Real Madrid are one of the wealthiest sports clubs on the planet, with revenues in excess
of €700 million in 2019/20 despite the pandemic. And wealthy clubs have wealthy owners: Abramovich,
Sheikh Mansour, John Henry. But while Real’s flamboyant president Florentino Perez is the
club’s figurehead and public face, he’s not the owner.
But who actually does own Real Madrid?
The short answer is the socios. These are club members, and there are around 90,000
of them, each hold voting rights in return for paying an annual subscription of 123 Euros.
To become a socio, you have to be vouched for by two existing ones and if you have been
one for 50 years, you no longer have to pay dues.
As well as voting in presidential and board elections, socios get benefits around ticketing,
and the sense of being part of the fabric of the club.
There are only four socio-owned clubs in Spain: Real Madrid, Barcelona, CA Osasuna, and Athletic
Club. Every other club in Spain is an SAD, a Sociedad anonima deportiva, effectively
a limited company with specific governing rules because of their involvement in sport.
This stems back to 1990, when Spain passed a law that would have wide reaching implications
for club ownership.
This law forced Spanish sports clubs, not just football ones, to go public by June 1992.
The intention was to protect these clubs as institutions. Prior to that, pretty much every
club in Spain had been run by socios.
Going public was a measure to force clubs to be more accountable and ensure better governance.
But there was an exemption clause that Real Madrid and the other three clubs took advantage
of. The Seventh Additional Provision of the law states that any club who could show that
they had operated in profit in each of the five previous seasons, going back to 1985/86,
could remain as a socio-run club.
Only Real Madrid, Barcelona, Osasuna and Athletic could prove this and so they exercised their
right to remain exempt from Law 10/1990.
So what do socios actually do? Every four years, the socios elect a president, who then
runs the club for their tenure. But beyond that, the socios have limited influence. In
fact, they have none. And this is where things become a little more complicated. Being a
socio-run club entails certain rules and responsibilities for the president and the board of directors.
Real Madrid cannot raise funds the normal way that a publicly owned company can. They
cannot float or raise money by selling off shares, and must instead rely on their revenue.
As The Athletic’s Matt Slater explains, “They could put money in via increased subs,
or some kind of fundraising effort, but it would raise issues for FFP regulators”.
Instead, the club must rely on television rights, matchday and merchandising revenue,
and other commercial deals.
Now this isn’t normally a huge issue for Real Madrid or Barcelona. Both clubs dwarf
the rest of La Liga with their revenue streams. In fact, the combined revenues of Real and
Barca are almost as much as the rest of La Liga make together, around 1.5 billion.
Real made 757 million Euro in 2018/19 and that fell to 715 million in 2019/20. The biggest
decrease was in stadium revenue, obviously, while football wages increased to 378 million
Euro. Television revenue fell to 149 million Euro, but marketing and commercial revenue
actually increased to 312 million Euro. They also increased revenue from player sales.
This is how Real were able to post a slight post-tax profit of just over 300 thousand
Euro while most of Europe’s big clubs were haemorrhaging money.
The club can take on debt to finance wages or longer-term projects like the stadium renovation,
and this is generally done at favourable rates with local banks; the club also took out a
government loan due to the pandemic.
But, as The Athletic’s Dermot Corrigan puts it: “Madrid have to live off what they can
make.” This is why, with revenues down and no fresh injections of capital, the club are
falling behind the other behemoths of European football like Manchester City or PSG.
The president and board of directors also have a serious financial obligation. According
to the Seventh Additional Provision, directors must be able to provide 15% of annual turnover
in the form of a bank guarantee every season. This guarantee can be exercised as a liability
should the club find itself in an insurmountable financial crisis – either the directors
themselves, 5% of socios by vote, or the league itself can force this to be paid out by the
directors to save the club, should it ever come to that.
This means that in order to run as president, or to be appointed to the board, you have
to be very rich. Perez, Real Madrid’s current president, is the head of engineers and construction
company Grupo ACS and had a reported net worth of 2.3 billion Euro in 2018, according to
Forbes magazine.
And that’s one of the issues with socio ownership. Although, technically, the socios
can determine the club’s direction with their vote in the presidential elections,
after that, power is concentrated in the president’s hands and his or her board of directors for
four years. It creates a situation where only a certain wealthy elite can hold these positions,
because of the 15% rule.
And Perez, or other presidential hopefuls, can make all kinds of promises around player
signings and coaching appointments to win over voters. Fulfilling these promises, like
building the galactico eras at Real, costs lots of money and that’s money that must
come from revenue. So, it’s a tricky balancing act that demands a lot of political and financial
nous to get right, and one that clubs haven’t always navigated successfully. There can also
be a lack of the kind of financial oversight that comes from shareholder participation
and elections are often full of accusations of financial mismanagement. Socios get no
say beyond the presidency, either: decisions on signings, other investments, and commercial
deals sit solely with the board.
There are benefits to being a socio-owned club, though. Not being a publicly traded
company means that the clubs can benefit from not-for-profit status with banks, meaning
that loan arrangements are cheaper. Members feel that the club is closer to them, that
they have a stake and a voice in its running, however limited that might be. And the club
is preserved as an entity, assuming it’s run well, and cannot be dismantled or moved,
used to run up significant debts, or taken over by anyone with enough
money
to do so.