Money spent on Ronaldo will be worth it

Jun 12 2009 by Michael Kelly, The Journal

THE £80m offer from Real Madrid for Ronaldo may end up being enough to buy Newcastle United, lock stock and barrel. Is it financial madness or just good business by the Spanish football giants? Mike Kelly reports

THE financial figures involved in the Ronaldo deal are mind boggling.

First there’s the £80m transfer fee. Then there is the reported annual salary of £10m over a six-year period with a guaranteed 25% rise every season. If he sticks around for the whole of his contract – pigs might fly, you may think – it will add another £110m to the deal.

So, taken in its entirety, Ronaldo could actually cost Real Madrid £200m – twice the reported value of Newcastle United.

More sobering still, when experts were asked which would provide better value for money – buying Ronaldo or the Magpies – they gave an unequivocal answer: Ronaldo.

Football analyst Vinay Bedi said: “At the end of the day why does anybody buy any sort of business but for the revenue it can generate.

“The revenue Real Madrid can generate with Ronaldo in the Champions League is much, much more than the revenue you can expect to generate with Newcastle United in the Championship.” Spanish billionaire Florentino Perez is back in charge of Real Madrid and it was he who, in his first term as president, reintroduced the “Galacticos” principle of the club.

In the late 1950s and early 60s that meant stars such as Alfredo Di Stefano, Ferenc Puskas and Raymond Kopa arriving in the Spanish capital and led to unrivaled European Cup success on the field.

From 2000 to 2006, Perez was at the helm when the club bought Zinedine Zidane, Figo, the Brazilian striker Ronaldo, David Beckham and Michael Owen as much for the cash they could generate as the trophies they could win. Commercially it worked like a dream.

Bedi, divisional director at stockbrokers Brewin Dolphin in Newcastle, said: “They always maintained they recouped at least half of the transfer fee of each Galactico through merchandising. Perez said the bigger the name, the bigger the fee, the bigger the merchandising.”