Soccer Stars Versus Solid Team Investment
February 25, 2004
Bayern Munich's coach had hoped for snow, and lot's of it. That would have evened up the chances for the German team when it faced off against Real Madrid for the most prestigious soccer competition on the continent. But the weather gods couldn't be persuaded to postpone the Champions League knock-out match between the four-time winner from Bavaria and the nine-time champ from Spain, and so the battered German eleven took to the pitch on Tuesday evening and hoped for the best.
Earlier in the week, Bayern's chairman Karl-Heinz Rummenigge gave the team a 10 percent chance of beating Real, but as the match approached, he whittled it down and said he had been too optimistic. With star players like Ronaldo, Zidane and Beckham, Munich's Kahn and co. stood little chance of coming out victorious.
When the teams, arguably two of Europe's traditional powerhouses, entered Munich's Olympic Stadium, more than just a game of ball was at stake. It was a battle of giants. In 2001 Bayern Munich took home the Champions cup and in 2002 Real Madrid stole it back. The Germans had a lot riding on the match especially after enduring a painful downwards spiral in the national Bundesliga this past year, but for many in the business, the real meaning of the game had little to do with who came out winner.
Money makes the ball go round
"In the end it's all about money," Bayern Munich manager Uli Hoeneß said in an interview with the Frankfurter Allgemeine Zeitung on Tuesday. In an era when soccer has moved beyond the stadium and onto the stock exchange floor and once lucrative television rights have shriveled up, both teams are focusing steadily on the bottom line. But that's where the likeness ends. Whereas Bayern adheres to the old school of turning a profit through sports wins, Real sets its stakes on marketing and global branding.
"Soccer is going the way of commerce and globalization," Real Madrid's sports director Jorge Valdano said, explaining his team's business philosophy in the Munich-based Süddeutsche Zeitung Magazin. With some pride he added that his team is moving faster in that direction than others.
"One of the characteristics of Real Madrid is to always be ahead of the times," he said. And the times dictate expensive player transfers: David Beckham for 35 million euros last year, Ronaldo for 47 million euros a year before, and Zidane for a record-breaking 75 million two years ago.
That's money well spent, according to the sports director. The players are the stars; they're the reason for the sold-out stadiums and the devout fan following. They're also the team's ticket to financial success. On Beckham's first day with Real Madrid more than 8,000 jersey's with his number 23 sold out at €63 a piece. A tour of Asia just after his signing brought in another €8 million. That's cash the team can use to pad its €270 million annual budget -- the biggest in Europe.
"We sell more tickets, do more tours and sign on more advertisers than competitors," said Valdano. And that all has resulted in the wealthiest, most modern soccer team in the world. Real Madrid is a global brand unlike any team before it.
Profits before sports?
For Munich's Hoeneß, Real Madrid's ticket to success hasn't paid off yet. "The real test is when economic wins parallel the team's sports wins," he said acknowledging the Spaniards prowess on the pitch. But he isn't convinced hefty investment in players like Zidane pay off in the long run. For the cost of one of Real's star players, Munich could pay for four or five.
"Unlike others, we're not ready to go into debt for a new player," he told the Frankfurt paper. Munich's business philosophy is firmly grounded in the notion of building sports successes on sound financial footing. "Real has only started pulling itself out of debt now that fame is kicking in,"the German manager recalled, and added that things could change quickly if the team doesn't continue its successes, or if one of the stars is benched for a season.
In fact, so far only Beckham's transfer has proved profitable, generating a kick-back well beyond the initial investment. Ronaldo and Zidane haven't turned a profit yet, Hoeneß pointed out. For the German team, that's reason enough to hold back on luring star players to the Bavarian capital, even if they would help turn the team around on the pitch.
Rather than focus on one or two big names, Bayern is working to build up an across-the-board team and bring in new talents. "We need young players, who are hungry and ready to work hard," Hoeneß said.
Even if, such an approach doesn't lead to the winner's circle, in the long run, the Bayern manager believes such a conservative financial strategy will pay off not only in goals but also in profits. "If not, than I'll pack my bags and leave."