Steven G. Mandis

The Real Madrid Way


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rel="nofollow" href="#ulink_ff458218-a790-5f03-a7d6-8932bfd9595c">INTRODUCTION: LA DÉCIMA

      ON THE COOL EVENING of Saturday, May 24, 2014, Real Madrid’s soccer players walk onto the field for the 2014 UEFA Champions League final and look up at a screaming full-capacity crowd of 65,000 in Lisbon, Portugal’s Estádio da Luz (“Stadium of Light”). The world’s most watched annual sporting event is about to air in more than 200 countries, drawing an estimated global audience of 400 million viewers. (To put this into perspective, only an estimated 160 million people worldwide watched the 2014 Super Bowl, 114 million of them in the United States.) The Real Madrid players are dressed in their traditional gleaming white jerseys, the front of which are adorned with “Fly Emirates,” a Real Madrid sponsor’s logo. On the upper-left front of their jerseys, over their hearts, is the club’s famous emblem with a royal crown on top. On the upper-right front is the logo of Adidas, another Real Madrid sponsor. The crest on the left sleeve shows the number of European Cups won by Real Madrid. With the temperature hovering around fifty-nine degrees Fahrenheit, some of the players have chosen to wear long-sleeved jerseys.

      The tournament is referred to as the UEFA Champions League (previously known as the European Cup until it was renamed in 1992) because it is a tournament of the soccer teams that finish in the top few teams of their country’s respective soccer leagues. Real Madrid had last won the competition—their ninth title—in 2002. After over a decade of chasing La Décima (“the tenth”), Real Madrid is ninety minutes away from realizing that goal. Their opponent in the final is cross-city rival Atlético Madrid, wearing their traditional red-and-white striped jerseys. There had been two teams from the same country in the Champions League finals before, but there had never been a Champions League final between two teams from the same city. There was such high demand from Real Madrid’s club members for the tickets the club was allocated by UEFA that the team had to award the tickets by means of a draw. In addition, Real Madrid sold out its 81,044-capacity home-city stadium, Bernabéu Stadium, to Madridistas (a nickname for people who support Real Madrid) to watch the game on big screens.

      With a tenth European trophy for Real Madrid or a first for Atlético Madrid at stake, the Madrid versus Madrid battle for the title of best team in Europe—which generally translates as the best team in the world—is historically earth-shattering even before the prime-time kickoff.

      Real Madrid’s team of galácticos consists of amazing star players, including Portuguese forward Cristiano Ronaldo,8 who is considered one of the two greatest soccer players in the world (along with Argentine forward Lionel Messi, who plays for rival club Barcelona). Ronaldo’s jersey number is 7, and he is sometimes referred to as CR7. During the 2013–14 season, Ronaldo had truly established himself as one of Real Madrid’s contemporary icons, along with previous galácticos like Zinedine Zidane, Raúl González, and Luís Figo. Ronaldo finished at the top of the Spanish La Liga season’s goal-scorers list with fifty-one goals in forty-seven games—more than one goal per game average is an astonishing statistic. Though it is often overlooked, Ronaldo also contributed nine assists that season to add to his impressive stats. Beyond his good looks, his sculpted body reflects the incredible winning mentality and hard work that he puts into striving to be the best and to set an example for his teammates.

      Ronaldo has a fearsome scoring partnership with Welsh winger Gareth Bale and French striker Karim Benzema. Benzema joined Real Madrid in July 2009, one month after Ronaldo, when Real Madrid paid a €35 million ($49 million) transfer fee to French team Lyon, with the fee rising to as much as €41 million ($57 million) including incentives. Before the 2013–14 season started, Real Madrid had paid English team Tottenham €91 million ($120 million) for Bale. The three star players were nicknamed the “BBC” by the Spanish media—for Bale, Benzema, and Cristiano.

      The starting lineup of the Real Madrid team that won the 2014 Champions League final. Back row (left to right): Casillas, Ramos, Varane, Khedira, Benzema, Ronaldo. Front row: Di María, Bale, Coentrão, Carvajal, Modrić.

      Despite the perception that Madrid simply buys its star players, the goalkeeper for this epic game is Spaniard Iker Casillas, who started his career at the age of eleven in Real Madrid’s youth academy, which is sometimes referred to as La Fábrica (“The Factory”). In 1999, at age eighteen, he was promoted to the first team.9 As the longest-serving member on the team, Casillas was automatically appointed captain during the 2010–11 season. As a product of the Real Madrid development academy, he knew and exemplified the ethos of Real Madrid. In fact seven out of the twenty-five players (28 percent) on the first team in the finals are graduates of the academy. Together they share the spirit, expectations, history, and essence of Real Madrid with the new players.

      Real Madrid’s coach that season, Carlo Ancelotti, is well suited to manage their superstars, not only because of his calm temperament on and off the field but also because of the respect he commands as a former star player and winning coach. Ancelotti likes to stretch the game and take advantage of open spaces, but Atlético’s coach, Diego Simeone, has proven enough times that he is a tactical genius and will not be overwhelmed by the occasion.

      The media has marketed the game as David vs. Goliath. Real Madrid generated €550 million ($726 million) in revenue during the year, compared to Atlético’s €170 million ($224 million). Real Madrid paid their players an average of $7.6 million compared to Atlético’s $2.6 million. Real Madrid has a powerhouse balance sheet, probably one of the strongest in all of sports, while Atlético had such serious debt problems three years prior that they fell behind in their tax payments. Although any link between winning in sports and profitability has been disproven in several studies (see sidebar below), the media has been speculating that an Atlético win would increase the value of their brand and profitability. The media seems to have forgotten that, after winning the Champions League in May 1998 and May 2000, Real Madrid was close to bankruptcy by 2000.

      Simon Kuper, writer for the Financial Times, and Stefan Szymanski, former professor of economics and current professor of sports management at the University of Michigan, made the argument in chapter three of their book Soccernomics (New York: Nation Books, 2009) that most soccer teams lose money. According to the authors, the buyers of soccer teams are wrong if they assume that if they can get their teams to win trophies, profits will inevitably follow. The authors analyzed the Premier League from 1992–93 to 2011–12 and discovered that even the best teams seldom generate profits. They also detailed how unprofitable the overall industry is. In addition, they showed that there was little correlation between success on the field and making money. Instead, Kuper and Szymanski found that most teams didn’t care about profits. They were spending what they believed it took to win games. The majority of teams even paid players more money than they had or could produce, so the teams would borrow money, and most had a precarious amount of debt.

      In a 2008 unpublished MBA thesis at Judge Business School in Cambridge, Francisco Cutiño showed that winning games doesn’t necessarily help soccer teams make profits. Rather, the effect works the other way. If a team finds new revenues, those revenues can help them win games because they can help buy/retain better players:

       But contrary to the common idea that good [on-field] performance will drive good financials, there is evidence that better revenue-generating structures can have a significant impact in the performance of the team . . . only with good financial results clubs can buy and retain good players and create good teams.

      Therefore, a team should develop a sustainable economic-sport model to make profits to buy/retain better players, which leads to better results.

      In Winners and Losers: The Business Strategy of Football (New York: Viking, 1999), Szymanski and researcher Tim Kuypers analyzed ten years of the English Premier League (1990–99) and discovered that the one variable with the highest correlation to winning is: the teams that pay the highest salaries for the best players win the most often. It probably doesn’t take a lot of classes on data analytics