The recent contract negotiations with Alves are the first major test for the new management. A ‘star’ player is asking for a significant raise and is threatening to take his talents elsewhere if the demands are not met. In most places, such stunt usually yields the desired effect for the player.
But not here. Not this time. Because the man tasked with leading the negotiations on behalf of the management, the bad guys, is no one other than Señor Rosell. The man who can often be seen pacing the Camp Nou hallways with the book titled ‘Austerity’ under his armpit. The front cover is facing out in case an uninformed employee has any doubts about what this man stands for. A stern look on his face, he appears very determined to curb down the spending. There will be no bending over he says. The ‘salary structure’ needs to be fully honored. I, for one, am supportive of this cost cutting initiative.
The said contract negotiations seemingly had divided fans in two camps. One believes the team will be just fine if Alves decides to leave and think the salary offered by the management is an appropriate one. Meanwhile, the other group is already preparing for the imminent decline. It is all but assured, they believe, that the teams are going to beat us into the ground if Alves is not there at RB. If only the management is not so stingy.
Exaggeration and personal preferences need to be cast aside. A rational fan needs to look at the economic situation The Club is in and the possible side effects ‘bending over’ for Alves might have in terms of future salary demands. Such fan will then acknowledge the alternatives available at the RB position. It seems many are overlooking the fact that there is a player named Adriano in our squad. Comfortable with using both feet, equally fast and more sturdy than Alves, he has seen his playing time go up as of late. Granted, the sample size might be too small to draw any meaningful conclusions from but note an interesting detail. Adriano, unlike Alves, has more balls recovered than lost.
Salaries expense for 09/10 season was a whopping €263M. The figure consists of €235.2M (sports) and €27.7M (staff). People familiar with the matter put bonuses at around €40M. That would leave base salaries at somewhere between €160 (assuming bonuses were 25% of the base salary) and €190M (the amount that is left after the bonuses are withdrawn from the salaries – sports account). Bare in mind, such salary expense is for the ‘small group’ Pep prefers to work with. One is left to marvel about all the jaw-dropping that would ensue if Pep opted out to go with what has been the standard roster size across Europe’s top leagues (for the clubs of similar stature).
This is the Yankees’ kind of payroll we are talking about here. An ‘establishment’ team from a big City (market). Something Barça is not and it never was. The payroll needs to get more in line. There is only one ‘superstar’ (Messi) and possibly two (Villa, Pique) players on that roster that are widely popular and marketable (a Jeter and Rodriguez equivalent). Not nearly enough to warrant the expenditure.
Players earn the base salary and bonuses based on team and individual performance. As mentioned above, the bonuses were estimated at 25%. While I do not question the justification of rewarding the players for the (over)achievement, it only makes sense to devise a way to offset this cost increase.
The same way there is a bonus clause in players’ contract, there has to be one included in the contract with the party acquiring the media rights. That means the said party needs to adjust the fee according to team’s most recent accomplishments. The way it is now, the broadcasters are getting more people (larger viewership) tuning in to Barca’s games to sell ads to…at no additional cost.
Ticket prices have to go up too. The demand is simply too large to be ignored. More about this some other time.
As for salaries in general, an important metric to look at is the Wages-to-Turnover ratio. That number was 68% in 2010. The same ratio for 04-09 period averages out at 59%. With revenue at the present level, that would translate to €34.86M in savings last year.
For the sake of comparison, Arsenal and Manchester United had an even lower Wages-to-Turnover ratio at 46% and 44%. With the salary structured like that and the revenue The Club generated last year, the potential savings would be €84.7M and €92.4M respectively. A sizeable difference.
Not so long ago, I had proposed lowering the base salary for the players ‘over 30’ (the category is not exact and depends on the position) regardless of their popularity and past contribution. Before I expand on this, let me stress that these are the players who up to this point had 4-6 years of high salaries. They had already earned enough money for a comfortable life and then some more.
Now, the center piece of the pay structure should be that only players worth huge money are the ones with an extraordinary skill set and in their prime. ‘The prime’ meaning somewhere in the 23-29 age group. Everybody else is going to play for ‘change’ and a shot at glory. A roster spot at The Best Club in the World carries significant weight.
A senior player ‘past his prime’ has diminishing physical condition. ‘Wear and tear’ is increasing the risk of injury every week goes by.
Such player is:
a. going to get hurt and spend significant time off-field recovering (the older the player and the thicker his medical record is the longer the recovery is going to be)
b. Pep is going to leave him on the bench not to aggravate the lingering issue (ex. Xavi’s Achilles’ problem) and ‘save him’ for games that are carrying more significance
In the case of Xavi and Puyol, expect to see them even less next season because of the upcoming Euro 2012. Somewhat buckling under ‘pressure’ from the Federation and out of the appreciation for their careers, Pep is likely to do what he can to make sure these guys are healthy enough to try to win the Trophy back-to-back. A potential historic feat for Spanish football. On a side note, that is where a player like Fabregas, acquired at a reasonable price, comes into play.
