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Decisions to Define a Decade

The club has reached an inflection point, the weight of decisions to be made in the coming months can either push the club’s trajectory upward or have it spiral downward.

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Real Madrid - Christmas meeting Photo by Pressinphoto/Icon Sport via Getty Images

The tension is palpable, and the frustration is evident, Zidane’s standard (almost repetitive) press conference answers now carry a feeling of disdain. The Frenchman knows he will continue to shoulder the brunt of the media pressure, but the current chaos enveloping Real Madrid is more than just Zidane. The French coach is a shareholder in the plight and negativity surrounding the club, but he is not alone. Florentino Perez, Jose Angel Sanchez, the board, the players, the context of a global pandemic – all these entities and events have played a role. For those devoted to Madrid, it’s not simply the poor results, it’s the lack of a project. There has been no evolution, no transition, and quite simply little to foster hope for a better future. It feels like the club is stuck in a stale purgatory.

Not only is the current state of purgatory stale, but it’s murky and gray. In fairness to the club, most of life is lived in the gray; a far more nuanced and complicated existence than a straight black and white answer. This is true for sporting institutions just as it is for the everyday human being. It’s not as simple as pointing all the blame at Zidane. The club may opt to continue with their manager through the end of the season, the least he deserves for all the has given the club, but definitive decisions regarding the club’s future need to be made soon. The coach, the philosophy, the culture, the future of young players and the renewals of veterans need to all be evaluated for the club to pry themselves out of a state of limbo.

Being in a state of limbo means there are questions. Questions have again been asked after the historic loss to Alcoyano, which falls within the context of a season where the team has failed to beat the likes of Elche, Cadiz, Alaves, Osasuna, and Shaktar Donetsk. There are rightfully questions over Zidane’s future, as it now hangs in the balance. As a repercussion, much of the club’s future decisions hang in the balance. So how does the club move forward?

All of the cards have to be on the table in order to understand how the club can move forward. The financial reality is one of those cards. From a transfer market heavyweight standpoint, this is not the Real Madrid of years prior. The financial implications imposed by the Coronavirus pandemic have accelerated the growing gap between the Spanish elite (Real Madrid and Barcelona) and publicly owned clubs propped up billionaires and premier league revenues. Per the Telegraph, the club’s debt could total as much as €1 billion by the end of the season. Galactico signings become more and more difficult with each passing year. The club cannot afford to accumulate more debt and acquire more loans without having the income to pay those loans back. Sadly, money does not magically appear with no strings attached. A club cannot leverage the future sustainability of the entire institution on the hopes that Mbappe wins the club the treble every year.

Fortunately, the head honcho’s, Florentino Perez and Jose Angel Sanchez, have had the foresight to acknowledge the immense financial power of the likes of Manchester City and PSG. Madrid were vehemently against the change to the Spanish TV revenue distribution changes enacted in 2019, which provide more parity for the rest of the league. Yes, the big two still rake in drastically more money than the rest of La Liga, but they cannot compete with top Premier League clubs, where a team like Manchester United brought in annual TV revenue of €240 million in 2019 vs Madrid’s €155 million.

What’s the solution? Create more streams of income. Starting with the stadium renovation. The stadium will become an asset that is used 365 days a year rather than the roughly 104 days it was bringing in revenue pre-COVID. The key to maximizing those stadium revenues, as well as providing the best return to the club and its debtholders, is to fill the stadium as often as possible. How do you fill those stadium seats? A European Super League. With all due respect to Huesca, a Saturday evening match vs Huesca will not draw the same attendance as a showdown with Bayern Munich.

If a Real Madrid fan is screaming for super-star signings again, then they need to scream for the introduction of the European Super League, only then can Madrid find themselves on more level-footing with other mega clubs. It’s no coincidence that Florentino Perez has been pushing for the Super League to begin as early as 2022, when the new stadium renovations are expected to be complete.

The final piece of the new income puzzle is player sales. The departure of players for big money has become an integral part of the Real Madrid business model. Each year they budget for sales to boost overall revenue. Big money departures for youth team products like Achraf Hakimi and Sergio Reguilon have only furthered the notion of Real Madrid’s youth system becoming a cash cow.

Along with increasing revenue streams, decreasing expenses can help the club compete. One such method of “decreasing expenses” is signing potential rather than ready-made products. The club’s big bet in the transfer market over the last few years, the way to stay one step ahead of PSG and City, is to buy the best young prospects in the game. By identifying and purchasing these talents, the club hopes to avoid having to spend over €80-€100M on a single player every summer. The idea is that those young talents, expensive for their age, will appreciate; allowing the club to sell for a profit or secure super-star for pennies on the dollar.

These “preventative measures” are all well and good, but there are no guarantees on their success. FIFA has already denounced a European Super League, while UEFA has long been a detractor in a bid to preserve the prestige of the Champions League. The stadium renovations – which include hotels, restaurants, shopping plazas, and an even more elaborate stadium tour – looked like a gold mine in a pre-COVID world. With no clear indication of when the world will return to pre-pandemic levels, some analysts forecast that travel won’t return to 2019 levels until 2024. If true, the stadiums returns may be stifled in the first few years after the renovations, which are the most important years for the club and its financers given the time-value of money.

And the young players? That preventative measure? There has been little to no regard for their development. The club and the manager seem to be diverging in different directions on that philosophy. Martin Odegaard is the latest victim to Zidane’s derailment of the club’s youth policy.

All the above context leads us back to present day, where Real Madrid linger in a hazy gray space. The time has come — definitive decisions must be made, and they need to be meticulously calculated. The era of selling half the squad and replacing half the squad with Galactico’s is over. Zidane may be the perfect manager for ready-made stars, but is the club capable of delivering his needs given the financial limitations? Significant investment has already been made on young players, should that be scrapped, or should a manager willing to experiment and integrate with those players be brought in? Can a new manager then survive the repercussions of a young and inconsistent squad? These questions need to be answered by season’s end. Once answered, the club must be ruthless in pursuit of their philosophy. Life may be lived in the gray, but there can always be solutions that guides through the fog. Whether it be to support Zidane, support the youth policy, or move into an entirely different direction – the stale languid purgatory the club find themselves can only be removed with a guiding solution. Arguably now, more than any other time in the club’s history, the decisions made today can have implications for the rest of the decade.

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