The Galactico Godfather

It’s the year 2000, the Y2k bug was proven to be a false alarm and a man so unremarkable to look at that you couldn’t pick him out in a line-up was elected President of the biggest football club on the planet (at the 2nd attempt). That man is Florentino Perez, the club is Real Madrid and what followed is truly remarkable and the results are now unforgettable sporting history. In 2014, Real Madrid were crowned European Champions for the 10th time, won the Spanish Cup (Copa Del Rey), and went on to win both the European Super Cup and World Club Championship. Only city rivals Atletico de Madrid stood between them and a clean sweep of every trophy available.Off the pitch for the 2nd year running Forbes has valued them as the most valuable sporting franchise in the world. Revenues are at an all time high and what we’re seeing is the perfect fruits of the labour of Florentino Perez and his team.

Vindication of an ideology that few clubs can authentically replicate, however much they would like to. Florentino Perez twice ran his campaigns on the platform of improving the finances of Real Madrid and since he took over, Real Madrid have gone from strength to strength. The basic ideology was dubbed Zidanes y Pavones after Zinedine Zidane (then the most expensive footballer in history) and Francisco Pavon (at the time the great white hope brought through from the academy). The “Pavon” part of the philosophy hasn’t really worked out as planned, none of the current 1st choice 11 are academy graduates. Ironically Real were knocked out of the Champions League this season by a goal scored by an academy graduate who didn’t make the grade! However, what is undisputed is the quality of the team, who are a collection of some of the worlds elite footballers mixed with some genuine superstars. Contrast this with fierce rivals Barcelona who have 3 and at their peak had 7 academy graduates in their first 11.

Los Galacticos is a very fitting name

Here is our pick of the best 11 players that have been brought through the gates of the Bernabeu by Florentino Perez.

real-madrid-perez-signings

Some of the greatest players in history, with plenty more missing! Irresponsible spending, massive debts, astronomical wages which mean this is another classic example of living beyond your means…Typical right? WRONG! Below is an illustration of the wage:turnover ratio for Real Madrid…Perez has managed to reduce this ratio by nearly 40%, and is well inside the maximum level recommended by the ECA.

real-madrid-wage-to-turnoverReal Madrid Wages 2000 – 2014 (Source: Real Madrid Annual Accounts 2014)

A sobering picture for any fan or executive not connected to Real Madrid. They’re currently the No.1 club in the world, are able to pay the best players the absolute best wages…and their business is built on solid foundations which means they can keep doing it!

SO HOW DID HE DO IT?

Real Madrid are 5x the size they were when Perez took over. Encouragingly he has not fueled that growth on the back of the “little man” i.e. the fans. When he took over in 2000; 40% of total income came from Members and Stadium, today it’s 25%. What has underpinned his presidency is the market appeal of his players, and his ability to financially capitalise on that. Unsuprisingly, income from marketing has become the most important revenue stream, making up 32% of total income (ahead of broadcasting). Most impressively is the 13% of revenue that comes from international friendly matches. Madrid have always been a world famous team, in Perez they found a man who knew how to spectacularly reap the benefits of that fame.

real-madrid-operating-income

 

Footballing success and financial success go hand in hand, fans across the world part with their hard earned money because of emotion, memories and a shared sense of being part of something bigger than themselves. When all is said and done it’s the men in the dugout and on the pitch that make the difference between agony and ecstasy and greatness and obscurity.
Players come and go but the ideology, philosophy and the man remain the same. An institution developed in his own image with spectacular results.

 

Real Madrid: The House that Perez built.