Madrid Leads New G-14, Threatening Breakaway League

Well, I’m back, and what better way to return to writing for Managing Madrid than by tackling one of the thorniest and most complex issues in modern football, one that has massive implications for the governance and future of the game?

Yesterday, the British newspaper the Guardian reported that, under the leadership of Florentino Pérez, the Real Madrid president, as well as Bayern Munich directors Uli Hoeness and Karl-Heinz Rummenigge, the world’s wealthiest and powerful clubs are planning to unite once more under the banner of the G-14. Club football is gearing up for a conflict with the powers that govern the game, and the victors of this battle may determine what we will be watching on television for decades to come. Sensing weakness in a FIFA riddled with corruption and scandal and alienated from profits and decision-making power in the international game, Europe’s elite clubs see this as their opportunity to establish their primacy by threatening to break away and form a European super league.

Before we look at the implications of this, a history lesson is in order.

The G-14 was originally formed in September 2000 to allow clubs to present a united front in negotiations with Fifa and UEFA over international football. Its founding members, Real Madrid, Barcelona, Liverpool, Manchester United, Juventus, AC Milan, Internazionale, Marseille, Paris Saint-Germain, Bayern Munich, Borussia Dortmund, Ajax, PSV and Porto, were soon joined by Arsenal, Olympique Lyon, Bayer Leverkusen and Valencia in 2002. The G-14 engaged in several significant legal battles against FIFA in an attempt force that organization to compensate the clubs for the use of their players and for injuries sustained while on international duty.

The clubs also demanded a fair share of the enormous profits that FIFA and UEFA were raking in from the use of their players at the World Cup and European Championship. Under the leadership of the formidable Lyon chairman Jean-Michel Aulas, the G-14 began to expand further, extending invitations in 2007 to twenty-two additional European clubs. Fearing the G-14’s growing power and influence, UEFA president Michel Platini decried it as an ‘elitist’ organization and demanded that it disband, promising that the clubs’ grievances could be redressed through new structures within UEFA. As tensions mounted, the G-14 and UEFA eventually struck a deal. On 21 January 2008, the elite clubs signed the Memorandum of Understanding, a peace treaty that stipulated that FIFA and UEFA would pay compensation to clubs for injuries to their players on international duty; in return, they agreed to release their players for internationals until the 2014 World Cup and to dissolve the G-14.

While the clubs were placated temporarily, it was only a matter of time before relations with the international bodies soured. Much like the United States Senate, which accords desolate Wyoming the same number of votes as California, which has sixty-six times its population, football’s hierarchy is deeply unequal. Sepp Blatter, the FIFA president, is elected by his organization’s 208 national delegates, few of whom care much for Real Madrid or Barcelona’s profit margins. This leads to perverse incentives, where the body’s decisions are guided by the interests of national associations, not those who employ the players, earn the TV revenue and provide, as it were, all of the value that FIFA packages and sells with the World Cup. The only means of redress for the clubs is through UEFA’s European Club Association (ECA), but its power is diluted by combination with the other four confederations which are treated equally despite providing few, if any, of the players that earn FIFA over $1bn a year in World Cup-related revenue. The FIFA Committee on Club Football consists of twenty-one club representatives, including teams from Saudi Arabia, New Zealand, Colombia, Egypt, Côte d’Ivoire, the United States, Honduras, South Africa, Australia, Mexico and Japan, and only seven representatives from European teams. This disrespectful attitude towards the clubs is only compounded by the fact that of the $3.7bn FIFA earned from the 2010 World Cup in South Africa, only $40m was given to the clubs: just 0.01%.

But the clubs have enormous leverage, as it happens. When the current deal outlined in the Memorandum of Understanding lapses in July 2014, the clubs will no longer be obligated to release their players for international duty. If FIFA cannot negotiate a compromise, the World Cup will be dead in the water. For a number of years now the quality of international football has been steadily declining, and the club game and the Champions League are now universally acknowledged as playing host to the highest level of football. As a counterpoint to UEFA, which runs the immensely profitable and popular Champions League, itself the result of a victory by the clubs over the national organizations which led to a fair distribution of revenues, the elite clubs require comparable leverage.

According to the Guardian’s sources, the new G-14 clubs, which include Real Madrid, Bayern, Inter, Milan, Manchester United, Liverpool, Barcelona, Arsenal and Chelsea and may swell to encompass other European heavyweights such as Juventus, Roma, Porto, Benfica, Marseille, Lyon, Ajax, Manchester City or Tottenham, will threaten to secede from the current game structures and strike out on their own in 2014 when the accord ends. They would create a pan-European league, likely open only to the invited, to be played in midweek. The big clubs involved would probably seek to play second-string teams in their domestic leagues, counting on their reputations to shield them from being expelled from traditional leagues due to their revenue-generating potential. The league would operate on an American model instead of the traditional promotion-relegation scheme, with a knockout playoff tournament at the end of the season designed to conflict with biennial international competition.

This is almost certainly a mere threat to force FIFA and UEFA to agree to the elite clubs’ (perfectly reasonable) demands: greater access to decision-making power, reform of the game’s governing structures, fixing the international calendar to better align with the club season by eliminating awkward international friendlies, and a far greater share of international revenues for the biggest clubs. But if Blatter and Platini refuse to take the G-14 seriously, the clubs seem intent on forcing the issue this time, with potentially disastrous consequences. While a similar situation loomed before when Florentino Pérez was chairman of the G-14, with a 2007 strategy document developed for the organization discussing "a detachment of the top professional level from all remaining levels underneath, if this was agreed upon by the clubs," several factors have exacerbated the already tenuous peace.

A new breed of wealthy club owners eager to challenge established power structures and maximize club profit has emerged, including the Americans who control Manchester United and Liverpool, while UEFA’s potentially troublesome Financial Fair Play regulations and the financial crisis’s impact on club revenues have combined to create a perfect storm of anti-FIFA sentiment. The institution’s much reported problems of late have chummed the waters and now the other elite clubs have joined the hawkish Pérez and his Bayern confederates, eager to take their opportunity to renegotiate the terms of football governance.

Several positive outcomes are possible from this conflict. As Gabe and I have expressed a few times on our podcasts, international football is terrible and run by idiots. Because of the bad incentives that the system provides, FIFA is unlikely to be reformed from within. While Michel Platini, the UEFA president, is expected to take on Sepp Blatter’s mantle after his retirement in a few years, he is unlikely to be successful in reforming FIFA. However, the clubs have enough leverage to secure some concessions that may bring down the rotten edifice of international football. Additionally, their demands, particularly those for a reform of the international calendar, the current incarnation of which causes immense strain on already overworked players, are by no means unreasonable and would improve the game.

For many, however, the looming alternative if the sides cannot come to an agreement by 2014 is disturbing: a pan-European super league based on the NFL, the death of domestic leagues as we know them, and the relegation of the great international tournaments to quasi-amateur competitions featuring none of the world’s top stars. Imagine Spain taking on Argentina without Casillas or Messi, Xavi or Agüero, Iniesta or Tévez. Now you see why I’m not too concerned about even Blatter realizing he has to make a deal.