C. Ronaldo to Real Madrid for NZ$200million

Well folks, a new world record transfer deal has just occurred. Real Madrid under a new President, looking to reignite the spirit of the Galacticos, has shelled out over NZ$200 million for Cristiano Ronaldo, world player of the year in 2008. The previous world record transfer fee was incidentally set this week, with Kaka moving to the same side from Inter Milan for NZ$150 million. The record before that also rested with Real, snatching arguably the greatest player the world has ever seen Zinedine Zidane from Juventus for slightly less than NZ$150 million.

What recession?!

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  • Can the figure be justified from a financial or economic point of view?

    I’m guessing here that Real Madrid’s ticket and tv revenue is already at or close to the maximum (TV receipts may even fall during a recession). So it must come down to how much value Ronaldo adds on field. Yes, there are crucial games that win trophies and and see a club through to lucrative tournaments. And Yes, Real Madrid may get some of the investment back when Ronaldo moves on. But can any single player really add NZ$200 million of value?

  • http://soccernet.espn.go.com/columns/story?id=653653&sec=europe&root=europe&cc=3436

    An interesting article on the financial state of some of the big European names right now.

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  • MikeG

    Slightly off topic, but why have you said that the amount is NZ$200 million, whereas it was actually £80 million. I’m not doubting your forex conversion, but the deal wasn’t in NZ $!

    I can understand why it is being reported in terms that we have a better comprehension of, but in my view transactions like this should be reported as “£80 million (NZ$200 million at todays rate))”. It provides a better point of reference, particularly when looking at articles like this at a later time.

    (Sorry, just a small hobby-horse of mine)

  • @MikeG

    A good point. My personal bugbear in this department is the spurious accuracy of these price conversions in newspapers and other media. 80 million pound is more or less $200 million – instandly understandable. I’ve seen The NZ Herald and Dominion Post often provide four digits to similar numbers in the past so the report would read, for example, UKP80 million ($212.7 million).

  • @MikeG
    Because there is only so much information you can put in a heading? lol.

  • A couple of things here. Real Madrid isn’t a profit maximiser. It is a member owned club. Members only care about the profitability of the club in so far as it allows them to buy the players they want so they can win titles etc..

    So the transaction doesn’t have be justified in the sense of increasing the profitability of the club (i.e. a “financial” justification).

    To be justifiable from an “economic” perspective all it has to do is increase the net welfare of the members. That could happen through winning more titles or just the enjoyment of watching Ronaldo do step overs (and dive all the time, lol). Interestingly, the objective function of Real Madrid members appears to place a heavy weighting on the style of football played given that they fired Fabio Capello after 1 season even though he won the league that year.

    What I think is interesting about Real Madrid is the agency issues associated with the presidency. Before every election the people running to be president make outlandish claims about who they are going to sign and in a way it becomes a sort of bidding war between candidates (i.e. who can promise the biggest name). Whether the promises the candidates make are in the interests of club members or merely a shorted cited election bribe is an interesting issue.

  • I’m coming back soon, thanks for such great content