Either way, the time spent on the field for players like these two is likely to go down. It would then be unwise to award them a high base salary. The Club is not an upscale retirement community rich in activities and those interested in getting paid handsomely after they had reached the point of diminishing returns should go to Qatar and the leagues of similar stature. A more likely destination for the individuals whom to money is worth more than trophies, professional development and genuine camaraderie.
Notice how the initial medical report stated that Puyol will be out for an unknown time period. ‘Unknown’ being the key word. Asked for a clarification, Dr. Cugat said: “Puyol’s injury can be solved in a week, in two, or it can be longer.” Granted the specific nature of the injury but the level of uncertainty about the recovery period is significantly higher with senior players.
While the base salary needs to be trimmed down, bonuses should remain tied up to the level of contribution. That way if the team wins the Competition, their effort is going to be recognized.
In general, senior players need to recognize what their alternatives are, significance of winning trophies at that stage of their respective careers and how much had playing for The Best Club in the World had done for their image up to this point. I applaud Eric Abidal for his attitude in regards to the contract extension, quote: “I don’t want more money, I want more years, until 2015.” This at the moment when he is in a form as good as ‘we’ have ever seen him play. It then becomes hard to explain why is Puyol being paid significantly more.
The players brought up through La Massia should have an additional gratitude for the belief, resources and the value system The Club had placed allowing them to become not only World Class players but exceptional human beings. In that context, I would like to see Xavi, Puyol and the likes step up sometime soon and announce that they are initiating a pay cut themselves because they recognize ‘the situation Club is in’ and that ‘it is not all about money’ anyhow. The way of thinking that should be drilled into kids at La Massia from the early on.
As for the younger players, they should be awarded a modest base pay (a la Busquets) until they prove their maturity and value to the squad. In essence, they would have an incentive to work hard and give their very best for a 2 year period in order to get a shot at signing that huge ‘secure the family’ contract majority of the players are striving for. If such a young player starts thinking about leaving FCB for more playing time elsewhere, he should look no further than at Javier Mascherano, The Captain of the Argentine National Team. When asked about the limited playing time he has been seeing, El Jefecito was brusque: “If you join a team like Barcelona, you can’t expect to start every game. I play my minutes and work hard to get more.”
The current pay structure looks like this (due to scarce information the numbers are an approximation of what has been thrown around in the press):
L1 Messi (€12M)
L2 Iniesta, Xavi and Villa (€6-7M)
L3 Pique, Puyol, Valdes, Busquets (€4-4.5M)
I propose to bring Messi under €10M. It is the only logical thing to do now that Zlatan and that pesky agent of his are out of the picture. Xavi and Villa should get demoted to Level III with Xavi scheduled for an additional 20-30% pay-cut this time next year. Puyol is demoted as well and there is a possible 10-20% pay cut for Valdes. He does posses an above average ball handling skills but is still only a goalkeeper.
The more appropriate pay structure would be:
L1 Messi (under €10M)
L2 Iniesta (€6M)
L3 Pique, Busquets, Villa, Valdes, Xavi (scheduled for a pay-cut soon), Alves (€4M)
We are looking at €8-10M in instant savings. The lower base drags down bonuses creating additional savings in the process.
Salaries – Staff
It is hard to tell how much of this figure (€27.7M) goes to the top management. But what better way to make the point across than by a personal example. Sandrusco and his team should commit themselves to work for a symbolic $1/year and keep the executive benefits to the minimum. If The Club was a publicly traded company, it would be appropriate to award them some stock as a part of the compensation.
The amount of publicity an individual receives while serving as a Board member at The Club is intangible. When entering the politics, ‘El Presi’ had a great deal of recognition with the voters. The same amount it took some other candidates a great deal of time and money.
To add an insult to the injury, the amortization comes at €71.2M (Note 15.3). Out of that amount, a whopping 70.3% went for the players that are not even on the roster. Namely, Toure, Hleb, Caceres, Henrique, Keirrison, Ibrahimovic, and Txigrinskyi. That is more than €50M for the players who are not contributing at all.
I’ve seen heroin addicts manage their money better. This is just horrible. It would be easy to assign the blame to Laporta but the truth is Pep and Txiki were heavily involved in the process. All three should be equally embarrassed.
Looking at the bigger picture, there has to be a continuation. A long-term vision on how this team is supposed to look like in years to come. A clear strategy that would have priority over personal differences and daily politics. It is mind boggling to have such a huge amortization expense for non-performing players. It can’t be allowed to have one president commit close to €90M (transfer fees alone) on two players only to see them being cut from the roster less than a year after.
In conclusion, the austerity measures need to be implemented for 3-5 years while continuing to generate the revenue of €400M+. I want The Club to dominate both on and off the field.
Tom_Johnson is studying finance at an US institution.
Written by:Tom, Dick and Harry