sports finance

On Florentino Perez and @Cristiano Ronaldo’s contract negotiation

Photo: Lars Aronsson via Wikipedia

While the Spanish season may have ended with Barcelona winning the league, el Clasico with Real Madrid remains front page news. For all the criticism leveled at Florentino Perez and his penchant for expensive Galactico sides that don’t win much and chew through the world’s best coaches, the man remains without equal in the back room.

El Clasico in the back room

His late season bid for Neymar was never really about getting the player, who Perez arguably could not get and certainly did not need. It was all about making Barcelona pay much more than they wanted to for him and forcing them to sell stars and possibly forgo a big name defensive signing. Barcelona have indeed spent Galactico money thus far mostly unsuccessfully in their quest for the perfect partner for Messi, leaving them exposed in other areas of the pitch, which is exactly what Florentino wants.

But Perez may have opened up a new and very costly problem for himself with this victory. The recent publication of Real Madrid’s offer to attempt to lure Neymar away from signing with Barcelona showed they were offering the Brazilian talent an unprecedented 70% ownership of his image rights. Cristiano only gets 60% and he wants a significant raise. What’s more, Barcelona gave Neymar 100%, and that’s what Cristiano wants, along with a net salary between €18-20M before bonuses.

The recent Forbes report showed that Cristiano made €33.5M last season, €17.5 from salary and bonus, €16 from endorsements of which he contractually takes home 60%, or €9.6M (and the team gets 40%, or €6.4M.). So Cristiano takes home €27.1M.
Messi made €29.45M, €15.1 from salary and bonus, and €14.35 from endorsements of which he contractually takes home 100%. So Messi takes home €29.45M.

The fact that Cristiano’s demands are a problem for Real Madrid is seen in their offer to him. €14M net salary and negotiation of image rights. Because of the expiration of the Beckham rule, increasing Cristiano Ronaldo’s net salary to €14M will represent a 58% increase for the club before bonuses. This is because his current €10M salary is taxed at 24% while his €14M salary would be taxed at 52%. He costs Madrid €12.4 in salary now, but would cost €21.28 in salary with their current offer. If they choose to offer him the 70% they offered Neymar they would lose another €1.6M, to say nothing of 100%.

While Real Madrid famously have a lot of money, all of this goes a long way towards explaining their caution in agreeing a contract termination with Mourinho (as firing him would have cost them millions), their desperation to sell Kaká to finance Cristiano’s raise, and gives a balanced perspective on their search for a new trainer while also seeking to include players in deals in exchange for smaller transfer fees. Florentino’s job is not easy, but in this situation in particular he’s certainly the best man for the job.

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