino, I don't understand it, but if you have the money, I have no problem.” He

later added, “It's not Ronaldo's responsibility, but for me it is amazing, it's a lot of money and

there is an inflationary effect for other clubs. It takes away the popularity of the football; 99

per cent of people don't understand €94 million for a player – and my job is to protect

football.''

DEBT

The next major problem that mega-clubs face is debt. Amid a frenzy of borrowing to pay the

wages of international superstars– and build extravagant new stadiums – the most treasured

clubs in the Premier League have been sold off to foreign investors. But as times get hard,

English football could be sitting on a time bomb.

Lord Triesman, chairman of the FA, speaking at a conference in 2008 told the assembled

delegates to beware of the turmoil in global financial markets. Citing the estimated £3bn

cumulative debt of the Premier League's 20 clubs, he warned: "Football is obviously carrying

a pretty large volume of debt... Debt has to be repaid; alternatively, it has to be refinanced.

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Your fate isn't in your own hands. This poses us with a tangible danger... it is not

inconceivable that a great club, or a very small club, will come under pressures it has not seen

before."

A look at the annual review of football finance by the accountants Deloitte, released earlier

this year reveals that player wage costs are huge, eating up 63 per cent of total turnover in

2006-7. At some clubs, it is considerably more. And wages rose by 13 per cent in that year.

Only eight Premier League clubs recorded an operating profit over that period.

In February 2007, Liverpool FC was bought out by two American businessmen, Tom Hicks

and George Gillett. They loaded the Merseyside club up with £350m in debt, with a promise

of heavy investment, a lucrative new stadium and the tapping of new commercial

opportunities (a la’ Chelsea). The new stadium has since been put on hold because of "global

market conditions". And the club might find it hard to renegotiate its loans with banks. Some

football analysts believe Hicks and Gillett would sell, given the chance.

And then there's Manchester United. The most romantic name in international club football

was acquired by the US-based Glazer family in 2005. The Glazers took a profitable, debt-free

club and shackled it with £666m in borrowings. According to its most recent accounts,

£138m of these borrowings are charging a punishing interest rate of 14.25 per cent.

Manchester United has the strongest revenues of all the top clubs. But a large chunk is being

eaten up by debt interest payments alone. And for all United's stunning success on the field in

recent years, the business made a £57.8m loss last year.

So why do investors flock to buy debt-ridden clubs? The conventional wisdom is that the

Premier League is so glamorous that new owners will always come to buy any club in

financial trouble. As Dan Jones, a football analyst from Deloitte, wrote: "The key strategy for

earning a return from owning a club appears to be brand value and long-term asset

appreciation."

Michel Platini, UEFA President, has backed caps on wages, transfer spending - both absolute

and as a fraction of club turnover - and foreign ownership of clubs. Worried about the huge

debt, a Uefa committee has been constituted to formulate new rules. "We have three years to

regulate the situation," he said. "The idea is not to kill the clubs but to help them have better

balance. The big clubs like Manchester United have been dragged into debt by their owners,

the Glazers for the simple reason that they are spending more money than their annual

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revenue.  If you put the same [strict] regulations for all the clubs in Europe, they will accept.''

Clubs risk expulsion from Europe otherwise.

ARE PLAYERS TURNING INTO MERCENARIES, STAYING LOYAL ONLY TO MONEY?

In January 2007, David Beckham left Real Madrid to join American club Los Angeles

Galaxy in a five-year deal worth £128m. Football’s biggest pin-up star, one of the most

recognizable athletes in the world, after having played for Manchester United and Real

Madrid, arguably the two biggest clubs in the world, why did he move to the US, where

soccer is not too popular, to play in a league which is hugely inferior to the European

leagues?

Was it for money? But he is already one of the richest footballers in the world. The £128m

deal is understood to comprise his salary, existing sponsorship contracts, merchandising shirt

sales and a share of the club profits. He said in interviews that he was proud to have played

for two of the biggest clubs in football and that he looked forward to the new challenge of

growing the world's most popular game in a country that is as passionate about its sport as his

own.

He probably realized that the move to America was not a very bright idea and so he is now

playing for AC Milan on loan spells so that he can stay in contention for a spot in the

England team for the World Cup in 2010. He sought, but was unsuccessful in securing a

permanent transfer to Milan.

Footballers have been accused of being traitors for moving from one club to another, that

they don’t have loyalty towards the club and the fans that shower them with love and

affection. They are called mercenaries when they sign for any rival team. But look at it from

the point of view of the player. If you are a regular office employee, when you are working in

one company and receive an offer to do the same job in a bigger company for a higher pay,

wouldn’t you be tempted to move? So does the player deserve to be treated like a traitor for

the simple reason that he has moved to a more attractive job?

