The (bad) economy of LaLiga Impulse

Last Thursday the first round of a legal battle over the financing of Spanish football took place, which promises to be intense.

On the one hand, the agreement between LaLiga and the CVC fund to exploit and manage the competition's television rights;

on the other, the Royal Spanish Football Federation, Real Madrid, Barcelona and Athletic Club, who oppose it because they consider it illegal, financially ruinous for the clubs and that, contrary to what is announced, it will be harmful to the interests and aspirations of the lower categories of Spanish football.

Financially, LaLiga Impulso seems like a bargain for CVC: as announced, in exchange for just over 2,000 million it would obtain returns equivalent to 11% of the television rights of the League for 50 years (with the numbers of 2021, that 11% would be 177 millions).

Assuming that the value of these rights remains constant in real terms (a conservative assumption considering its historical progression), CVC's annual return would be spectacular.

If financially it is such a bad business, why does LaLiga Impulso have such a majority support from the clubs?

Two reasons come to mind here.

The first, the short-termism of the presidents of these clubs who, faced with financing problems, resort to the easy solution: the quick sale of assets at a price below the market price (

) —we assume that they do so because they do not have to render accounts to the social mass of the club.

And so we understand the opposition of the presidents of historic clubs who, as sports associations, do have to be accountable to their social mass and ensure the future stability of their clubs—.

The second reason is the effect of financial doping that the 38 LaLiga clubs that are now joining the CVC boat will enjoy, because they receive economic resources, anticipated from future income, as if it were guaranteed that they would maintain their current positions in the Liga the next 50 years.

And it is possible that this is the case, because this economic injection gives them a competitive advantage over the humblest clubs, which will have a very difficult time breaking this glass ceiling.

And we also understand the support for the project by the president of LaLiga, who ultimately owes his position to these clubs, which are the ones that have multiplied their annual remuneration by 10 in recent years.

LaLiga Impulso may resemble a closed league.

It is paradoxical that Tebas, a public enemy of the Super League for being a closed competition, promotes with CVC a reform of Spanish football that financially dopes the clubs that initially participate in his project over the rest of the humbler clubs.

This CVC-Tebas operation breaks the principle of equal opportunities between the clubs that participate and those that, being now in RFEF categories, aspire to form part of the League in the future (which for one of us, who longs to hear the chant Let's go my Linares in professional divisions, it's unforgivable).

Probably for these reasons, the RFEF is totally opposed to LaLiga Impuesto.

Its president does not doubt that it is illegal and that it seriously undermines the thousands of clubs in lower categories (with more than a million federated players in Spain), who will see their chances of growing and competing on equal terms with clubs from LaLiga that would now benefit from CVC money.

And we launched another question of an economic nature.

Are some kind of indirect incentives (premiums) being created to lose?

Because, as the project seems to be designed, the clubs that participate in it could see their income diminished with the sporting successes of the clubs that oppose it.

Let's imagine an exciting last day of the league with Atlético, Real Madrid and Barcelona level on points.

Let's imagine that Atlético visits the field of a club that is no longer at stake, but that knows that, after the agreement with CVC, its television income will be higher if Atlético wins the League, and will be reduced if, on the contrary,

is third… Is this possible?

Legal?

How does it affect the meritocracy of the League that a club may be interested in losing?

And what about sports betting?

Similar situations could occur to prevent clubs, which are now in lower categories, from consolidating in the League and, therefore, reducing the income of clubs financed by CVC.

The courts will decide on the legality of an agreement that clearly only seems to favor CVC, the short-termism of the managers of the signatory clubs and the president of LaLiga.

As economists, we believe that it is not profitable enough, that it creates entry barriers in professional football and that, furthermore, it is dynamically incoherent, that is, it is associated with serious management problems in the future.

As football lovers, we are concerned that it is not the boost that this sport needs in Spain in the current difficult circumstances.

José Ignacio Conde-Ruiz and Juan Francisco Jimeno Serrano are professors of Economics at the Complutense University of Madrid and at the University of Alcalá, respectively.

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