Collective La Liga TV rights deal may change financial balance

Spain’s La Liga has been dominated by Real Madrid and Barcelona since Valencia won the title in 2004. This is in no small part thanks to the fact that of Europe’s five biggest leagues, La Liga is the only one yet to adopt a collective television bargaining model. All that may now be about to change if the country’s sports minister Miguel Cardenal gets his way.

“The biggest pile of junk in Europe” is how Jose Maria del Nido famously once described La Liga. Del Nido is the President of Sevilla, one of the clubs most affected by the vast inequalities of wealth threatening Spanish football.

Sevilla were until five years ago a significant force in Spanish football. They won back to back UEFA Cup titles in 2006 and 2007, almost won the league six years ago and had some of the best players in the country, such as Dani Alves and Sergio Ramos. Alves and Ramos have long since departed for Barcelona and Real Madrid respectively – as all of the best young players in Spain do – and now del Nido is offering around the club’s star striker, Alvaro Negredo, in pursuit of a suitor to take him off their hands and help to reduce their catastrophic debts.

Sevilla, like most of La Liga, are drowning in a pile of debt which is currently increasing by around €15 million a year. Yet even Sevilla are among the biggest earners from television revenue in Spain, having made €31 million in 2011/12. However a cursory glance at the figures from 2011-12 highlight just how unequal television revenues are in Spain.

Increasing polarisation
Real Madrid and Barcelona accumulate approximately €140 million each – whilst 13 teams take €18 million or less. Or to put it another way, both Real Madrid and Barcelona earned more from television than the teams with the third, fourth and fifth largest shares combined.

Spain’s third best team of recent years, Valencia, take €48 million, less than teams relegated from England’s Premier League.

It is no surprise that whilst the big two dominate Forbes’ list of football’s richest clubs, there are no other Spanish sides in the top 20.

Television income accounts for the biggest proportion of income for Real Madrid and Barcelona, who take around half of the combined La Liga television revenues of €654 million.

The Catalan side’s revenues of €483 million, behind Real Madrid’s total of €513 million, is still greater than the accumulated total of the third, fourth, fifth, sixth, seventh and eight richest sides in Spain combined.

However the rest of La Liga is far more dependant on television income than other revenue sources.

Rayo Vallecano’s €19.9 million budget is almost entirely reliant on television. It is this which skews the advantage so far into Real Madrid and Barcelona’s favour that it should surprise no-one that they run away with the league each year.

Last season Valencia finished 20 points clear of relegated Villarreal, and 30 points behind runners up Barcelona. Valencia finished third. This is the symptom of the financial gulf off the pitch which has the knock on effect of forcing the rest of La Liga to spend beyond their means in the vain hope of keeping up.

La Liga’s total debt stands at over €3 billion, whilst a number of teams have been forced into administration in recent years, including Racing Santander, Real Zaragoza and Real Betis. Deportivo la Coruña are currently fighting for not just their La Liga status but also to stay fiscally afloat.

Fernando Roig, the President of Villarreal, has previously argued that “if they only want to have two matches (Real v Barca), let them have two matches, but this isn’t good for football.”

European disparities
The effect goes beyond La Liga itself and Spanish football. The German powerhouse Bayern Munich earned less than half what Barcelona and Real Madrid took from television rights last season.

This pressure permeates across Europe where the Premier League, Serie A, Bundesliga and Ligue 1 have broadly equitable distribution of revenues between their teams.

Interestingly Jose Maria Gay, the economic heavyweight at University of Barcelona whose reports into La Liga’s finances have cast a light on the league’s problems, believes that the French and German financial models are the right way forward. He pours scorn on the Premier League model, which whilst second to none at generating revenue, survives on the basis of its clubs being propped up by holding companies generously financed by billionaires.

French and German football both have governance mechanisms which oversee club finances to ensure they are viable in the long term.

For the leading clubs across Europe, the pressure of trying to compete with the Spanish giants has led to discord. It is in part what led Liverpool’s managing director Ian Ayre to suggest that Premier League teams should be able to negotiate individual television rights deals with foreign broadcasters.

Real Madrid is now the world’s most valuable team, having overtaken Manchester United. However, United’s match day income and commercial revenues are broadly in line with, and possibly ahead of Real Madrid’s. It is television revenue which pushes the Spanish side’s nose in front. This is how their vast revenues can impact on wider European football if nothing is done.

“I have been trying to transmit to other European clubs that at the moment we have this problem in Spain but in the future we will have the problem in Europe,” Sevilla’s former vice-president Jose Cruz told me back in 2011.

However the Premier League’s own new broadcast deal, which is worth over £1 billion a year, will only pressure Barcelona and Real Madrid to maintain the status quo to avoid falling behind their English rivals.

Cardenal acts
Sports minister Miguel Cardenal was forced to mediate in a dispute between La Liga teams which threatened to delay the start of the season for the second year in a row back in August.

That dispute was over the state of television rights, and now Cardenal is determined to act to resolve the impasse, recently saying that the government will bring in a new law to “regulate the collective sale (of TV rights)”, adding that they will be sold “in a single package."

Pressure from the government is really the nuclear option, but it may be necessary.

Some of La Liga’s ‘other’ sides have been cowed by Real Madrid and Barcelona’s sheer political and financial strength in the past, which has weakened their resolve to stand united against the status quo.

In 2011 a collective proposal was agreed, but it was designed to reduce, rather than eradicate, Barcelona and Real Madrid’s in built advantage. This battle may need political intervention to break the deadlock.

Cardenal’s comments, to the radio station Cope, will have been music to the ears of del Nido, who has been busy gathering support for a collective television rights deal.

What was a group of five or six who were opposed to this proposal back in 2011 has now grown, although one of the other leading proponents of a more equitable deal, Villarreal, were relegated last season.

At the start of the season del Nido said that "we have made a great deal of progress, more than we expected, and the number of clubs (supporting us) will continue to increase, to 15 or 16. That will mean that we will have to agree a distribution of TV (cash) that is not only fair but also equitable."

University of Barcelona professor Gay has predicted that Spanish football has five years to change or else it will kill itself because of the widening gap between the rich and the rest.

As crippling debts afflict teams everywhere, from Coruña to Bilbao, La Liga is well and truly suffocating in an ocean of debt. That is no one’s interests, and may be what forces the big two to give in.