Real Madrid- the Mightiest Team in Europe, and perhaps the Rightest politically but not yet the Best

There are 3 economic sayings well known to GreenGreenWorld readers even although they don’t necessarily agree with the values involved in them. The first two are “To him who hath, shall be given” and the related “Money makes money”. The third, most basic and most powerful,  is “Might is Right”. Applied to the world of football they create a set of assumptions along the following lines. The clubs with the greatest incomes will succeed in buying and retaining the best players and managers. In turn that investment will ensure that they are the most successful clubs on the field of play and that in further turn, that success will enable them to generate even more income, allowing the cycle to generate ever–increasing wealth and dominance. And that this cycle of wealth and success is natural, good, positive, rational and to be welcomed, so ‘might’ truly is right.

Taken together these assumptions form the intellectual and philosophical basis of the attention that is given to the publication of the eagerly awaited annual “Might is Right” League table issued by Deloitte, although they more delicately call it the Football Money League. Generally produced by March of every year, this Table grades  Europe’s(and therefore the world’s) richest football clubs in terms of their gross income for the previous season. So the table released a couple of weeks ago represents income for the last complete season, 2008-2009.

The new 2010 “Might is Right” table is

Position Last yr Club Income in £ms IncomeEuros
1 1 Real Madrid 341.9 401.4
2 3 Barcelona 311.7 365.9
3 2 Manchester Unt 278.5 327
4 4 Bayern Munich 246.6 289.5
5 6 Arsenal 224 263
6 5 Chelsea 206.4 242.3
7 8 Liverpool 184.8 217
8 11 Juventus 173.1 203.2
9 10 Inter Milan 167.4 196.5
10 7 AC Milan 167.4 196.5
11 15 Hamburg SV 124.9 146.7
12 9 Roma 124.7 146.4
13 12 Lyon 118.9 139.6
14 16 Marseille 113.5 133.2
15 14 Tottenham 113 132.7
16 13 Schalke04 106 124.5
17 NI Werder Bremen 97.7 114.7
18 20 Borussia Dortmund 88.1 103.5
19 NI Manchester City 87 102.2
20 17 Newcastle United 86 101
Relegated 18 Stuttgart
Relegated 19 Fenerbahce

While the table is the best measure available of crude economic wealth, it should be remembered that Gross Income is not the most sophisticated measure of economic power. It does not take account either of levels of debt and the attached monies committed to interest repayment, nor does it measure access to resources other than generated income.

The first of those factors, levels of debt and related interest payments, means that the table overestimates the economic strength of the English clubs Manchester United and Liverpool both landed with heavy annual interest payments due to the nature of the deals made by their American owners to finance their takeovers of the club. While Arsenal are also hampered by debts caused mainly by the construction costs of their new Stadium, this resource has enabled them to significantly increase their income thus explaining their leapfrogging of Chelsea. Most of the other clubs near the top of the list have significant debts but they do not handicap them to the same extent as those of Manchester United and Liverpool.

The second of those factors, crudely known as ‘owners with cash’, means that the table underestimates the economic power of Chelsea and Manchester City, for at least as long as their billionaire owners are prepared to subsidise their operation. It is likely that both clubs will engage in significant investments in the summer of 2010 due to this factor which should mean their on-field performance should benefit at the expense of clubs currently ranked above them.

Chelsea are the classic example of “money makes money” with Abramovich’s initial investment being used to create the on and off-field successes that have turned Chelsea into one of the top 6 income generating clubs. GGW can safely predict that a similar performance can be expected by Manchester City over the next few years with them climbing into the top 10.

Despite these two reservations, the “Might is Right” table is still the best available indicator of crude economic power translating into football potential. The rest of this article will highlight some of the more interesting issues arising from the 2010 table and apply its lessons to what can be expected from it for the rest of the season in terms of the top 2 European tournaments whose Quarter-final, Semi-final and Final draws were made earlier today.

The League shows that the two Spanish giants Real Madrid and Barcelona are in a class of their own. One factor in the Real Madrid and Barcelona lead is that they are able to negotiate individual TV deals for their games rather than having to spread TV money more equitably. The race for the 2010 La Liga title is truly a clash of Europe’s top two titans and the game in the Bernabeu on April 10th that may well decide which one claims domestic superiority should be one every GGW reader has cleared in their diary. However it is interesting that not another Spanish club appears anywhere in the top 20. A future GGW Spanish Scene report will focus on the financial crisis in the Spanish game which is likely to ensure no other Spanish club is likely to break into the Top 20 anytime soon.

The table also indicates the magnitude of the failure of Real Madrid to match their financial income with success in Europe. For an amazing 6th consecutive season they have fallen at the first knock-out round of the Champions League. Their might has not quite been right on the European scene and even the 2009 summer investment of over £250 million failed to break this dismal pattern, a failure that will definitely cost Pellegrini his job by the summer. The Real Madrid investment in new players alone was greater than the complete gross incomes of all but two other clubs.

