Spanish League Consolidates TV Rights, Orders Clubs to Slash Debts

Liga BBVA

Liga BBVA

This shouldn’t come as a surprise to anyone who’s followed La Liga (Liga BBVA) over the last few years, but Spanish soccer has been slowly killing itself. Just as recent times have seen the country’s economy suffer from a mounting debt burden that has crippled growth and spurred unemployment, so have many of Spain’s professional soccer teams dug themselves into precarious financial situations that have threatened to wipe them off the map.

Yet besides gross mismanagement and reckless organizational planning (be it a faux riche benefactor from the Middle East who isn’t as loaded as he claims, or attempting to build a brand new stadium while your club’s debt completely swallows its value), one of the major reasons why many Spanish clubs are bleeding dry is the economic inequality brought about by how they negotiate their broadcast television rights.

Unlike the Premier League, Serie A, Bundesliga and Ligue 1, as well as the four major North American professional sports leagues (NFL, NBA, MLB, NHL), La Liga is unique in that its clubs negotiate their TV deals individually. This structure works for some clubs in Spain — well, two clubs, really. Real Madrid and Barcelona, two global institutions with enormous worldwide followings, each reportedly earn in excess of $180 million annually from TV deals they negotiated themselves.

But compare such figures to those earned by the third-best team in La Liga last season, Atletico Madrid. Atletico received roughly a third of that amount ($61 million) from its own TV deal. From there, it only gets more depressing as the teams get smaller; though Rayo Vallecano finished eighth in the league last season, they could only muster about $18 million in television revenues, while 15th-placed Grenada earned less than $16 million. For comparison, Lionel Messi allegedly owes the Spanish government more in back taxes.

Which is why it was promising to read this week that the Spanish government will push for a new law by the end of the year that will transfer control of clubs’ television rights to the Liga de Futbol Profesional, requiring teams to adhere to a shared revenue structure more closely in line with their European counterparts. The government is also working with the LFP to institute austerity measures that aim to cut the total debts of Spain’s professional teams by $1.3 billion by 2016, ordering the 42 clubs in the Primera and Segunda divisions to slash their collective budgets by $130 million next season. It’s a long-overdue move that can only increase the overall health and competitiveness of one of the world’s most prestigious championships, which has been absolutely dominated, both on and off the field, by the hegemony of Real and Barca.

The Premier League is the prime example of the economic benefits of television revenue sharing amongst soccer clubs. The league has capitalized on its status as the most popular in the world to implement a financial framework that sees even relegation-bound clubs reap huge rewards from its TV deal. This past year, Queens Park Rangers, who will play in the Championship next season after being relegated, earned almost as much in TV revenue as Bayern Munich and Borussia Dortmund combined. That sort of compensation will only increase as the Premier League expects to rake in over $8 billion in television revenue alone over the next three years.

Some might consider the Spanish government’s reforms intrusive and motivated by tax revenue, with the country’s Secretary of State for Sport, Miguel Cardenal, stating that “the centralization [of TV rights] would let the public administrations be the first to get paid.” With all the publicity surrounding Messi’s tax case, it does appear as though the authorities are now clamping down on an era of unregulated finances in the game, and perhaps excessively so.

But when your top tier sides are getting disqualified from European competition for not paying their bills on time and the future solvency of your entire league is being questioned, you know it’s probably time for a change. While the past five years have witnessed unparalleled dominance by the Spanish national team, with Spanish-born players considered prized assets across Europe’s top leagues, Spain’s clubs have been teetering on the brink for far too long. The hope is that these reforms will usher in a new era of financial sustainability in the Spanish game — one that provides the Rayo Vallecanos and Celta de Vigos of the world with a solid economic foundation from which they can grow and compete.

What do you think about Liga BBVA’s restructuring of TV rights? Let us know in the comments section below or on Facebook and Twitter.

Reporting on the business side of the world's game.