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GRAHAME L. JONES / ON SOCCER

Mad money dominates the world soccer scene

The cash top clubs like Real Madrid lay out for star players has reached an absurd level. But the funny thing is, the investments may well pay off.

June 17, 2009|GRAHAME L. JONES | ON SOCCER

Either the soccer world has gone stark raving mad or the rest of us are simply naive in our economic outlook.

There is Monopoly money and then there is soccer money, and judging by last week's events there isn't much difference.

Last Monday, Real Madrid bought Kaka, Brazil's 2007 FIFA world player of the year, from AC Milan for a staggering $94 million.

Three days later, the Spanish club trumped itself by offering a record $131 million for Manchester United winger Cristiano Ronaldo, Portugal's 2008 FIFA world player of the year. United accepted, and the deal is expected to close later this month.

That's $225 million spent in four days on two players, and Florentino Perez, the ultra-rich, ultra-powerful construction magnate who is Real Madrid's president, is not through yet. He has half a dozen other players in his sights, most prominent among them being Spanish forward David Villa of Valencia and French playmaker Franck Ribery of Bayern Munich.

Chelsea is also chasing both players and has offered Bayern $50 million for Ribery. In keeping with the monetary madness of the moment, Uli Hoeness, Bayern's general manager, scoffed that Chelsea could buy "one of his legs, at best" for that amount.

However, Perez could again dig deep and land both Villa and Ribery. This is the same man, remember, who engineered the transfer of Portugal's Luis Figo, France's Zinedine Zidane, Brazil's Ronaldo and England's David Beckham to Santiago Bernabeu stadium for a combined $230 million during an earlier span as president, from 2000 to 2006.

The 62-year-old Perez is worth an estimated $1.8 billion. He knows how to tread the financial tightrope and is quite certain that splashing out, say, $400 million on new players will improve Real Madrid's bank account if not its trophy haul.

Beckham alone earned Real hundreds of millions in merchandise sales, and Perez expects his new "galacticos" to do the same.

"The most expensive players are often the cheapest," he said in a Spanish television interview, arguing that big-name players bring in more than they cost.

"There are specific footballers who can turn out to be very profitable, because of the commercial benefits they bring the club," he told the Times of London last month.

"When Beckham arrived, our sponsors significantly raised their payments to us and we rescued the finances of the club. . . . We established a model which allowed us to pay off our debts and raise our income, and we did it by investing in great players. They brought money in, the model worked."

Forgotten or ignored was that Perez also sold large chunks of Real Madrid real estate to help balance the books.

Now, after his Kaka and Ronaldo coups, Perez is hoping to work the same magic, and some believe the astronomical outlay will be worth it.

The two players could bring an additional $175 million a year to Real Madrid through foreign tours, jersey sales, improved television contracts and other commercial ventures, according to Simon Chadwick, director of the Center for the International Business of Sport at Coventry University in England.

Perez said that Real Madrid already brings in $561 million annually from ticket sales, television rights and merchandising, and he expects that figure to rise.

Meanwhile, AC Milan and Manchester United are realizing tidy profits on their investments.

Kaka cost AC Milan $12 million as a 21-year-old in 2003. He helped it win the European Champions League in 2007 and the club made $82 million by selling him. Good deal.

Ronaldo cost Manchester United $20 million as an 18-year-old in 2003. He helped it win the Champions League in 2008 and the club will make a $110-million profit by selling him. Even better deal.

Players as commodities is what it is all about.

"The reasons for the departure of Kaka are solely economic," said Adriano Galliani, the right-hand man to AC Milan owner and Italian Prime Minister Silvio Berlusconi. "Even a great heart must confront the situation and make choices. Milan cannot go on losing $99 million a year."

That did not stop just-retired defender and AC Milan icon Paolo Maldini from slamming the club where he spent his entire 24-year career. The loss of Kaka, Maldini said, was potentially ruinous.

"In the past, an idea like that would never have been considered," he said. "Looking at the accounts is logical, but it is also logical to set obtainable targets. Thinking of winning the Champions League without Kaka is a Utopian dream."

Kaka, who had repeatedly said he did not want to leave the club, has accepted the economic argument.

"There has never been a [financial] crisis like this one," he said. "The club needed to make this sacrifice, and I understand this very well. I don't blame the club for this."

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