On Wednesday 4th August, Spain’s LaLiga announced that they had reached an agreement in principle with a private equity and investment advisory firm, CVC Capital Partners. The strategic agreement called “Boost LaLiga,” ensures a €2.7 billion cash injection into the competition and it’ clubs in exchange for 10 percent of its revenue and a 10 percent stake in most of its business. Ninety percent of the investment will be going to the 42 clubs combined in Primera and Segunda División, including women’s football, semi-professional and non-professional football. The deal values LaLiga at around €24.25bn, it said.
“The partnership is designed to promote the global growth of LaLiga and the clubs as part of its strategy to become a leading global player in the digital entertainment market.” LaLiga’s official statement read.
Press release: #LaLiga announces an agreement in principle with CVC that will inject 2.7 billion euros into the competition and its clubs.
— LaLiga English (@LaLigaEN) August 4, 2021
The deal comes only three months after 12 of the largest European clubs, including LaLiga’s Atlético Madrid, FC Barcelona, and Real Madrid, attempted to form a breakaway competition, the European Super League, to obtain lucrative profits cash injections. It rapidly collapsed after a massive backlash from fans, players, and even governments, and the nine of twelve founding clubs withdrew, excluding Real Madrid, Juventus, and FC Barcelona.
Football clubs worldwide have struggled for revenues in the last 18 months due to the coronavirus pandemic, with fans abandoned mainly from the stadiums and competitions disrupted. This agreement aims to lead the transformation currently experienced in the global entertainment sector and maximize every growth opportunity available to the clubs to develop a new business model that will allow them to diversify and maximize revenues through marketing models that will help accelerate their digital transformation. According to La Liga’s statement, the money has to be used to improve sports strategy, international development, brand development, infrastructure, communication strategy, technology and data, and content development on digital platforms and social networking. LaLiga will maintain control over sporting issues as well as management of the sale of television rights.
CVC already has significant interests in sport, including a deal in March to inject £365m in rugby’s annual Six Nations tournament between the top European nations. It has also been involved in volleyball, tennis, MotoGP, and Formula One. Albeit, earlier CVC failed to make a similar deal with Serie A as its top clubs opposed it.
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Why are Real Madrid and FC Barcelona opposing it?
Real Madrid’s stand
A Real Madrid statement earlier on Thursday read: “This agreement was reached without the involvement or knowledge of Real Madrid and today, for the first time, La Liga has given us limited access to the terms of the agreement.
“The clubs have signed over their audiovisual rights exclusively for their sale on a competitive basis for a period of three years. This agreement, by way of a misleading structure, expropriates 10.95% of the clubs’ audiovisual rights for the next 50 years, in breach of the law.
“The negotiation was carried out without competitive proceedings and the financial conditions agreed with CVC Capital Partners give them annual returns of over 20%. This opportunistic fund is the same which tried and failed to reach similar agreements with the Italian and German leagues.
“Real Madrid cannot support a venture which hands the future of 42 Primera and Segunda División clubs over to a group of investors, not to mention the future of those clubs who qualify over the next 50 years. “Real Madrid will convene the Assembly of Representative Members to debate the agreement and discuss the significant loss of equity, unprecedented in our 119-year history.”
FC Barcelona’s stand
“FC Barcelona considers that the operation that has been announced has not been sufficiently discussed with the clubs (the owners of the TV rights); that the amount is not congruent with the years of duration, and the deal affects part of all clubs’ audiovisual rights for the next 50 years,” a Barca statement read.
“The terms of the contract that La Liga is describing condemn Barcelona’s future with regard to broadcasting rights. FC Barcelona wishes to express its surprise at an agreement driven by La Liga in which the teams’ opinions, including those of FC Barcelona, have not been taken into account.
“There has not even been a presentation of options offered by other competitors in order to evaluate the pros and cons in a post-pandemic situation in which there are still many questions that are left unanswered.”
Although, Real Madrid and Barcelona are also facing financial difficulties, with Barcelona having to miss out on their most outstanding player ever, Lionel Messi, because they could not afford his wages as per LaLiga’s Financial Fair Play rules. But they still oppose this deal because they think it is bound to harm the supergiants in the long run.
Both the clubs think the deal is disproportionate, and CVC is getting away with a steal. Barcelona and Real Madrid generate the most money in LaLiga, and they believe CVC will get too much of the revenue generated.
Real Madrid and Barcelona remain adamant to the European Super League idea. Their Presidents think this is the only solution for sustenance in the sports entertainment market.
Both the clubs expressed their anger at not being presented with the terms and conditions of this deal before LaLiga executed it. The Spanish football league’s executive committee approved the planned CVC deal on 4th August. The committee includes the bosses of Atletico Madrid and Sevilla but not those of Real Madrid or FC Barcelona, and it will now be put to the vote by all the 42 club members from the top two divisions.
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