Page last updated at 12:17 GMT, Tuesday, 2 March 2010

Why TV is the key to Real success

By Nils Blythe
Business correspondent, BBC News

Why do Real Madrid and Barcelona have higher revenues than any English club? The answer lies in the way they sell television rights to their domestic fixtures.

Cristiano Ronaldo
Ronaldo's club earn an average of 150m euros a year from TV rights

The Spanish system allows them to negotiate their own broadcasting deals. In many other countries the TV deals are negotiated by the league they play in, and the money is distributed according to an agreed formula.

As winners of the English Premier League, Manchester United received £52m from the distribution of TV rights in 2008/9.

Real Madrid - second in La Liga - earned more than double that amount from its broadcasting contract with Mediapro.

According to the sports unit at consultants Deloitte, both Real Madrid and Barcelona have deals with Mediapro until at least 2012/13 which will contribute broadcasting revenues of, on average, approximately 150m euros ($203m; £136m) each year.

Unequal

In England the distribution of TV money is unequal. But it is a lot less unequal than in Spain.

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For example, Manchester City, who came tenth in the 2008/9 season received £40m - only £12m less than winners United.

And this way of distributing money has helped seven English clubs into Deloitte's list of the 20 highest-earning clubs in the world. Spain has the top two, but no other Spanish club makes the top 20.

The attraction of more equal distribution is that it should help produce a more competitive domestic league.

So far this season, both Real Madrid and Barcelona have won 19 out of 23 games in La Liga.

In England, Chelsea and Manchester United have both won 19 out of 28.

So watching an English Premier League game has offered viewers a better chance of watching something other than the routine destruction of less well resourced clubs.

Dangers

With international TV rights becoming an increasingly important source of income and leagues competing for attention around the world, the Spanish model has clear dangers.

In the long run, re-distribution of revenues to help the less well supported clubs should produce a more competitive and watchable league.

The merits of a more re-distributive system are about to be put to the test. In Italy the clubs are about to move from a system where clubs sell TV rights individually to a more collective arrangement.

As the Deloitte Sports Unit warns in its annual report on football finance, that may pose problems for clubs like Juventus.

Its 28,000-seat stadium is a third of the size of some of the other big European clubs. And with that limit on ticket sales, Juve gets almost two thirds of its total revenue from its lucrative domestic television deal.

A more even distribution of Italian TV revenues is an obvious threat. But the argument is that making collective arrangements will increase total revenues and make Serie A into a stronger league.

As most football fans now know, it is the business arrangements behind the scenes which often drive what happens on the field. And very often, TV is the key.



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