Racing Santander And The Economic Problems Facing La Liga

Racing Santander’s protest during its Copa Del Rey Quarterfinal game against Real Sociedad has sent shock-waves through the soccer world and for good reason. There have been problems over players not receiving their wages before, such as with Malaga FC only a year ago, but very rarely have the players gone so far in their protests. However, it looks as if Racing Santander players were running out of choices. They had been unpaid since September and in their minds their only remaining choice was a high-profile protest. Was this a case of the owners playing hardball or is the club really that low on funds that paying their players might bring the club crashing down as if its foundations were made of termite infested balsa wood? Typically the outside viewer would like to blame this on diva-soccer players or greedy owners. However, in the La Liga there are other factors at play that could be greatly influencing this player protest.

Jose Maria Gay de Liebana is an economics professor at the Universidad de Barcelona and Spain’s leading football economist  and his prediction is that Spanish football will kill itself in five years if some rules don’t change (Dirty Tackle).  This is because the cost of holding matches is rising but the TV revenues are split unevenly between La Liga teams (Dirty Tackle). Currently, Real Madrid and Barcelona split 50 percent of the La Liga TV revenue between themselves. Leaving the other 50 percent to be shared amongst the other teams (Independent). Barcelona and Real Madrid were recently fined $10 million over the TV rights deal they signed in 2010 because a recent ruling said they violated Spain’s anti-competition laws when agreeing a television deal for their domestic league and cup soccer matches. However, that recent ruling cannot limit the damage that this TV deal has done to help Barcelona and Real Madrid break away from the rest of the Spanish teams.  Because of this imbalance it has been hard for the other 18 La Liga teams to make money and they find themselves in a world where  they have to keep up with the exorbitant amounts of money being spent on players in order to compete for the Champions League. No team highlights this plight better than Malaga FC who despite making the Champions League, and advancing very far, have had highly visible money troubles. In 2012 Malaga was banned for a year from Champions League and Europa League for non-payment of wages and faced a a ban for a second season if they didn’t pay their wages (Telegraph). They eventually did pay those wage bills and went on to advance to the quarterfinals of the Champions League where they got knocked out in the final minutes after being incredibly close to beating Borussia Dortmund to advance to the semifinals. Despite this excellent run in the Champions League, Malaga FC was precariously close to never even being in that Champions League, and it shows how very real the problem has become in the La Liga.

Racing Santander has seen a fall from grace recently. They were bought in January 2011 by Indian businessman Ahsan Ali Syed. Although he promised to invest in the team and make it a force to be reckoned with, Racing Santander finished with the lowest points in La Liga and was relegated (Telegraph). The club began to free fall and currently sits in Segunda B.The club tried for  capital increase in October but that did not pan out and had to be abandoned and currently they are in bankruptcy proceedings (Telegraph). Things do not look good for Racing Santander and there are many places to point the blame; the owners, the TV deal structure, escalating player wages. Unfortunately, the economic failings of Racing Santander are not an isolated problem in the Spanish soccer leagues. Although this incident brings it to the forefront, there will be more incidents to follow.  There is something inherently wrong in the economics of Spanish soccer and hopefully economists can find the cure before the symptoms become too severe.

Sources (in order):

Dirty Tackle: http://sports.yahoo.com/blogs/soccer-dirty-tackle/spanish-economist-says-la-liga-could-kill-itself-174518564–sow.html

Independent: http://www.independent.co.uk/sport/football/european/how-tax-break-gives-real-madrid-and-barcelona-an-unfair-edge-8749146.html

Telegraph: http://www.telegraph.co.uk/sport/football/competitions/champions-league/9761090/Malaga-banned-for-a-year-from-Champions-League-and-Europa-League-for-non-payment-of-wages.html

Telegraph: http://www.telegraph.co.uk/sport/football/competitions/la-liga/10608849/Racing-Santander-players-go-on-strike-during-cup-tie-in-protest-at-unpaid-wages.html

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