World’s greatest player, world’s greatest transfer fee, the world’s two greatest clubs (or so they would say): what is going on in world football? A seismic shift in the balance of power or just hype? Here is your quick guide to the winners, the losers and the score draws.
The Glazer family
The rich just got richer. Eighty million pounds represents an addition of about 5 per cent to the net worth of the Glazer family, who have a controlling stake in Manchester United; OK, not quite, since selling Ronaldo means a fall in shirt sales next year, but that’s not as important as you probably think – all merchandising sales by United last year produced less than £80 million for the club (largely thanks to the counterfeit trade).
But the bigger story is the success of the family’s financial engineering. The current financial crisis was triggered by people borrowing to buy property on which they could not afford to keep up the payments, but that doesn’t mean that all borrowing to acquire an asset is ill-advised. The Glazer family is on the brink of pulling off the greatest buy-to-let scheme in financial history. They used debt to buy out expensive equity, and have used the robust cashflow from the club to pay it off quickly.
This also proves that Manchester United plc was hugely undervalued by the shareholders. At the time, it was argued that the Glazers were taking a big risk, that if the performance of the team slumped and income collapsed, they would bankrupt the club. Even a few weeks ago there were stories about the club’s debt trading well below par. But the Glazers have demonstrated that all the nay-sayers were wrong; with the benefit of 20:20 hindsight their judgment has proved excellent.
Was there ever really a prospect that the club’s legendary fanbase would desert them even if the going got tough? Probably not – and anyway, the going didn’t get tough.
Manchester United fans
Have the fans lost anything? Three Premier League titles and one Champions League in four seasons must surely be enough to satisfy even the greediest glory-seeker. Whisper it, but some fans have been known to say that it wouldn’t be such a bad thing if the Premier League got more competitive. So, a Ronaldo-less United might just benefit everyone, even United itself.
True, United fans have helped to pay for the Glazers’ financial engineering in the form of sharply increased ticket prices, but they remain among the cheapest in the Premier League (last season they ranged from £28 to £48; Newcastle’s ranged from £25 to £60. Nuff said).
Players benefit from transfer market activity that stimulates demand for their services and ultimately pushes up their wages. Will Ronaldo’s move trigger a game of musical chairs? The transfer market is one of the most unpredictable in the world (who would have thought the record would be broken in the midst of the biggest recession since the 1930s?), but I will stick my neck out and say “no”. Even if the Glazers wanted to replace Ronaldo, who could they go for? Probably the only forward of comparable quality is Lionel Messi, and he’s unlikely to leave Barcelona.
Then there is a host of strikers with potential but not quite proven quality that Manchester United could buy, but why should they when they already have Rooney, Tevez and Berbatov? If they wanted anyone, it would probably be a midfielder like Lampard – and buying him would break the bank – but right now there’s no obvious need for them to do that.
With the billionaire Florentino Pérez back at the helm, Kaká and Ronaldo on the payroll and probably more to come, it looks as if the glory days will return, and not a moment too soon after the recent successes of Barça. Is it sustainable? Last time Pérez sold the training ground for around €480 million to fund the acquisition of the galácticos. What will he sell this time? Or will this come out of his estimated $1.8 billion personal fortune built up in the construction industry? Real Madrid is too iconic to be allowed to fail. The fans may see their ticket prices go up, but the lender of last resort will almost certainly be the Spanish taxpayer, somehow or other.
There are endless complaints that football has become increasingly unbalanced – for instance, Michel Platini’s attacks on “cheating” English clubs who buy success in Europe through building up debt – and that regulatory action is required to level the playing field. Critics in the Premier League should be heartened if Manchester United look a bit less dominant, while Spain returns to its traditional two-horse race. In all probability the Champions League will have two English and two Spanish semi-finalists next season, rather than the three and one of the last two seasons, but that is hardly revolutionary. In any case, as football has boomed over the past two decades, there’s little evidence that the fans really care that much about competitive balance.
Recession or no recession, European football is permanently in financial crisis. Clubs spend more than they can afford in chasing championships or avoiding relegation. This generates enormous angst and has disposed of a number of private fortunes, but the clubs live on. If Leeds United had been a real business it would have been sold up and shut down, but this hardly ever happens even to the small clubs, let alone the giants.
Nonetheless, financial crisis creates a feeding frenzy among would-be regulators, who tell us they know best for football (or, even, that “they are football”). Interestingly, it is the English model of football capitalism that has been facing the greatest pressure for regulation, because of the amount of money supporting it, because of its business-like values and, frankly, because of its success.
The model everyone else espouses is member-owned clubs, such as Barcelona and…Real Madrid. Now the cry will go up for more regulation of budgets and salary caps as in the American leagues, although of course no one wants football to be run like the American leagues (which, as the Glazers will tell you, make real money). All this muddled thinking will, sooner or later, lead to some ill-conceived intervention: expect more resolutions from the European Parliament.
Stefan Szymanski, professor of Economics at Cass Business School and the co-author with Simon Kuper of the forthcoming book Why England Lose.