Another feature of the current Might is Right League is the economic power of the English club game with 4 clubs in the top 7 and another 3 in the top 20. Celtic fans who have adopted Martin O’Neill’s Aston Villa are likely to be disappointed. If  Might is Right, the serious contenders for Liverpool’s 4th Champions League place are Spurs and Manchester City, with Villa and Everton out of the economic frame.  O’Neill’s best hope is to persuade the American owner to invest much more heavily outwith their income generation. And the table shows the amazing extent of Mike Ashley’s incompetence. To take the 20th most powerful club in Europe into the second division truly is quite an achievement.

The process of conversion to a common currency means the exchange rate has an impact on relative positions. The 7 English clubs are adversely affected by the fact that the exchange rate used, that of June 2009, meant a 7% reduction since 2008 and even greater since 2007.

Italy may have 4 clubs in the Top 12 but they are clearly an economic class below the top clubs of Spain and England. What may be a surprise to some GGW readers is that Germany have 5 clubs in the top 20 with a 6th just relegated. Borussia Dortmund are graphic proof that massive crowds(they have the highest average crowd in Europe) and good income can be undone by poor economic management and that massive debts are rightly called crippling.

France has two teams in the lower reaches of the Top 20 but no other country outside this top five has a single representative, not even these traditionally successful European nations of Portugal and Holland.

Needless to say the Old Firm never even came close to inclusion, yet again, and are over £20m from making the Top 20. Given the importance of TV rights in terms of overall income, frankly they never will until either they are admitted to the English Premier League or else unite with the Dutch, Portuguese and Belgians  to form  an Atlantic League that can create a combined TV rights market similar to the English, German, Spanish, Italian, and French ones.

The full Deloitte Report is over 40 pages long and contains much more fascinating detail than can be included in an article of this size. It can be obtained free from Deloitte at . The Deloitte Report should be read in conjunction with the recent UEFA Report “The European Club Footballing Landscape”. A much fuller analysis of these 2 key reports on European Club football finance will soon be available from SISIF (The Sherbrooke Institute for the Study of International Football)

Applying the Might is Right approach to the European Club Competitions

The Top 10 Clubs all have an income at least 50m euros more than the club in 11th place and seem a self-perpetuating elite.

Since the Champions League began only 2 clubs from outside the Top 20, Ajax in 1995 and Porto in 2004, have won the trophy. It is to the enormous credit of the two managers Van Gaal and Mourinho they were able to achieve that success with limited resources. They are both still in contention for the 2010 title with stronger clubs but if Might is Right Barcelona will deny them a second victory. In the last 12 years, other than Mourinho’s Porto, all winners have come from the current Top Ten.

The Top Ten all qualified for the 2009-2010 Champions League and they all assume, generally correctly, that they will be in the Champions League every season. Of this year’s Top 10 elite, only Liverpool and Juventus may struggle to qualify for the 2010-2011 Champions League. However of the clubs ranked 11th to 20th only Roma and Schalke seem assured of qualification and only Lyon and Marseille, and Spurs or Manchester City seem in a possible position to join them, with Hamburg, Werder Bremen, Borussia Dortmund and Newcastle definitely not going to make it.

In terms of the UEFA Cup/Europa League only 1 of the last 10 winners has been a Top 20 Club, ironically Liverpool in 2001. However 3 of the last 5 winners have been from that other group of clubs under-represented in the Might is Right league, East European Clubs with rich sponsors/owners i.e. CSKA Moscow, Zenith St Petersburg and Shakhtar Donetz

2010 Champions League

There is a pleasing symmetry about the Champions League draw with the 2nd and 5th ranked Might is Right teams facing off in one half of the draw and the 3rd and 4th ranked teams meeting in the other half. Barcelona the 2nd ranked team should be strong enough to see off 5th ranked Arsenal. They then should face, and beat, 9th ranked Inter Milan in the Semi-finals.

The key game in the other half of the draw is more finely balanced. Manchester United in 3rd place are ranked one place above Bayern Munich. However the gap is even narrower than it appears because of Manchester United debts and Bayern’s exercise of their might in the summer with many expensive new signings like Gomes, Robben, ,Pranjic and Olic. GGW reckons Bayern Munich could upset the relative rankings by triumphing.

If Might is Right the winners should then face Lyon(ranked 13th) in the Semi-Final, before going on to lose to Barcelona in the Final.

Europa League

The Might is Right figures show how vulnerable Liverpool will be to a major decline over the next couple of years from their current 7th position if they lose the Champions League element of their income next season by failing to secure 4th place in this season’s Premier League, particularly in light of their heavy debts and high interest repayments. However if Might is Right they should have the consolation of winning, and then next season retaining, the Europa League although the income from victory is far below that from even Champions League mediocrity.

Final hosts Hamburg SV are the only ranked team in their half of the draw and should make it to the Final where home advantage may enable them to prevail even over Mighty Liverpool.

While Liverpool are also the only ranked team in their half of the Draw,  the other three  teams, Benfica, Valencia and Atletico Madrid have a good pedigree of European success even if their budgets no longer allow them to be ranked  in the top league of Might is Right. Even with their heavy debts Valencia have the highest income of the three and for GGW are the most likely to make it to Hamburg if Liverpool don’t convert their might into victory.