Reuters - Sat, 10 Jul 16:03:00 2010
The Spanish national team's triumphant march to their first World Cup final has deflected attention from the parlous financial state of many of the clubs living beyond their means in the domestic league.
Even La Liga giants Barcelona, second on accountancy firm Deloitte's latest list of the world's richest clubs by revenue, admitted cashflow difficulties this week, new president Sandro Rosell saying the Catalans were seeking a 150 million-euro bank loan to address "liquidity problems".
Spain's worst recession in at least 50 years, the collapse of the real estate market and surging wage and transfer costs have combined to push clubs ever deeper into the red and forced some, such as Real Mallorca, into administration.
The situation has been critical for some time but little action has been taken by the Spanish FA, the professional football league or the Socialist government.
A large part of the problem is the power wielded by Barca and their big-spending arch rivals Real Madrid, who topped Deloitte's Football Money League with income in the 2008/09 season of 401.4 million euros compared to Barca's 366 million.
Unlike in rival European leagues, deals for audiovisual rights, a key revenue stream for clubs, are negotiated individually and Real and Barca rake in around half of the 600 million-euro TV pot between them.
"The financial instability in Spain is mainly due to excessive outlay on players," Angel Barajas, associate professor of financial management at the University of Vigo, told Reuters.
"This elevated spending is an attempt to remain competitive with clubs like Real Madrid and Barcelona who have a much bigger revenue-generating capacity," he added.
"It means a lot of clubs invest quantities in players that are greater even than what they are capable of earning.
"They accumulate debts that they cannot cope with and go into administration or have to sell off assets to survive."
The LFP has proposed capping the amount spent each year on player wages and transfers at 70 per cent of income but analysts have said the measure would leave too much wriggle room.
The battle over income from Spanish TV deals escalated in May when some richer teams said they planned to create a separate first division.
Poorer clubs had urged the government to introduce the collective bargaining system used in the English Premier League and elsewhere but secretary of state for sport Jaime Lissavetzky told Reuters he was not prepared to step in.
RFEF President Angel Maria Villar said he did not want to discuss the finances of clubs in the domestic league and only wanted to talk about the national team.
"When we are back in Spain there are many questions which concern us, which we want to improve, which we want to modify," he added.
"When we return to Spain and get back to day-to-day work we will take the decisions we need to take."
A study by University of Barcelona professor Jose Maria Gay published in May showed the 20 clubs in La Liga had combined debt of 3.526 billion euros in 2008/09, up from 3.49 billion the previous season.
Revenue growth more than halved to a tepid 4 percent, from 10 percent in the 2007/08 campaign, and operating costs rose to 1.704 billion euros, outstripping income of 1.455 billion euros by 249 million.
Only Real and Barca and lowly Numancia, who were relegated, made an operating profit, while total labour costs accounted for a whopping 85 percent of operating income.
"The problem with Spanish football is exactly the same as the one that led the country as a whole into the current crisis," Gay told Reuters.
"Spending beyond earning capacity, falling back on borrowing from banks and paying too much for assets, above all players.
"In the end, if there is no profit, what is happening now occurs: losses, unmanageable debt and uncertainty reigning over Spanish football."
Gay and Barajas both said they did not think the clubs' financial difficulties would threaten Spain's ability to compete in international competition.
"The success of the national team (in South Africa) could raise the international profile of La Liga and our product would be much better adapted for sale to the wider world," Gay said.
"The national team is conducting an extraordinary marketing campaign which will serve to open eyes around the globe to the greatness of our football.
"Now the officials - the LFP, the federation and the government - and the clubs have to work out how best to make money out of this amazing success. It depends on them."