A September 2015 General Assembly Meeting of club members representatives. They vote by a mano alzada (holding up their hands), a normal practice of Spanish-listed companies. An independent company counts the votes.

      As expected, any operating decisions that require the voting of approximately 92,000 people would be a cumbersome process. Thus, the socios hold an election to form the General Assembly (“Socios Compromisarios”), which comprises around 2,000 members elected by the socios for four-year terms. The General Assembly’s main responsibilities revolve around the financial aspects of the club, such as approving the club’s budget for the season. The General Assembly also has certain other powers such as the ability to discipline the club president, as well as authorizing the club to borrow money.

Ownership Structure

      Ownership structure of soccer clubs has evolved over time and across geographies, creating both advantages and disadvantages. Before 1990, Spanish soccer clubs were structured as mutual organizations owned by, and run for, the benefit of their members. By the 1980s, poor financial management, such as spending too much money on players and having too much debt, threatened the financial viability of almost every club. With uncertainty about who was accountable in the event of default of debt by a club (many members thought a local government entity would bail out their club), in 1990, the Spanish government intervened and created Sports Law 10/1990 to regulate the legal structures of the clubs. The regulation required all clubs that could not prove they were financially viable, with a positive balance in their accounts during the 1985–86 season, to convert into a what is called a Sociedad Anónima Deportiva (SAD), which is like a limited liability company (LLC), to increase financial accountability. The SAD structure still did not prevent the clubs from being financially irresponsible and borrowing too much money, but now most people recognize that it is the SAD entity that is accountable. Initially, the ownership of the SADs was very diverse, but over time ownership became concentrated, so that today most SADs are controlled by high-net-worth individuals. Of the forty-two professional clubs in Spain, only Real Madrid, Barcelona, Athletic Bilbao, and Osasuna were able to prove they were financially viable and stay member-owned clubs.^{32, 33} Member-owned clubs are not-for-profit organizations and do not provide financial distributions to members. The profits, if any, are reinvested for the benefit of the members and provide for internal financing to sustain and grow the organization.³⁴

      This divergence of structure among clubs has created financial advantage for some and challenges for others. For example, billionaires buying Chelsea and Manchester City made them contenders overnight and significantly increased the competition and cost for talent, which affects teams like Real Madrid. Recently, Wanda Group, a large conglomerate owned by Chinese billionaire Wang Jianlin, acquired a 20 percent stake in Atlético Madrid for €45 million, giving Wanda a seat on the board of directors. Now Atlético has access to more resources to buy talent.

      Member-owned clubs such as Real Madrid and Barcelona do not have a billionaire owner or corporation or a wealthy investment owner to absorb losses or provide increases of capital, etc. Therefore, the clubs owned by members are at a competitive financial disadvantage, which forces them to seek a sustainable economic-sport model. In addition, with elections by club members for the president and board, it’s more difficult for the club to seek long-term financing as the lenders don’t know who will be running the club in the future and what their strategies may be. The election is also similar to a political election in that candidates may make promises that are good in the short term but disastrous in the long term. Or an incumbent may take actions to make the finances look better than they are, hiding problems, or sacrifice the financial future to win in the present.

      On the other hand, having community membership invokes the opportunity for clubs to have a closer relationship with local residents and fans. It really is their team. They have a say and vote. The structure of Real Madrid ensures a high level of fan involvement and engagement. This could lead to an ability to generate greater passion and loyalty. It may be difficult for a billionaire owner to turn over how the team is run to their community. Another advantage worth noting is that member-owned clubs have consistency in ownership. Many sports teams are bought and sold over the years, and the owners can have different priorities and values. Real Madrid has had its socios ownership from the beginning, so it may be easier to draw values from them. When the elected presidents of Real Madrid have drifted from the values, the socios have taken action, including voting out an incumbent president.

      Too much debt can also impact strategic decisions and ownership structure. Manchester United was purchased in a leveraged buyout. To help pay down debt, Manchester United went public on the New York Stock Exchange in 2012 by selling shares to investors. Now Manchester United also has to answer to financial investors who may have different values and priorities than the fan community. Before going public to raise equity to pay down debt, Manchester United sold Cristiano Ronaldo to Real Madrid in 2009 and gained financial flexibility. In contrast, since Real Madrid cannot sell shares and strives to be economically responsible, it has to find innovative ways to fund operations and develop a sustainable economic-sport model.

      Billionaire owners and investment groups are starting to buy or invest in sports properties in other cities or sports to generate synergies. For example, Manchester City and the New York Yankees purchased a majority of a Major League Soccer franchise in New York for an estimated $100 million.³⁵ This may be more difficult for nonprofit, member-owned clubs to replicate and place them at a competitive disadvantage.

      The NFL’s Green Bay Packers is the only nonprofit, community-owned major league professional sports team based in the United States.³⁶ While the Packers are the smallest market team in the NFL, they—like Real Madrid—sell the most jerseys in their league. In addition, while differences exist between the Packers and Real Madrid,³⁷ their league-leading jersey sales may suggest that community-owned teams share characteristics that are more appealing even beyond their local communities, which can lead to more commercial success.

       Table 2.1: Ownership of Selected European Professional Soccer Teams