Jose Mourinho: A Model for Business Management?

“The Way Mourinho Manages” – Wall Street Journal, 06-02-2010

Many may not know that Jose Mourinho, the incoming manager for Real Madrid, is known for being methodical.  From his training preparation, exhaustive notes and ability to connect on a deeper level with his players beyond the pitch.  What can a business executive learn from him?

Player Wages is Largest Contributor to La Liga Being Billions in Debt

“La Liga in debt to the tune of €3.53bn – report” – ESPN Soccernet, 05-20-2010

According to a study by University of Barcelona professor Jose Maria Gay, 85% of La Liga clubs’ debt is the result of player wages.  Only Barcelona, Real Madrid and Numancia reported an operating profit.  Meanwhile, Real Mallorca, which is €85 million in debt, recently filed for voluntary administration.  Professor Jose Maria Gay believes Barcelona and Real Madrid will have to make short-term sacrifices to improve the league’s long-term financial situation.

Soccer Places Three Teams in Top Five of Most Valuable Brands

“The Most Valuable Sports Team Brands” – Forbes, 05-18-2010

In Forbes’ third sports team brand value installment, the publication values Manchester United, which comes in at #2, at $285 million due to their four-year, $130 million shirt sponsorship with AON, their deal with Nike and their estimated global fan base of 333 million followers.  Real Madrid, which ranks third with a brand value of $240 million, benefits from their $1.4 billion, seven-year television deal, the largest for any professional sports team.  And Barcelona, ranked fifth with $180 million, has increased its value by 6% by winning major domestic and international competitions, and expansion of their stadium, Camp Nou, the largest one in Europe.

Individual Television Bargaining in Spain Has Created Financial and Competitive Gap

“Spanish Teams Eye Breakaway” – Wall Street Journal, 05-12-2010

Of the 20 teams in the Primera League, 15, including Barcelona and Real Madrid, have agreed to further discussion around breaking away from the Segunda Division.  While this is similar to the organizational structure in England and soon-to-be in Italy, many believe this is more about distribution of television revenue. 

Spain, which negotiates television deals individually by club, has witnessed a huge gap between the top two teams, Barcelona and Real Madrid, and the rest of the league.  The third place team, Valencia, is 28 points behind the leaders, but much closer in points to the 15th place team.  Barcelona and Real Madrid collect around half of the €520 million the league generates annually in television revenue.

Real Madrid, Barcelona and Chelsea Rank in Top 5 Highest-Paid Sports Teams

“The 10 highest-paid sports teams in the world” – Yahoo! Sports, 03-29-2010

In a list provided by the Annual Review of Global Sports Strategies, Real Madrid, Barcelona and Chelsea rank #2, #3, and #4, respectively, by salary amongst the world’s professional sports teams.  MLB’s New York Yankees came in first and the NBA’s Dallas Mavericks in fifth.  All data is from the 2008-09 season.

According to Subtraction.com, the Yankees generated $375 million in revenue in 2008.  According to Deloitte’s Football Money League 2010, Real Madrid generated in excess of €400m during the 2008-09 season.

Thanks to A.B. for the heads-up.

EPL Profits Will Go Overseas When Financial Fair Play Sets In

“Super-rich owners should feel in debt to Uefa over finances” – Times Online, 03-29-2010

The Times applauds the effort by Michel Platini and UEFA to regulate European soccer.  They agree the game is “still woefully underregulated” and American and other foreign owners will benefit from the proposed changes.  The opinion piece argues for slow, sustainable growth and the maintaining of television revenue sharing, rather than the independently negotiated contracts in La Liga, which benefit Real Madrid and Barcelona.

What Yesterday’s Loss Means in Financial Terms for Real Madrid

No doubt, the UEFA Champions League is big money.  The final game in 2010 is set to be played on May 22^nd in Real Madrid’s prestigious Bernabeu Stadium.  Real Madrid and club president Florentino Perez had high hopes of playing in front of a raucous home crowd in the championship game.

In 2008, Sportbusiness.com noted that research commissioned by MasterCard showed the winner of the 2009 Champions League was set to make around €110.35million.  FC Barcelona’s championship run last year was one of the reasons it made the jump to second on Deloitte’s 2010 Football Money League “Rich List.”  MasterCard’s research went on to state that any team that advanced out of group play to the Round of 16, the stage we are currently in, made on average €38.45million.  These amounts are determined by:

• UEFA participation payment
• UEFA prize money
• Share of UEFA commercial revenues from the tournament
• Ticket sales
• Commercial and marketing revenues
• Increased squad value

Not including revenue generated from Real Madrid’s home match against Olympique Lyonnais yesterday and revenue for hosting the upcoming championship game in May, back of the envelope math reveals that Real Madrid’s 1-2 defeat on aggregate means they will miss out on around €70million in potential revenue had they been able to reach and win the final game.  That revenue loss is probably much more because of Real Madrid’s massive international following.

A win could have gone a long way in paying down the €327million in reported debt.  MBA Soccer wonders if Argentinean international Gonzalo Higuain realized as much when he hit the near post in the 25^th minute.  Had Higuain scored, that would have put Real Madrid up 2-0 in the game, 2-1 on aggregate, and a couple million euros in the bank.

