How Real Madrid’s financial problem in the UEFA Champions League was fixed.
Starting in the 2018/2019 season of the Champions League the Union of European Football Associations (UEFA) which governs all European soccer changed the payment structure for the participating clubs. The new payment structure saw the addition of Coefficient Payments. This new payment structure in turn helped Real Madrid who historically has been one of the best performing clubs in the Champions League but struggled to capitalize financially due to their low Market Pool Payments.
Market Pool Payments are part of the Champions League payment structure which according to UEFA’s published financials “is distributed according to the proportional value of each TV market represented by the clubs taking part in the UEFA Champions League from the group stage onward.” These payments have historically been approximately 40% of the total payout for the Champions League and are a component of why the winning club doesn’t always receive the largest payout of all the participating clubs.
As shown in Table 1 below even though Real Madrid defeated Juventus 4–1 in the 2017 Champions League final, Juventus ended up receiving €110.4M in total payments to Madrid’s €81.1M given that Juventus received €58.8M in Market Pool Payments to Madrid’s €26.2M. Similarly, in 2016 even though Manchester City only made it to the Semi-Final they received €46.9M in Market Pool Payments whereas Madrid received only €26M.
These low Market Pool Payments for Real Madrid have stemmed from Spain having multiple teams compete in the Champions League as well as Spain’s TV market value being low relative to other Big 5 leagues in Europe. Table 2 shows that in ten out of the eleven seasons of the Champions League from 2007 to 2017 Spain had four or more clubs competing. Real Madrid who competed in all eleven seasons had to share the Market Pool Payments for Spain with more clubs compared to German, Italian and French clubs who predominately had less than four clubs competing in the Champions League per season. Similarly, England during this time period had four or more clubs compete in all eleven seasons of the Champions League.
And as shown in Table 3 English clubs from 2007 to 2017 played 412 total games by 45 clubs which is fairly close to Spain’s 431 games by 44 clubs. The distinction being that English clubs have been paid €1.06 billion in Market Pool Payments to Spain’s €718M. This has resulted in England having a Market Pool Per Game payout of €2.57M to Spain’s €1.66M. For comparison clubs in Greece and the Netherlands who haven’t had a strong historical performance in the Champions League were able to obtain have higher Market Pool Payments Per Game relative to Spanish clubs.
Ultimately as shown in Table 4 this low Market Pool Payment Per Game leaves Real Madrid, Barcelona and Atletico de Madrid to be ranked 30th, 34th and 41st respectively out of the 100 different clubs to compete in the Champions League from 2007 to 2017 based on Market Pool Payments Per Game. Causing them to fall behind other European giants such as Juventus, Paris Saint Germain, Manchester City and Tottenham who receive approximately double the payment per game that Spanish clubs received.
These financial struggles by Real Madrid stemming from multiple clubs sharing a low valued TV market pool changed when UEFA introduced Coefficient Payments. As detailed in UEFA’s Financial Report for 2018/2019 “The aim of the new model is to distribute earnings much more on the basis of sporting merit and to reduce the previously significant part calculated on a commercial parameter such as the TV market, which could have a big impact in the case of only one team qualifying from an association in an important market.” Under the new Coefficient Payments system the 32 clubs that qualify to the Champions League are ranked from 1 to 32 based on a 10 year performance review “…which gives higher merit to clubs with a long track record in UEFA’s club competitions”. This new system also includes bonus points for winning the Champions League and the Europa League.
Each club is then awarded shares based on their ranking with each share being worth €1.108M. Real Madrid being the best ranked club with 32 shares received a payment of €35.5M in part due to their four title wins in 2014, 2016, 2017 and 2018. As shown in the graph below with this new Coefficient Payment system even though Real Madrid weren’t able to make it past the Round of 16 in 2019 & 2020 they were able to receive €85M and €83.7M in total payouts which were not significantly lower than the €80.1M, €81.1M and €88.7M payouts for winning the title in 2016, 2017 and 2018.
This new Coefficient Payment structure has also allowed Real Madrid to increase its guaranteed minimum total payout in the Champions League by €35.5M, before the addition of Market Pool Payments. As shown in Table 5 in both systems Real Madrid was guaranteed €15.2M for qualifying to the Champions League. A further €9.5M performance bonus is awarded for reaching the Round of 16 which Real Madrid has been able to achieve every year since 2008. With an additional €5.2M performance bonus for winning two games in the Group Stage which is the minimum number of games needed to be won in order to advance to the Round of 16. This brought their guaranteed total payout to €29.9M which has more than doubled to €65.4M with the addition of the €35.5M in Coefficient Payments. All while this new guaranteed total payout can be expected to continue given their most recent 1–0 win in 2022 vs Liverpool.
Sources UEFA Financial Reports:
