When times get tough, brands endure.
By snapping up two of the world’s best – Kaka (£56 million) and Ronaldo (£80 million) – Real Madrid’s Florentino Perez has broken the bank in his quest to build Galacticos 2.0.
And he’s not done yet. Watch for David Villa, Xabi Alonso, and Franck Ribéry.
The costliest players are often the cheapest, said Perez, and he’s right. Here’s why.
The top teams get 90% of the attention and take home 90% of the profits. When money is scarce, even advertising budgets get cut. So if you are going to advertise, who will you spend your money with? The big boys, of course.
So is Cristiano Ronaldo the highest paid T-shirt salesman in the world?
He will be.
Let’s look at history. When Beckham came to Madrid, he tripled shirt sales – from under a million to over 3 million. At £40 a shirt, that adds up. And that’s just a small slice of the revenue pie. So what happens when Kaka sells two million and CR7 another three million?
The secret ingredient is Adidas. Although the numbers are confidential, SoccerBlog guesstimates that adidas has a deal with Real Madrid that’s up at the level of £500 million for five years. Just a guess, of course, but it’s based on what happened earlier with Beckham.
And with Ronaldo, Adidas also gets to disrupt Nike’s deal with Manchester United. Talk about having and eating your cake!
Add another £200 million or so for TV rights, and now you start seeing the economics.
And that, dear readers, is a quick glimpse at the business model for football in recessionary times. Perez will make money for Real. What will be more interesting is if he can start winning as well.
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