Real Madrid are top of the world

Today at 04:00 AM

In 2023/24 that Real Madrid became the first football club to exceed one billion Euros in revenue, as this grew by an amazing €230m (27%) from €843m to €1,073m.

However, profit from player sales dropped from €71m to €21m, while operating expenses also broke through the billion Euros barrier, rising €162m (18%) from €911m to €1,072m. In addition, there was an unfavourable €8m swing from €6m net interest receivable to €2m payable.

As a result, pre-tax profit was "only" €20m, though this was more than twice as much as the previous year's €9m. Profit after tax was up from €12m to €16m, as tax payable went from a €3m credit to a €4m charge.

This result means that Real Madrid have reported profits in each of the last ten years, adding up to more than a quarter of a billion Euros in that time - €274m to be precise (before tax).  In fact, they have generated profits every season since 2002/03 and there is no sign of this stopping any time soon, as they have budgeted another €28m surplus for this season.

Revenue

According to the Deloitte Money League, Real Madrid already had the highest revenue in the world in 2022/23, with their €831m narrowly ahead of Manchester City's €826m.

Following last season's big increase, Real Madrid's €1,073m revenue is now a substantial €310m above Barcelona's €763m. This has now become the normal order of things, as the only time the roles were reversed in the last decade was 2018/19, when Barca were €84m ahead. In other words, there has been a revenue swing of nearly €400m in just five years.

The revenue growth was particularly impressive, given that the stadium was not fully operational during the season.

Nevertheless, membership fees amf stadium revenue more than doubled from €152m to €307m, while there was also notable growth in marketing, which rose €77m (23%) from €330m to €407m. In addition, international competitions & friendlies increased by €15m (11%) from €136m to €151m. These were new club records for all three revenue streams by some distance.  On the other hand, broadcasting fell €8m (4%) from €187m to €179m, while other income was down €9m (23%) from €39m to €30m.

Furthermore, the higher revenue was largely offset by a steep increase in the cost base. Total wages rose €52m (12%) from €453m to €505m, largely due to higher bonuses for the success on the pitch, while other expenses shot up €118m (39%) to €425m.

Madrid's €20m pre-tax profit is the highest to date for last season, though almost all the comparatives are from 2022/23 (with the exception of Athletic Bilbao, Barcelona, Celta Vigo and Osasuna).  In stark contrast, Barcelona's €129m pre-tax loss is the worst in La Liga by a long way. The highest losses in the previous season were posted by Espanyol €23m, Getafe €18m and Sevilla €17m.

Player sales

Madrid's player trading profit last season was not particularly high for La Liga, so was a fair way behind Barcelona's €79m. Even Celta Vigo made twice as much last season.

Real Madrid have made a lot of money from player sales, adding up to €646m in the last decade. That said, the gains have been reducing, so they only averaged €51m in the last three years, which was only half of the €102m in the preceding 3-year period.

The club said that it had become more difficult to carry out significant player sales, both because of the huge losses incurred by most European clubs due to COVID and because of the evolution of the dynamics of the transfer market itself, with an increasing number of players finishing their contracts without being transferred.

Despite the recent reduction, it is worth noting that Real Madrid had the second highest profits from player sales in Europe in the five seasons up to 2022/23 with their €439m only surpassed by Chelsea's €481m.

Like every other football club, Real Madrid were adversely impacted by COVID with the club stating that they lost €390m revenue, split between €106m in 2019/20, €194m in 2020/21 and €90m in 2021/22.   Moreover, this huge figure excluded new revenue that could have been obtained had the pandemic not struck and also lower profits from player sales due to the depressed transfer market.

It's an "arms race" in shirt sponsorships and kit deals, but Real Madrid's are among the very highest in the world with Emirates and Adidas reportedly paying €70m and €120m a year respectively. Both deals have been extended: Emirates to 2026 and Adidas to 2028 (merchandising is on top).

As signs of the continuing power of the Real Madrid brand, the club signed its first sleeve sponsorship deal last season with US technology giant HP. Some reports in the Spanish media suggest that this is worth an incredible €70m a year, though other sources have said that it is not so much.

Real Madrid have earned a hefty €581m from European competition in the last five years, which is at least €150m more than both Barcelona €425m and Atletico Madrid €410m.   Real Madrid have been the most successful club in Europe, winning the Champions League an incredible six times since 2014. In fact, they have earned well over €100m in each of the last four seasons from TV money alone.

Stadium

Real Madrid's average attendance increased from 57,000 to 72,000, as the stadium development progressed. This was the highest in Spain, comfortably ahead of Atletico Madrid 59,000.  The club has described the redevelopment of the Santiago Bernabéu as "one of the great projects of Real Madrid, a stadium that aspires to become a reference in the 21st century" with an 85,000 capacity. There has been €1.2 bln investment to date, including €270m in 2023/24 alone.   [I took the stadium tour before the renovation and have also had dinner there and I was impressed then.   One of my granddaughters now lives in Spain and can't wait to visit.]

Madrid's €469m wage bill is far ahead of the rest of La Liga, so as an example is nearly twice as much as the third highest club, Atletico Madrid €245m, and €300m more than the fourth highest, Sevilla €175m.

This summer's activity has illustrated a couple of key elements in Real Madrid's transfer strategy:

• They have brought in some big players without having to pay a transfer fee, e.g. Antonio Rüdiger from Chelsea and David Alaba from Bayern Munich.
• They have been willing to invest big sums in young talent: Bellingham, Aurélien Tchouaméni from Monaco, Eduardo Camavinga from Rennes and Vinicius Junior from Flamenco

Debt and interest

Gross financial debt dropped from €120m to €77m, following the repayment of some bank loans. However, gross stadium debt increased from €1,018m to €1,289m, so total financial debt added up to €1,367m, up from the previous year's €1,138m.

Real Madrid's €1,170 stadium loan is made up of three elements: €575m taken out in 2019, €225m in 2021 and €370m in 2023. The club has done well to secure the funding at fairly attractive interest rates, which average out to 3.2%.

Traditionally, Real Madrid have paid very little interest, but the debt used to finance the stadium development will put them at the top of the European rankings, e.g. the highest payments in 2022/23 were Manchester United €36m, Inter €29m and Tottenham €29m.

Real Madrid's approach could basically be summarised as "success brings success", enabling them to be the first club whose revenue broke through the billion Euros barrier. This approach has been supported by continual strengthening of the squad, exemplified this season by the acquisition of Mbappé, but their investment in youth has also been quite striking.

The Bernabéu stadium development provides a great opportunity to generate even more money, though it will also present some challenges, as this project has led to the club building up sizeable debt, which will have a significant impact on cash flow via higher interest payments and debt repayments.

This project will also lead to a big rise in operating expenses, but Madrid have proved over the last 20 years that they are very aware of the old financial maxim that "revenue is vanity, but profit is sanity", so the chances are that they will once again get it right off the pitch