Richard Gillison how Ronaldo's purchase will help Real to sell more jerseys in Malaysia, China and South Korea.
WHAT DO you get for €94 million? Cristiano Ronaldo’s transfer from Manchester United to Real Madrid sets a world record and tells us much about how football works.
"Don't try to make it out to be a science, because it isn't," one leading football agent told The Irish Times, referring to the scale of the deal. "Manchester United have thought of a figure, said 'pay it or forget it, you have 24 hours to do the deal'. And Real have come back and said 'yes'."
However, the bet taken by Real Madrid is that the commercial benefits of buying Ronaldo outweigh the enormous cost in transfer fee and wages. Like houses, player transfer values at the top end of the market are based on rough comparables, deals of similar stature which form a price guide. In this way, Real Madrid’s accountants will have done some number-crunching in terms of the return they received from shirt sales and other merchandise off Luis Figo, Zinedine Zidane and David Beckham.
This point was made by newly elected Real president Florentino Perez in a recent interview, when he said: “We have to make up for lost time. When Beckham came we went from earning €7 million a year to €45 million a year through deals with our sponsors. We salvaged the situation of the club.
“If Cristiano Ronaldo comes, even though Nike currently sponsors him, he then puts on an Adidas shirt every week. There are certain players who are very profitable because they have spectacular commercial repercussions that earn the club money. We once earned €15 million for two games in Japan.
“Now they would not pay that, but in that era we had Figo, Zidane, Ronaldo and Beckham.”
Real’s current price to play a pre-season friendly is around €2 million, according to sources in the game, and the club is expected to increase the amount of games it plays as a result of Ronaldo and Kaka’s arrival in Madrid.
Although a major star in footballing terms, Ronaldo’s marketing appeal pales when put against Beckham’s. When the England star moved from Real to Major League Soccer in 2007, the league revealed that 300,000 Los Angeles Galaxy replica jerseys were sold in a year, three or four times the number of the biggest basketball or baseball stars in the US and more than any other Adidas shirt sold in the world that year.
However, Beckham’s appeal went far beyond football fans, and it is here one of several question marks hovers over Real’s ability to make back its €94 million.
In return for the fee and wages, Real Madrid is likely to have obtained a 50 per cent share of the player’s image rights, meaning it will get half of any deal his agents negotiate. Currently, the Portuguese has three personal sponsors: Nike (for which he is paid between €3.5-€5.9 million; Castrol Performance motor oil (€2.3 million); and Socceraid, a sports drink company in which he has a shareholding.
Significantly, his agent, George Mendes, recently joined forces with the Hollywood agency Creative Artists (CAA), which will add to his commercial clout in the US.
The Hollywood hook-up is appropriate. In commercial terms, Ronaldo has more in common with film actors such as George Clooney and Brad Pitt than he does with Ryan Giggs or Carlos Tevez. There is increasing evidence that football fans in markets outside of Europe, in the US or Far East for example, follow the player, not the team, and this shift in power is a major factor in the size of the contract.
“Twenty years ago the club told the player what to do, it was a master-servant relationship,” says top London sports lawyer Nic Couchman, of Couchman Harrington, an image rights specialist. “That has changed fundamentally because of money and because of the power that money and global television exposure gives to the player. Laws supporting free-agency have proliferated and players have generally become more tuned in to what the commercial entitlements might be.”
To maximise its income from Ronaldo, Real Madrid will focus its attention on increasing the amount of money it makes from countries such as China, Malaysia and South Korea. According to Simon Chadwick, professor of sports business strategy at Coventry University, the club makes just five per cent of its income from outside Europe.
“The European market is saturated, so overseas sales of shirts and merchandise will be critical,” says Chadwick.
But, he says, this will not be easy. People in countries such as China or Japan are not “cradle to grave” fans of European clubs, and in this way the choice to support Manchester United or Real Madrid is a consumption decision, in the same way as buying an Apple computer or Chanel perfume. “Football is a lifestyle product outside Europe,” says Chadwick.
Their allegiances change from season to season, depending on which club is successful.
The other major roadblock to exploiting this market is the amount of counterfeit merchandise available at a fraction of the price of the real thing. A Manchester United shirt in a Beijing market costs less than €5, compared to €65 for the official version.
These are figures that will alarm Real Madrid’s accountants, but not its fans, for whom the purchase of the World Player of the Year is a statement of intent from the club’s new regime.
As one agent told The Irish Times: "This is a political deal, not a football one."