On November 24, 2002, FC Barcelona played Real Madrid at Camp Nou amidst 98,000

Barca fans and 400 Madridistas. It was Luis Figo's return to the Catalan cathedral as a Real

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Madrid player. There were chantings and name calling. Banners, lighters, broken whiskey

bottles and a pig’s head were hurled at him by the crowd.

Figo is one of the few players who have been brave enough to play for both Barcelona and

Real Madrid. Between 1995 and 2000, the Portuguese legend was worshipped by the

Barcelona supporters, winning the UEFA Cup Winners' Cup in 1997 and inspiring Barcelona

to two successive league titles.

But after the summer of 2000, he became one of Barcelona’s biggest ever hate figures

because he ditched the Catalans and signed for their most loathed rivals Real Madrid,

considered the dastardliest of sins possible (from Barcelona’s perspective).  

It’s not as if Real stole him away like a coveted toy. A sum of £38m was stacked into

Barca’s vault and made Luis Figo the most expensive footballer at the time but that of course

is not to be imported into the context.

A lot has also been made about players getting involved in brand endorsements, filming

advertisements and promoting products. Whenever a player has a dip in form, fingers are

immediately pointed and ‘pundits’ start saying things like “These days he spends more time

filming adverts than in practice. No wonder he is not performing well.” But if we look at the

person’s career over the long-term, we realize that an athlete’s career is very short in

duration, compared to office employees. Most sportspersons can only play at the top-level for

a maximum of ten to fifteen years, whereas office workers can work up to 60 years of age.

So from the players’ point of view, they have to make as much money as possible within this

short time. Endorsing brands is one way of earning easy money. Although it should never

take priority over playing the sport, players should have some fallback option at the end of

the road, which brand endorsements provide.

David Beckham is the best example of this phenomenon; he is immensely famous outside the

game, probably the most recognizable footballer around. In a recently published “rich list” of

English footballers, he was reported to be worth 125m pounds. The next richest English

footballer is Michael Owen at 38m pounds. This shows how vast a fortune Beckham has

made endorsing products.

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WAGs and their influence on players

WAGs is an acronym used particularly by the British tabloid press to describe the wives and

girlfriends of high-profile football players, originally the England national football team. The

infamy of the WAG culture reached its zenith during the 2006 World Cup as the press gave

increasing coverage to the socialising and shopping activities of the English WAGs, who

were based in the German town of Baden Baden. It was frequently suggested that England's

exit from the tournament in the quarterfinals was a result of such distractions.

Former Manchester United captain Roy Keane had lashed out at footballers' wives and

girlfriends, as well as their lavish lifestyle, during their trophyless season in 2001-2002.

Keane blamed United's loss of form on some of his team-mates' fixation with wealth,

claiming that they had "forgot about the game, lost the hunger that got you the Rolex, the

cars, the mansion." Earlier in the season, Keane had publicly advocated the breakup of the

Treble-winning team as he believed the team-mates who had played in United's victorious

1999 Champions League final no longer had the motivation to work as hard.

In an October 2008 press conference, England and Manchester United footballer Rio

Ferdinand heavily criticised the WAG culture, particularly in Baden-Baden two years

previously, calling it a "circus" and giving praise to new England manager Fabio Capello's

more disciplined regime, and after England had qualified for the 2010 World, Capello made

his first public comment on the WAGs by making it clear that the England players will only

be able to see their wives and partners the day after a match, stating that "We are there to

play, not for a holiday". Capello did acknowledge the stabilising influence of the fairer sex

when discussing Wayne Rooney’s improvement in discipline.

DOES MONEY BUY SUCCESS?

Real Madrid and the Galacticos

Florentino Perez took over as president of Real Madrid in 2000. Pérez's promise to bring

in Luís Figo from arch-rivals FC Barcelona played a decisive role in the elections.

Luís Figo was signed for a world record £38.7m in 2000. He also marked the start of Pérez's

policy to bring one of the best football players in the world to Real Madrid each season. The

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players were soon popularly referred to as Galácticos. In 2001, Zinedine Zidane was signed

from Juventus for a world record transfer fee of £46m. He was followed by Ronaldo in

2002, David Beckham in 2003, Michael Owen in 2004, and Robinho in 2005. Initially,

Pérez's policy worked to great success, because each Galáctico built their squads around the

player, and had a more proper team balance of attack and defense. In Perez’s first years in

office, Real Madrid won two Spanish Championships and its record ninth European Cup.

The galácticos' policy resulted in increased financial success based on the exploitation of the

club's high marketing potential around the world, especially in Asia. Its economic model led

it to finally overtake perennial leader Manchester United as the world's richest club by

revenue in 2005–06. Real Madrid became the biggest club in the world due to the fame of

its galácticos and the resources they generated.

