There’s no debating the enormous success of Real Madrid Football Club, both on and off the field.
Awarded ‘Best Club of the 20th Century’ by FIFA, winner of 13 European Cups, 7 FIFA Club World Cups, 33 LIGAS, and over fifty other cups in the last six decades, Real Madrid has won more trophies than any other sports team. Their players have consistently proven themselves to be some of the world’s best.
On the business side, Real Madrid was ranked best earning soccer team in the world according to the Deloitte Football Money League for 2017/18, and ranked the most valuable football club in the world by KPMG in 2019. This year, Barcelona has snuck in as the highest earner, but Real Madrid is still number 2 with earnings of €757m, and showing no signs of slowing down.
What exactly is it that makes this club such a titan when it comes to winning and earning?
We’ve looked at the latest analyses of Real Madrid’s success, and boiled it down to these 5 essential strategies.
Buying the Best Players
It might be hard to believe, but it wasn’t until the 1950s that Real Madrid began winning, and that happened when overseas talent was purchased by the club’s president, Santiago Bernabeu. Bernabeu’s mantra was “a star a year.” His decision to acquire household names like Alfredo Di Stefano, Hector Rial and Raymond Kopa in the 1950s led to an instant turnaround, and built the foundations for the club’s continued success.
Bernabeu’s strategy defined Real Madrid’s high-risk, high return approach to securing talent in the years to come.
Their policy of purchasing expensive, incredibly talented and famous foreign players was based off two business principals: firstly, high-profile players bring their massive audiences and celebrity status to the club, and secondly, winning games at all costs is essential to the club’s commercial success. Although this strategy tested the club’s finances in the 1990s, it proved effective overall.
In the last few decades, the club’s significant investments in superstar players like Ronaldo and David Beckham have continued to pay off, with these players adding significant value to the club. Even when they aren’t winning (and they usually are!), they still earn celebrity dollars for the club via guest appearances, advertising and sponsorship deals.
Real Madrid’s Commercial Director explained their strategy by comparing football to the movie industry, telling Financial Times:
“Real was a content provider – just like a Hollywood studio. So just as it was rational for a film studio to pay millions to get a box-office star like Tom Cruise in their movie, so it was rational for Real to pay huge amounts to sign Beckham or Zidane.”
Branding, Branding and Branding
Steven Mandis, Columbia Business School Professor and author of “The Real Madrid Way,” spent years investigating Real Madrid from a business perspective, trying to discover how it achieved such extraordinary success. He found that aligning the values and culture of fans with company branding and strategy was key.
Real Madrid built a community brand and identity into the core of it’s business model, placing the values of their fans into the center of everything it does, from player selection to merchandise partnerships. They effectively harnessed media, advertising and digital content to foster a sense of identity and belonging among their fans. They also branched out to reach new audiences, and have benefitted financially as a result.
“We are a football team, but we are also a brand and a company, not to mention a content provider. Being able to share things is important to our fans. And, always, the core thing is knowing our fans better and getting as much information about them as we can. Having this information benefits how we communicate with them, but also what we offer them, how we present our sponsors to them, and how we bring value to them.”
Innovative Management Strategy
In the 1990s, the soccer industry changed dramatically, and only the clubs with new and innovative business models would survive. Clubs had to develop new income streams, because of the limited seating capacity of stadiums and declining revenue from TV licensing.
Real Madrid implemented an innovative new model under the first Club President, Florentino Perez, during 2000 to 2006. His main aim was to make the club the “top sports firm in Europe,” turning it into a debt-free, profitable institution. The new strategy consisted of 5 pillars, according to business analysts:
- Restructure of internal organization into 3 areas: sporting, marketing and corporate-economic.
- Promotion of the Real Madrid brand worldwide.
- Recover assets that had earlier been sold.
- Development of new lines of business.
- Transformation of traditional supporters into effective customers.
This restructuring was highly effective, and the club saw it’s income rise from US$165.48 million in the 2000-2001 season, to US$331 million in the 2004- 2005 season.
Investing in Training
Of course, even with all the money for all the superstar players in the world, you can’t have success without good training. Real Madrid invests in some of the best coaches in the world, and their current head coach, Zinedine Zidane, holds the longest unbeaten streak in the history of Real Madrid, with 40 winning matches under his belt.
Not only do they hire the best coaches for their superstar teams, they also invest in ‘La Fábrica,’ their elite youth academy and player farm system, housed in the Ciudad Real Madrid training ground. In the 1980s, Real Madrid won five consecutive La Liga titles, two consecutive UEFA Cups and reached three consecutive UEFA Champions League semi-finals with a squad composed mostly of players formed at La Fábrica.
This training institution continues to produce winning players such as Achraf Hakimi, today.
Throughout the story of Real Madrid’s challenges and successes, there is one constant. Every good decision started with clever leadership. Santiago Bernabeu understood the earning potential of foreign talent, as early as the 1950s. It has been under the guidance of Florentino Perez’s presidency, that Real Madrid became the word’s richest professional football club, in the 21st Century.
In the sports industry, as in every other enterprise, innovation requires forward-thinking leadership. That’s a valuable lesson that other businesses can take, from the Real Madrid success story.
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