How Much in the Red are Real Madrid and other European Clubs?

“Who will be Europe’s first major football financial failure?” – BBC, 03-09-2010

Spain-based Phil Minshull of the BBC wrote a great piece on other clubs throughout Europe that are in the same financial situation as many of the English Premier League clubs coping with high debt burdens.  Minshull reports that some analysts believe Real Madrid’s debt may be higher 80% higher than the €327m reported earlier.  And in Italy, there’s a belief that a number of clubs are also not providing accurate numbers. 

Interestingly enough, Minshull and a couple of his friends are trying to predict which major European club will be the first to fail financially.

Deloitte’s Sports Business Group Issues 2010 Highest Earning Clubs Rankings

Deloitte's Football Money League Report

“United drop in rich list; Real top list with Barca in Second” – Sky Sports, 03-02-2010

The Deloitte Sports Business Group, based in Manchester, UK, announced their annual Football Money League report.  Spanish league powerhouses Real Madrid and Barcelona rank #1 and #2 as soccer’s top revenue earning clubs.  Real Madrid had revenues in excess of €400 million during the 2008/09 season.

Thank you to A.B. at Baylor for catching this item.

Soccernomics is Wrong: Spain does Underachieve

MBA Soccer just finished reading Simon Kuper and Stefan Szymanski’s book Soccernomics, an interesting, data-driven take on why soccer clubs don’t (and shouldn’t) make money, the game theory behind a penalty kick shootout, and a critique of fan (consumer) loyalty, amongst many other thought-provoking subjects.  MBA Soccer highly suggests you buy or borrow a copy.

That said, a number of the authors’ findings seemed like a bit of stretch.  The one, though, that really stuck in MBA Soccer’s craw was the explanation that the Spanish national soccer team has actually overachieved, not “notoriously underachieved” as so many Spanish nationalist and average soccer fans have assumed for decades.  This can’t possibly be true, can it?

Kuper is noted as one of the world’s leading writers on soccer.  Szymanski is a renowned sports economist and the MBA Dean of the Cass School of Business in London.  MBA Soccer is a revolving set of hack MBA students occasionally writing and reporting on the business of soccer.  The odds of MBA Soccer proving Kuper and Szymanski wrong on the subject of soccer are small to none, but that’s not going to deter us from trying—or hoping that someone reading this is much smarter and will dig deeper to prove us right.

To determine a country’s chance of success against an opponent, Kuper and Szymanski use three key data points: income per head, total population and international experience.  The more average income per person, the better; the larger the population of the country, the better; and the more games played against other countries, the better.  Taking these three factors into account when comparing two countries and employing the powers of regression, Kuper and Szymanksi are able to come up with the expected goal differential of an international match.  Focusing on 1980-2001, this is what they had to say, contrary to public opinion, about the overachievement of the Spanish national team:

“Everyone instinctively benchmarks the Spanish team against Germany, Italy, and France, but that’s unfair.  Spain is a much smaller country, and though its economy has been catching up fast, it’s still significantly poorer.  Consider, for instance, Spain’s record against Italy in the twenty-two years.  Over the period Spain’s population, income per head and international experience were on average about 30 percent inferior to Italy’s.  Given that, we would have expected Spain’s goal difference to be about minus two over its four games against Italy.  Instead, Spain overachieved, notching a win, two ties, and a defeat with a goal difference of zero.” (pg. 282)

 C’mon now, “30 percent inferior” to Italy . . .?  Spain is a country rich with soccer history.  While Spain’s population is small, their domestic league, La Liga, ranks as one of the best, if not the best, with Real Madrid and FC Barcelona consistently dominating European club competition.  Their national players are getting the best experience day in and day out.  So, how about we consider when Spain isn’t considered “30 percent inferior,” but rather the superior team in a game?

At the 1982 World Cup in Spain—yes, in Spain—the home side tied Honduras, 1-1, and lost to Northern Ireland, 0-1, in group play.  At the 1986 World Cup, Spain lost on penalties to Belgium in the quarterfinals.  At the 1994 World Cup, Spain tied the Korea Republic, 2-2, in group play.  And, at the 1998 World Cup, Spain lost to Nigeria, 2-3, and tied Paraguay, 0-0. 

Using the Kuper-Szymanski Model, Spain should have had a better goal differential against those teams based on the following factors: 

Honduras – income, population and experience

Northern Ireland – income, population and experience

Belgium – population and experience

Korea Republic – income and experience

Nigeria – income and experience

Paraguay – income, population and experience

 True, these are one-off games but, simply put, from 1980-2001, Spain consistently choked in important matches.  Good teams find a way to dominate these games.  Go ahead and employ all of the statistical models you want, but the World Cup and other major competitions have a habit of getting the better of teams like Spain (also see the Dutch).

 After telling a friend from Spain that Kuper and Szymanski believe the Spanish team overachieves, the friend laughed, and said, “Only the English would be silly enough to think that.  They also probably think they’ll beat the U.S in South Africa.”

 Yes, South Africa . . .