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Rise of the Nuevo Galacticos

I'm gone for a couple of days having contracted some sort of virus, no it was not swine flu, and an orgy of spending breaks out in the world of soccer and strange doings going on in hockey. Just goes to show, you never know what is going to happen next in the sports world. First, the orgy of spending, which so far has been confined to one man and one club, but with those millions of euros changing hands, more is sure to come.

Florentino Perez just recently took the reins back as the President of Real Madrid, having been elected promising a return to glory. Archrival Barca scored a treble this past season, winning La Liga, the Copa del Rey and the Champions League. Real Madrid fans could not hide their disappointment nor their desire for a change in the way their club operated. Enter, or rather re-enter Perez, who, when he last ran the club from 2000-2006, initiated the Galacticos by signing Zinedine Zidane, Luis Figo, Michael Owen, Ronaldo and David Beckham. He paid the the then highest transfer fee on record in compiling talent and did not allow Real's debt to deter him. That debt however, did prove to be so expensive that he had to sell the club's training field to pay for it. The original Galacticos were conceived by Perez to be more of an economic project than a football one and in that they were successful. The club grew to be the top grossing club in the world even as the parts failed to mesh successfully on the pitch.

He now appears to be replicating the strategy although with lessons learned from the original run: that the players must also fit together strategically from a playing standpoint and not just a marketing one. In little more than ten days time, he has paid out a reported 68 million euro transfer fee to AC Milan for Kaka followed closely by the record fee of $131 million to Manchester United for Cristiano Ronaldo. That sum was sufficient to cause the public debt of Man U to rise to 85 bid from the low 80s in which it had been infrequently trading. Man U is heavily indebted due to the debt incurred when the Glazer family bought the club several years ago. While there had been concern that all of the transfer fee would go to pay down that debt, Sir Alex has been given an 80 million pound pot to seek new talent. On the other hand, Real Madrid is tapping a credit line Perez established immediately upon taking office and is not done with its acquisitions.

While the moves were not unexpected, the scale of the transfer fees involved I think dwarfs what anyone would have thought likely before transfer season arrived. In the midst of the Great Recession, it is a bit unseemly for soccer clubs to be spending unbelievable sums for essentially the rights to negotiate with players, although we all know the player negotiations have already been concluded before the transfer fee negotiations are finalized. Fans understand that athletes make millions and to some extent that's fine, but these exorbitant amounts just don't go down that easily.

Full post as published by Sports Biz on June 12, 2009 (boomark / email).