Soccer Economics

The World Cup starts in about two weeks. Even in soccer-phobic America, there will be a lot of attention paid to the games and to the tournament as a whole. Soccer is an acquired taste; I have acquired a sufficient taste for soccer that I enjoy watching top-level clubs play each other; I am not nearly to the point where I would call myself a knowledgeable fan or a rabid fan. Let me suggest that the World Cup games might be an opportunity for a few American “soccer-phobes” to begin to acquire a taste for the game.

However, before those games begin, there are a few less than fully positive things happening in the world of soccer. These will surely be forgotten for the month of the World Cup tournament, so let me mention them now before the drum beats get too loud.

Manchester United is one of the foundation teams of the English Premiere League. They are sort of the NY Yankees of English football; people either love them or detest them. I like two of their players – - Wayne Rooney because he plays like the Energizer Bunny and Fabio Fabio because his parents named him after an echo chamber. Manchester United is in financial trouble – potentially major financial trouble.

Several years ago, the Glazer family, owners of the Tampa Bay Bucs too, bought out the shareholders of the Manchester United club and did so with borrowed money from banks that were only too happy to advance money to someone whose net worth was then north of $2.5B. According to reports, the bank loans amount to £500M ($726M as of this morning) with additional loans of £138M ($200.5M as of this morning) from hedge funds. The hedge fund loans reportedly are PIK loans (Payment In Kind) wherein no payments are due until the loan matures in 2017 when it all has to be repaid with interest at 14.4%. If my calculation is correct, the Glazers will owe the hedge funds alone $400.2M in 2017 in a lump sum payment. Yowza!

As we know, the banking crisis of 2008 took a toll on all business enterprises including sports franchises. Added to that is the fact that the British supporters of ManU have never taken to the “foreign ownership” of the Glazers. They particularly do not like the fact that tickets to see the team play in their home stadium (Old Trafford) have increased almost 50% in the last couple of years. Fans are now staging protests and starting to talk about boycotts to force the Glazers to sell. Before ManU’s final game of the season, a smoke bomb bearing the colors that symbolize the fan protest movement was set off just outside the team’s “Megastore”.

Manchester United played to the largest average crowds in all of the English Premiere League last year – - by a sizeable margin – - and still faces debt service problems because the debt exceeds $1B rather comfortably. Even a small fan boycott could be disastrous for the club and by extension for the English Premiere League. It will be interesting to see if ManU is a buyer or a seller of players during the upcoming “transfer period”. Right across town at Manchester City, that rival club is owned by an oil sheik who is not bashful about spending to acquire players. Stay tuned…

Were that an isolated event, it would be worth noting and then moving on. It is not an isolated event. In Spain, the equivalent of the Premiere League is La Liga. In La Liga, the dominant teams are Real Madrid and Barcelona. To give you an idea how dominant they are, Barcelona won La Liga last season with a record of 31 wins, 1 loss, 6 ties; Real Madrid went 31-4-3. Those two teams spend money on players in huge amounts and dominate the league but that does not help the other clubs.

There are 20 teams in La Liga; only Barcelona and Real Madrid were in the black last year. Now come the staggering numbers… According to a study done at a university in Spain, the cumulative debt of the 20 teams in La Liga is €3.55B ($4.35B as of this morning). Eighteen of the twenty teams are running in the red; none of those 18 teams came close to challenging either Barca or Real Madrid; in toto, the league is in debt for quite a bit more than $4B. Moreover, the debt comes mainly from huge player salaries driven by the money spent by Real Madrid and Barca; for La Liga as a whole, the study concluded that player salaries amounted to 85% of the costs for the clubs. [Aside: As a point of reference, the NFL is staring at a negotiating impasse for a new CBA where the league wants to reduce the player salary expenses from the current 59.8%.]

It is not only the “bottom feeders” in La Liga that are in financial trouble. Real Mallorca finished fifth in La Liga this season and just filed for the Spanish equivalent of bankruptcy because Real Mallorca is carrying a debt burden of €85M ($104.3M as of this morning). The team has been up for sale for a while; but not overly surprisingly, a buyer has not surfaced who is willing to take on that level of debt to own a team that ran in the red for the past few seasons and has no rational chance of overtaking Barca or Real Madrid in the next few seasons.

The Premiere League could be in trouble because one of its major teams could be financially on the brink; La Liga could be in trouble because only its major teams can show a profit. The situations mirror each other but neither is a harbinger of anything good if things continue to go in the direction they are going now.

I began this morning by mentioning the upcoming World Cup tournament. Let me return to that point for a moment to suggest that you might want to have a rooting interest against Argentina in the tournament. From the outset, let me say that I bear no animus toward Argentina as a country and the few folks that I have known in my life who are of Argentinean extraction are all good and worthy folks. The reason to root against Argentina is that Diego Maradona (their coach for this World Cup tournament) has said that he will run naked through the streets of Buenos Aires if Argentina wins it all.

Folks, Diego Maradona is 50 years old. Go to Google Images and find yourself a few recent photos of him in a clothed state. Now ask yourself if you really need to see that man running naked anywhere – - and you will indeed see it in this age of YouTube and digital photography. The answer to that question is that you do not need to see that and you do not want to see that.

Diego Maradona was a great soccer player. He and Pele were probably the two best players of the last 50 years. If he goes streaking in Buenos Aires he will not be remembered as potentially the best player of the 20th century; he will be remembered as a great player who was involved in the dramatic goal that came to be known as “The Hand of God” goal and who subsequently made an ass of himself by running the streets with his ass – - and his other equipment – - in full view. We can all do without that. I hope Argentina loses just because of that.

Finally, syndicated columnist Norman Chad provided this thought about the longer view of one’s life and the great beyond:

“In the 1950s, McCarthyism threatened the very fabric of this nation. Sixty years later, the same can be said of McCarverism.

“In purgatory, I assume I will be interviewed by Jim Gray.”

But don’t get me wrong, I love sports…

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Comments

  • Ed  On May 27, 2010 at 2:54 pm

    I would not count on the US embracing soccer with this World Cup. They didn’t do it when it was held here. Soccer has been “about to break out” since Pele – what’s that, 35 years? It has never caught on here in the mainstream, and it has about as much chance as the NFL catching on big time (not NFL Europe level) in Italy. Why it fails, should it fail? Arguable. But it does.

  • The Sports Curmudgeon  On May 28, 2010 at 9:28 am

    Ed:

    I never meant to imply that the US would embrace soccer the way European and South American countries do. If I made such an implication, it was unintentional. That is not going to happen.

    For the US, soccer is a minor sports endeavor and will not attain the level of “major sporting endeavor” in my lifetime. What I meant to say is that the World Cup games that will be on TV here in the US can provide a way for some folks to begin to enjoy watching soccer more than they do now.

    I like to watch top-level soccer teams play each other. I do not like to watch less-than-top-level soccer teams play; if I come across a televised college soccer match, I linger on that channel for about 15 seconds and then move on. Soccer played by teams at the World Cup level is a different animal than soccer played by college teams – - and frankly, by MLS teams too.

    MAYBE a few folks who never liked soccer will find some small measure of interest in seeing the game played at a very high level. If so, that will help to grow soccer in the US a small amount. Remember, I doubt seriously that soccer will ever be a major sport in the US and it will certainly not happen while I am still vertical and taking nourishment.

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