Real Madrid Club De Fútbol

IMS 6310 – Fall 2017
Midterm Case Study

Real Madrid Club de Fútbol

Summary

        Soccer, also known as ‘fútbol’ or ‘football’, is one of the most common sports in the world with almost 100 years of history. It all began in 1863 in England, when rugby football and association football branched off on their different courses (FIFA, 2017). In Paris in 1904, the Fédération Internationale de Football Association (FIFA), becoming the sport’s first governing body, and was founded with the goal to regulate the 204-member organization to establish and oversee rules and activity. Several European professional soccer teams were part of the Union of European Football Associations (UEFA) where they served as the governing body. The European soccer league followed an open-system where “clubs could be promoted or demoted between the premier and secondary national leagues according to performance.” This promoted competition and allowed fans to align with certain teams creating a strong fan-base.

        Madrid Foot Ball Club, the predecessor to Real Madrid, was founded in 1902. The team was granted the title of “Real” to the club in 1920 and by the early 2000s; Real Madrid became a Top Five favorite in eleven out of twelve of the most involved regions. (“Energizing the Brand..”, 2002). During the 1950s through late 1970s, Real Madrid were unstoppable on the field resulting in 5 cup wins. This momentum was lost after their president at the time, Santiago Bernabeu, passed away. The incoming president, Lorenzo Sanz, did not know how to operate the team and resulted in selling off players and assets to cover debts.

As the teams finances turned problematic, as they were unable to generate more income and increase revenue with their traditional business models, a major shift was needed in order to stay afloat. During the 1990s, the clubs transitioned from their main source of traditional revenue from gate receipts and local corporate sponsorships to a strategy of leveraging television revenues and merchandising internationally. (Dobson, 2001) This change in strategy has been a format analyzed by other teams, the economic press and researchers of international business. By leveraging the success and driving key initiatives to create value, Real Madrid could be able to exploit the brand to rake in the revenue. By strategically aligning with the right media outlets, Fernando Perez took advantage of this when he became president in 2000.

        By focusing on defined pillars, a plan to eliminate the current debt, a proposal to allocate funds and initiatives to grow the brand, Fernando Perez was the catalyst to catapult Real Madrid into a household name all across the globe. The successful implementation of Fernando Perez’s strategic plan caused Real Madrid’s income to practically double from $165.5 million in the 2000-2001 season to $331 million in 2004-2005 (Deloitte, 2006).

Analysis

        Fernando Perez quickly realized in order to revive the team’s financial standing; more funds and a reinforcement of the brand was desperately needed. Perez wanted to drive brand value initiatives by considering the executive leadership team as content providers.  Following the spirit of Bernabeu, Perez focused on building up the team and building a professional organization by treating Real Madrid as its own global enterprise.

        Perez and his managers focused on four brand value drivers: (1) the size of the audience; (2) level of fan-base engagement; (3) sociodemographic make up of audience; (4) bridging fan associations. With these in mind, the team set three interdependent goals including: (1) creating capital to provide flexibility; (2) Acquire key players to build team; (3) exploit Real Madrid brand as much as possible.

        To tackle the first goal, Perez negotiated the repurposing of land, reacquired exploitation rights, and outsourced certain aspects of their marketing division to Sociedad Mixta. In October 2000, Perez was able to raise a significant amount of sponsorships, which built the story of the brand. Soon enough, the expansion resulted in a 223% increase in merchandise and licensing and 730% increase in sponsorship and image rights.