highlandcityfan Posted July 12, 2023 Report Share Posted July 12, 2023 A new article suggesting Real Madrid will be investigated over unexplained payments. I've posted the link below, but my focus is on the numbers of the finance deal, excerpt below; "Madrid’s short-term finances were significantly bolstered last summer by €360 million (£306 million) from the sale of 30 per cent of revenue over 20 years from their remodelled Bernabeu stadium." Now venture capitalist are evil, bla bla bla, but apart from the flagrant abuse of rules which is only too normal for Real Madrid, thoroughly welcomed and even encouraged by Madrid-favouring powers to counter the anti-establishment catalonians from Barcelona, the key thing in my mind from this exerpt, is - what gargantuanly terrible business sense that is. The theory isn't bad, if it has some kind of long lasting positive impact (eg cash injection to increasing and refining academies / scouting networks the world over - but Madrid showcase short-termism at its very best, and worse - the numbers.... Look at the %s... The article quotes - Annual revenue 607m gbp, cash injection 306m, in return for 30% of revenue for - 20 years! What sort of Mark Ashton-esque business model is this? To reframe, but with the same principle percentages. If you needed a lump sum for whatever reason, would you ever approach your employer, ask for 50% of your annual salary as a lump sum payment, and in return you'll forgo 30% of your salary for 20 years....?! It's unutterably diabolical business sense, and if I was a real Madrid fan, I'd be incensed (if I wasn't too busy abusing my own players). Though tbf, they're so short-termist themselves, they probably wouldn't understand the implications and simply decry "get your cheque book out, Pérez". >>> Link <<< 2 Quote Link to comment Share on other sites More sharing options...
Monkeh Posted July 12, 2023 Report Share Posted July 12, 2023 Just now, highlandcityfan said: A new article suggesting Real Madrid will be investigated over unexplained payments. I've posted the link below, but my focus is on the numbers of the finance deal, excerpt below; "Madrid’s short-term finances were significantly bolstered last summer by €360 million (£306 million) from the sale of 30 per cent of revenue over 20 years from their remodelled Bernabeu stadium." Now venture capitalist are evil, bla bla bla, but apart from the flagrant abuse of rules which is only too normal for Real Madrid, thoroughly welcomed and even encouraged by Madrid-favouring powers to counter the anti-establishment catalonians from Barcelona, the key thing in my mind from this exerpt, is - what gargantuanly terrible business sense that is. The theory isn't bad, if it has some kind of long lasting positive impact (eg cash injection to increasing and refining academies / scouting networks the world over - but Madrid showcase short-termism at its very best, and worse - the numbers.... Look at the %s... The article quotes - Annual revenue 607m gbp, cash injection 306m, in return for 30% of revenue for - 20 years! What sort of Mark Ashton-esque business model is this? To reframe, but with the same principle percentages. If you needed a lump sum for whatever reason, would you ever approach your employer, ask for 50% of your annual salary as a lump sum payment, and in return you'll forgo 30% of your salary for 20 years....?! It's unutterably diabolical business sense, and if I was a real Madrid fan, I'd be incensed (if I wasn't too busy abusing my own players). Though tbf, they're so short-termist themselves, they probably wouldn't understand the implications and simply decry "get your cheque book out, Pérez". >>> Link <<< It's another reason they want the super league, The big clubs in other countries are trying to compete with the prem in terms of revenue, 1 Quote Link to comment Share on other sites More sharing options...
Mr Popodopolous Posted July 12, 2023 Report Share Posted July 12, 2023 (edited) I mean, it's short term gain for long term cost but the redevelopment of the Bernebau could bring significant medium to long term revenue gains in itself. Of which 30 pct will go to this company. Real Madrid and short-termism yes and no. I agree with the premise but: Militao Garcia Bellingham Valverde Camavinga Tchouameni Vinicus Jr Rodrygo All in the 20-25 bracket...Mbappe likewise if they sign him, building a team or the nucleus of a team for the next decade. The unexplained payments bit seems like a greater effect on the wage to revenue ratio as opposed to the adjusted loss limit albeit sale of future revenue categorised in that way, hmm. The €300m is astronomical too..albeit the Covid losses will also have been huge for Real Madrid. How on earth the near €300m loss would have come about is unclear, they weren't that expansive immediately post Covid. Edited July 12, 2023 by Mr Popodopolous 1 Quote Link to comment Share on other sites More sharing options...
Dr Balls Posted July 12, 2023 Report Share Posted July 12, 2023 There has to be an assumption that however they invest the £300 million now, it will increase returns so significantly that the 30% of revenue repayment will not reduce the profit to the club as revenue will grow so much. However for that to be the case revenue would need to increase by around 45-50% I.e. the additional money would pay for itself within a year, yet they would be paying that out for 30 years. From the outside, it still looks like a really bad deal however desperate they are for immediate cash upfront. Quote Link to comment Share on other sites More sharing options...
The Swan and Cemetery Posted July 12, 2023 Report Share Posted July 12, 2023 37 minutes ago, Dr Balls said: There has to be an assumption that however they invest the £300 million now, it will increase returns so significantly that the 30% of revenue repayment will not reduce the profit to the club as revenue will grow so much. However for that to be the case revenue would need to increase by around 45-50% I.e. the additional money would pay for itself within a year, yet they would be paying that out for 30 years. From the outside, it still looks like a really bad deal however desperate they are for immediate cash upfront. My maths may well be wonky, but make it revenue growth of approx 3.3% pa vs what they would have received, to break even over 20 years. Loss making in year for first 10 years then starts to be profitable. 5% and lose money for the first 7 years and significantly profitable over 20 years. Trying to remove impact of inflation all round and get to, in effect, a net present value of the additional investment. 2% growth pa and lose significantly over 20 years with only final 3 years profitable. At least investor and RM incentives aligned, the more effectively the investment is used, the greater the returns on the investment. And implies no repayment of capital, ie investment rather than lending, which makes it easier to get the financials to work. It may well be obvious from the above, but I’m not an accountant, so happy to defer to anyone with more competence (aka… anyone). Quote Link to comment Share on other sites More sharing options...
ScottishRed Posted July 12, 2023 Report Share Posted July 12, 2023 Real Madrid are well known for the ‘assistance’ they receive from the Spanish government. Anyone recall the astronomical profit they made selling their old training ground to the council so they could turn it into......a car park! They were key movers in the failed Super League project with the driver being extra revenue, obviously, to negate the financial power of the EPL. They have already bought Bellingham and clearly want Mbappe. On the pitch they are miles behind Man City, I watched both of the CL semi’s and it was men against boys.That is not something that they will not try to address. I have always felt that they get an easy ride regarding FFP which is much more stringent than in the England. It will be interesting to observe how this plays out. 1 Quote Link to comment Share on other sites More sharing options...
Simon bristol Posted July 12, 2023 Report Share Posted July 12, 2023 Im much more familiar with the barcelona situation than real madrid, but i understand madrid have spent a whole lot on the stadium during covid times and were playing games at a smaller venue for a while which will have resulted in a significantly reduced income for a while, perhaps this cash injection is in part supposed to cover this 1 off expenditure? barcelona last season were ridiculous, selling future tv rights and merchandising to fund a couple of hundred million of new signings including ferran torres, raphinia and a mid 30s but great lewandowski and still paying messi a salary which they deferred for years even after after he left. 1 Quote Link to comment Share on other sites More sharing options...
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