Monday Musings: Three Solutions to Real Madrid’s Broken Loanee System

Matt’s Monday Musings: A series with no rhyme or reason — just consistent thoughts on all things Real Madrid released every Monday. Some weeks may be long form, others just short anecdotal thoughts. Either way, I’ll be posting reflective content on the current, past, and future on-goings of the club:

Take Kubo is on the verge of completing a permanent transfer to Real Sociedad for €6.5 million. Real Madrid will retain 50% of his rights, meaning they will have the option to re-purchase the player at a discount or benefit from his future sale. This is the right deal for the player, the selling club, and even the buying club (though they will begrudgingly accept the 50% clause). The problem? This deal should have happened two years ago, following Kubo’s debut season in La Liga with Mallorca. Instead, the Japanese playmaker journeyed through various La Liga teams: Emery’s Villareal, Bordalas’ Getafe, and returned to Mallorca under a new coach, Luis Garcia Plaza, and then Javier Aguirre. It has been anything but stable.

In an earlier edition of the Monday Musing’s, I explained how Real Madrid’s youth policy has been a resounding success. Despite that success, there is still room for improvement. Prospects that are acquired and not yet ready for the first team are often sent out on loan, but the success rate of finding the right club has been hit or miss. Sometimes players are not ready to contribute at the highest level, but other times the club selected does not have the incentive to invest in a loanee. So how does Real Madrid rectify this issue?

The Kubo project can be one to learn from moving forward. When Kubo made the move to Villarreal and was struggling for game-time under Unai Emery, rumors started to quickly circulate around his discontent. Whether it was Real Madrid pushing the story, Take Kubo’s agent, or both — media quickly cobbled up the idea that the best move was for Kubo to find a new club in the winter window. Less than 6 months after arriving, Kubo was getting ready to pack his bags and leave Emery’s Villarreal. I had been vocal in my objection of that decision. The then 19-year-old needed a stable environment at a quality club with a top level manager. Unai Emery was willing to invest the time in the player – likening him to a young David Silva — but wanted, or rather needed, more than a year to develop the player.

A loan, even a multi-year loan, provides little upside to clubs competing in European competitions. There has to be a win-win-win scenario for all three parties. That is difficult to find in any negotiation, even in a scenario with just two parties, but below are three potential solutions:

1. Sell a prospect, but include a buy-back clause, ROFR, or 50% rights retention clause

Real Madrid historically have always included either a buy-back clause, right-of-first-refusal, or more recently retained a 50% ownership rights in a player when selling a talented U23 from the academy or the first team. This is nothing new in terms of a club strategy. Though, the club has been hesitant to sell assets and lose control over players that they believe can “explode”. In reality, these players need years of cultivation before they can contribute to the Real Madrid first team. One failed loan spell depreciates the value of the asset and delays any dividends that the player could provide in the future. All three entities – the player, the parent club, and the prospect club — need to have skin in the game. Long term prospects, need long term projects.

Rather than opting for one or two year loan spells, Madrid should opt to sell the player outright and retain one of the aforementioned clauses. It gives the buying club incentive to develop the player - as they can profit from his future sale and benefit from his on-field performances.

With a player like Reinier Jesus, this can be tough to achieve as he was purchased for €35 million. Prospective buying clubs (outside the Premier League) simply cannot afford to pay a transfer fee of €35 million for a teenage prospect, even if they insert a buy-back clause around €50 million. It simply too high of risk and too large a capital outlay. Even after a two year loan spell at Borussia Dortmund, there still remains €24.2 million to amortize on Reinier’s contract. This leads to solution #2...

2. Keep the players with Castilla

Take Kubo and Reinier Jesus are two players that likely would not have taken massive steps in their development playing in Segunda B week in and week out. Though, if you ask Jorge Valdano , there a few better teachers of the Real Madrid values and creating a professional environment, than Raul Gonzalez Blanco. By staying close to home, the players can periodically train with the first team and fill in any gaps when injuries arise or rotations are required. Given the investment in someone like Reinier Jesus, there would be greater pressure on the first team coach to try and provide minutes at a La Liga or Champions League level. The ultimate goal would be to get Real Madrid Castilla promoted to the second division. The reserve side would then be a step closer to a La Liga level environment. If keeping Serio Arribas (what appears to be the new plan this summer) and other elite talents at the Segunda B level is required to achieve promotion, it may be worth the developmental hit in the short term. Arribas and others can earn a lucrative contract, be sold on the chance for first team opportunities, and work towards the goal of achieving promotion. For big investments like Reinier, the club clearly believes in their quality and potential and thus should be kept close to home like both Rodrygo and Vinicius Junior experienced.

There would be both positive and negative knock-on effects in this strategy change for Castilla. The positive: an ultra competitive environment is created with the most highly talented youngsters in the world, pushing for promotion to Segunda. The negative: it could stall the progress of other players coming up (like a Bruno Iglesias) and see them ultimately leave the club and explode else where. It would be a delicate balance for the club to manage, but the re-introduction of Real Madrid C could help create a buffer.

3. Create a mutually beneficial partnership with another European club

Ask any supporter of a first division club, like a Real Mallorca or a Real Valladolid, and they will likely be fervently against loans for Real Madrid youth products. Instead they would rather promote their own or invest in players that will be at the club long term. It would be hard to sell a supporter, and thus hard to sell a director or President, on an partnership agreement with Real Madrid. Yes, Real Madrid would be sending their best and brightest, but those players are then groomed and developed just to leave. There is no connection to the club taking on the loan and no benefit in terms of profit.

Instead, Real Madrid could provide the following in exchange for sending loanees to one or two specific clubs: right of first refusal + a percentage discount on any prospects that Real Madrid decide to sell (I.E. a Jorge De Frutos goes on loan to said club and does well, but Real Madrid do not have room for him in the squad. The club, who just had the player on loan for a year, now gets the opportunity to buy Jorge De Frutos at discounted rate before any other interested clubs can make an offer). That same partnership could also include salary coverage from Real Madrid and/or a fixed fee (say €5 million euros) for any player that comes back to form as part of the Real Madrid first team.

The partnership could go even further in order to convince the prospect club. The club carrying the loanees would also have the opportunity to purchase any Real Madrid academy prospect, not just players that Real Madrid chose to strictly loan. For example, one summer the club could bring in Reinier Jesus on loan and buy Mario Gila and Antonio Blanco out-right for slightly discounted rates. The agreement could be put in place for 3-5 years and then re-evaluated.

Ideally it would help a club like Ronaldo Nazario’s Real Valladolid, or American-owned Real Mallorca, move from relegation battles to mid-table security, and eventually European competition contention. Once that level is hit, the partnership may dissolve as the club partnering with Real Madrid has built up the funds to operate on their own cash reserves, as well as their own talent. If ultimately the partnership between both clubs were to see that type of success, then there will be a queue of other clubs interested in a similar deal.

Regardless of what is decided, Real Madrid need to create a formula that makes sense for the prospects that are not yet ready for the Real Madrid first team. You can sell a young player on the dream of playing for Real Madrid, but there then needs to be a clear career path outlined. A strict well-rehearsed plan to adhere to — this is where the youth model still has room to improve.