Real were expected to continue their level of dominance in the domestic and European game

after 2002, with the signing of Beckham expected to strengthen the team. However, following

seasons would see limited success on the pitch, with Real failing to win any trophy for next

three seasons after their 2003 league title. In the same period, rivals FC Barcelona won the

2006 UEFA Champions League and successive La Liga titles.

Several reasons have been proposed in the media for the failure of the galáctico policy:

A lack of interest in defensive talent harmed the team, as Pérez did not want to pay

large wages to defensive players. Claude Makélélé departed the team shortly after the

signing of David Beckham when the club refused to raise his relatively low salary,

despite being widely considered as one of the best defensive midfielders in the world

and a key to the team. 

The shock sacking of coach Vicente del Bosque, twice Champions League winner and

shortly after Real's 29th league championship in the 2002–03 season. del Bosque was

able to balance the many different modern player egos in the star studded team,

considering that several galácticos were competing for the same position and had their

playing time reduced. Subsequently, the superstar players placed together failed to

form a cohesive footballing unit — having a large number of very talented, renowned

individual footballers did not translate into a great footballing team.

The galácticos policy meant that players were picked not according to form, but rather

according to their reputation. The aim was to collect the best players in the world.

PratyushPage 15 of 17

There were also allegations that some, in particular Beckham, were picked because of

their marketing potential off the pitch.

Signings for non-footballing (marketing) reasons. David Beckham, a natural right

winger, joined the club in 2003 partly due to Beckham's huge popularity in Asia when

Real Madrid already owned another right winger, Luís Figo, meaning that one or the

other was forced to play out of position in many games. One director was, reportedly,

quoted saying that Beckham was signed for his good looks and Ronaldinho, who

joined Barcelona the same summer, was too "ugly" to play for Real Madrid.

Ronaldinho would lead the powerful resurgence of Barcelona while Real Madrid

failed to win any trophy for three straight seasons. Ronaldinho was the terror of the

Real Madrid defenders as they failed to keep him from scoring.

Second Galacticos Era

In a presidential election in mid-2009, Florentino Pérez returned to the presidency. Pérez

again pledged to go on a spending spree to return the club to European and domestic

competitiveness, notably with his vocal claims of an attempt to sign AC Milan's Kaká.

And so began the second era of the Galacticos with the arrival of Kaká, Cristiano Ronaldo,

Karim Benzema and Xabi Alonso to the Santiago Bernabéu.

Real kicked off the second galacticos era in impressive fashion, winning five league games in

a row. But soon this was followed by defeats to Sevilla and AC Milan. But the ultimate insult

to the club has been losing to a third-tier club Alcorcon in the King’s Cup. Alcorcon operate

on a budget of just over one million euros, around 400 times smaller than Real's.

So in Real Madrid’s case, what could be the biggest amounts of money ever spent on buying

players hasn’t rewarded the club with results on the pitch. All they have got for the heavy

spending has been a sense of underachievement amidst a cycle of hope and disappointment.

Chelsea and their rise to the top under Abramovich

Chelsea were a mediocre team until the early 2000s. Gianfranco Zola was the only well-

known established star in their team. They used to finish in fifth-sixth place in the league

PratyushPage 16 of 17

table. In June 2003, Chelsea was sold to Russian billionaire Roman Abramovich for £140

million, completing what was then the biggest-ever sale of an English football club.

The club embarked on an ambitious programme of commercial development, with the aim of

making it a worldwide brand, and announced plans to build a new state-of-the-art training

complex in Cobham, Surrey.

Over £100 million was spent on new players and a new manager, José Mourinho, was

recruited, and Chelsea ended the following season as league champions. Since the takeover

the club have won six major trophies - the Premier League, League Cup and FA Cup twice

each - a trophy haul bettered only by Manchester United.  In 2008, they reached their first

UEFA Champions League final, in which they lost on penalties to Manchester United.

Under the guidance of Mourinho, and currently Carlo Ancelotti, Chelsea have become one of

the best teams in Europe with great depth in squad and wonderful coordination., reaching the

semifinals of the Champions League almost every year in the past five or six years.

CONCLUSION

As is evident from Chelsea’s story, money CAN buy success. But pumping in finances alone

is futile. Along with the financial investment, there needs to be a strong back-room staff. The

right people are to be recruited to take care of the day-to-day functioning of the club.

While economies across the globe have been wrecked by recession, football has continued to

grab headlines with shows of financial strength. Financial experts warn that this financial

bubble is set to burst. The TV rights, sponsorship deals and the season ticket revenues that are

already in place, make the position appear financially secure but when it’s time for the

renewal of these deals, the football administrators could be in for a rude shock.

These are concerning times for The Beautiful Game. As Lord Triesman, Chairman of the FA

says, "Football clubs are not mere commodities. They are the abiding passion of their

supporters. We forget that at our peril."

PratyushPage 17 of 17

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