La Liga Awaits Clash of The Titans

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Author: Jason Traub, CEO 23 Capital

Posted: 11.12.19

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This month sees the long awaited opening El Clasico of the season. Jason Traub, CEO 23 Capital takes a closer look at the financial impact of one of the biggest games in football.

Sharing 59 Spanish league titles, alongside a combined haul of 18 Champions League wins, Real Madrid and Barcelona are undoubtedly the giants of Spanish football, so its no wonder El Clasico represents a game of such glitz and glamour that fans from Madrid to Manila tune in to watch these two heavyweights go toe-to-toe for 90 minutes.

But why is El Clasico such a global phenomenon? In many ways, the derby transcends sport and there are few equivalent games that can match its intensity and global appeal. In decades gone by, Real Madrid have very much been the glamour club of European football. Bar a handful of successful periods, Barcelona languished in their rival’s shadow in the 20th century, until Cruyff came along as Barcelona’s coach in the 1990’s and ripped up the playbook.

Since then it’s been Madrid’s turn to play second fiddle in La Liga, forced to watch the Catalans claim the lion share of both domestic league and cup trophies, and become the aesthetic benchmark for how the game should be played.

From a financial perspective, El Clasico is a mammoth clash. On their own, Real Madrid ($4.24bn) and Barcelona ($4.0bn) are the second and third most valuable sports club brands on the planet, behind only the Dallas Cowboys. Their respective partnership deals, with Adidas and Nike, are amongst the most lucrative in the sport, whilst both clubs have spent more than $100m on a single transfer.

The game itself draws unparalleled amounts of income. Broadcast across 100 countries to a reported 400m audience, each match generates $42.5m in media value, according to research from Nielsen in 2017, of which television broadcast accounts for 60%. The rest comprises of shirt and player sponsorships, and pitch-side and on-screen advertising.

In an ever-growing online era, social media is starting to contribute more to match earnings. A recent report from France 24 states that, during the build-up to the fixture last season, video content published online relating to the match generated over 100m views; two million more impressions than the Super Bowl, widely seen as the biggest sporting event on the planet. Increasingly, commercial opportunities from social media are beginning to rival traditional sources of marketing income, including shirt sales and stadium megastores.

In addition, the knock-on effect El Clasico has on La Liga is clear to see, widening the reach and appeal of Spanish football across the globe. As Real Betis President, Ramón Alarcón, puts it: “Sometimes if you have a huge brand that is making the path for you, it has its advantages.”

Of the $1.52bn broadcasting rights pot that was distributed to La Liga teams for the 2017/18 season, 23% ($345m) of the budget was handed to the big two, enabling the clubs to purchase the likes of Frenkie De Jong and Eden Hazard, and provide Lionel Messi with an ever-larger contract.

Since the Spanish government implemented a collective bargaining and sale system, as well as a central-distribution system for the La Liga broadcasting rights, the income gap derived from broadcasting rights between the elite and smaller clubs has started to close. The new TV rights distribution model has ensured a more equal sharing of wealth, cutting the ratio from top to bottom teams from almost 8:1 in 2014/15 to 4:1 in 2016/17.

In June 2018, Telefonica won the bulk of the domestic broadcast rights for the 2019-2022 cycle for €2.940b in an auction that raised a total of €3.4b. Despite it only being four of the eight packages awarded, it represented a 15% increase on the previous cycle.

Simultaneously, La Liga renewed its contract with Mediapro for the sale of international broadcasting rights. This five-year deal which runs from 2019–2024 totalled €4.5b resulting in a 30% rise in international broadcasting rights over the last three-year period.

As Real Madrid and Barcelona have seen continued financial and sporting success, the fortunes of many of the La Liga’s 18 other clubs have also improved. Alongside Betis, city rivals Sevilla embarked on a first ever pre-season tour of the USA and have established four academies across the country in recent years, capitalising on the world-wide appeal of La Liga.

Barcelona’s inter-city rival, Espanyol, is looking further afield to China and the Far East. When they signed Chinese international Wu Lei earlier this year, an estimated 40m viewers tuned in from China to watch his debut against Vilarreal, compared to a domestic viewership of 177,000.

These figures represent unchartered territory for regional clubs such as Espanyol, who previously would have never dreamt of attaining so many followers in Asia and this evidence further attests to the impact Real Madrid and Barcelona’s success has in generating global commercial opportunities for other clubs in La Liga.

When the match is played on 18th December, Lionel Messi and Sergio Ramos will lead their respective teams out for what will be the 243rd El Clasico. For 90 minutes passion, ambition and drive will be the primary focus of the clubs, leaving the financial impact of the match on the side lines.

Tags: Football, Broadcasting rights, Sport

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