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Monday Musings: The Premier League’s financial dominance post-COVID and how Real Madrid have adapted

This week’s Monday Musings reflects on how the financial gap has widened between the Premier League and the other top four leagues post-COVID + Real Madrid’s reaction to their competitors compounding wealth.

Manchester City Media Day Photo by Tom Flathers/Manchester City FC via Getty Images
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:

News that will not surprise football fans: the Premier League provides financial resources that far surpass their competitors in the corresponding “big five” leagues. Here is the bigger question: how much further has that gap widened since the Coronavirus pandemic ravaged club finances and what has that meant for La Liga and specifically Real Madrid? By taking the aggregate spend from 2018-2020 (pre-COVID) for each of the big five leagues vs the same parameters for 2020 (post-COVID) - 2022, the numbers start to tell a story.

Data via Transfermarkt

The Premier League has outspent La Liga on roughly a 4:1 ratio. For every $100 million spent by La Liga, $400 million has been spent in the Premier League. That number not only compounds season after season, but it has been growing. Meaning that 4:1 ratio has the possibility of becoming a 5:1 ratio. La Liga’s top six actually outspent the Premier League top six in the two season’s prior to COVID, but more recently the variance has been flipped on it’s head:

The above table describes the Premier League’s spending ratio vs La Liga. In the pre-COVID era, for every $1.4 billion spent by the EPL, $1 billion was spent by La Liga. A $400 million gap. After COVID, the ratio has adjusted to that aforementioned 4:1 — (3.7 in the table above).

There is less money going around after the pandemic, about $1.1 billion less. In fact, if we remove the Premier League – which is the only league to see transfer expenditure grow post COVID – the other four leagues are spending 25% less than they did a few season earlier. That equates to $2.3 billion less in transfer fees paid. It is harder for clubs to sell players and thus harder to buy players as the cash is not as readily available. In a pre-COVID market, it would have been easy for Valencia to sell players like Gaya, Soler, and Guedes for big money. Instead, they had to get Jorge Mendes to fund another desperate Portuguese transfer to Wolves. There are countless examples riddled across the market. In essence, a recession hit and the Premier League clubs are the only investors with cash on hand to buy the heavily discounted stocks.

There are various reasons for Premier League’s financial dominance, but the biggest of all are the broadcasting rights. La Liga simply cannot compete on a head to head basis when it comes to audio visual rights. For the first time in Premier League history, the overseas broadcasting rights will top domestic. International rights will hit £5.05 billion, while UK broadcast rights will be worth £5 billion between 2022 and 2025. La Liga will not hit either of those figures for domestic or international rights on longer five-year deals.

So how has Real Madrid responded to these changes with their transfer strategy? I highlighted the success of the youth policy and “market opportunities” in a separate Monday Musings. Though, another key strategy change has been both the timing and speed of transfer agreements post-COVID. Madrid lay the ground-work in the off-season and then strike as soon as the market opens or an opportunity presents itself. The club avoids long contentious negotiations where other parties (Premier League clubs or state-funded clubs) can then get involved and drive up the wages, bonuses, and overall transfer fee.

For example, Aurelien Tchouameni initial contacts were made as early as October 2021 via a report from MARCA. Then, in January 2022, Juni Calafat – Madrid’s chief scout - flew to Monaco to discuss a transfer directly with Tchouameni and his entourage. A week after the UEFA Champions League final and the fall-out of the Mbappe transfer, Tchouameni was signed. Liverpool were heavily interested, PSG were heavily interested, and Chelsea under Roman Abromavich nearly had a deal done – but the player’s will and Madrid’s ability to wrap up the deal quickly made the difference. The story with Antonio Rudiger is similar. Eduardo Camavinga will tell the same tale. If the player can make his intention clear: Madrid above all else, then the club can handle the rest.

Once the renovations from the Santiago Bernabeu are complete, Real Madrid will be able to better compete with their Premier League counterparts. The sad reality is there is no competing with clubs like City, Newcastle, or PSG if regulations are not put in place. Thus, Madrid must continue to invest early and often in young talent and exploit market opportunities when they arise. The commercial value and brand power of clubs like Real Madrid and Barcelona still hold tremendous weight with regards to sponsorship deals and improving broadcasting rights. Both the league federations and the clubs that form those leagues outside of the EPL will be doing everything in their power to keep the gap from widening. It will be worth keeping an eye on the trend over the new few years: do the rich keep getting richer or do the other four leagues cut the distance? Either way, Real Madrid have been proactive in their approach and will continue to adjust their transfer strategy as the competitive landscape evolves.

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