Why has Real Madrid become the highest-earning club in the world?

In the 2023-24 season, Real Madrid became the first football club in history to achieve annual revenue of $1.1 billion. This is the second-largest revenue scale in the world, trailing only the NFL's Dallas Cowboys, and the club has now cemented its reputation in the global sports business world as the "most valuable football team."

In this article, we will explain in an easy-to-understand manner, using specific examples and figures, why Real Madrid has achieved such a high valuation, looking beyond mere star player acquisitions to the club's growth strategy and its associated risks.

1. The first football club in history to reach $1.1 billion in annual revenue

1-1. The second-largest revenue scale in the world, behind the Dallas Cowboys

In 2023-24, Real Madrid recorded $1.1 billion in annual revenue. This is the first such achievement in history for a football club and the second-largest revenue scale among all sports teams, following the NFL's Dallas Cowboys ($1.2 billion).

Supporting this achievement is the comprehensive renovation of the state-of-the-art home stadium, the Santiago Bernabéu, which was completed in 2023.

2. New revenue pillars generated by the stadium

2-1. Matchday revenue doubles to $270 million

With the completion of the new stadium, Real Madrid doubled its matchday revenue from the previous year to $270 million. The factors are as follows:

• Installation of VIP lounges

• Increased seating capacity and a retractable roof

• Sales of approximately $80 million in "Personal Seat Licenses (PSL)" (a format where the "right" to purchase season tickets is sold)

2-2. Rapid increase in sponsorship revenue and the contract with HP

With the stadium renovation increasing corporate advertising value, sponsorship revenue grew by 20% year-on-year. Of particular note is the new sleeve sponsorship deal with the IT company HP.

3. Stagnation of media revenue and the importance of the stadium

In the European football world, excluding England's Premier League, the growth of television broadcasting rights revenue is slowing down or trending downward. Major leagues such as those in Spain, Germany, France, and Italy are no exception.

As a result, "revenue generated from the stadium" is becoming increasingly important for club management, and the following elements are attracting attention:

• Ticket sales

• Hospitality business (food and beverage, VIP areas, etc.)

• Hosting non-football events

• Maximizing brand sponsorship revenue

4. Investment strategy to drive the "cycle of victory"

4-1. Annual player salary costs of $250 million

In the 2023-24 season, Real Madrid spent approximately $250 million on player salaries alone, which is the third-highest level in the world. It is by far the highest amount within La Liga.

4-2. The "profitability" brought by victory

By assembling a powerful squad of players,

• winning the domestic league (La Liga)

• participating in and winning the UEFA Champions League

and other such sporting successes can be expected. The Champions League, in particular, is said to bring in up to $150 million in revenue if a team wins through a single season, making it truly the "key to recouping investments."

5. The influence of Mbappé—players are also advertising towers

In the summer of 2024, Real Madrid acquired global star Kylian Mbappé. This contract, said to be worth approximately $35 million in annual salary, goes beyond mere reinforcement of the squad.

Mbappé has hundreds of millions of social media followers, and this "digital influence" is the most attractive asset for corporate sponsors.

In fact, the background to HP signing a sponsorship deal with Real is said to be the expectation of increased awareness as a global brand and the ripple effect caused by Mbappé.

6. Risks lurking behind growth

6-1. Risk of performance decline

No matter how much the squad is strengthened, if performance in matches declines, there is a possibility of losing Champions League qualification and missing out on huge revenues.

6-2. Debt risk—$1.3 billion in liabilities

Stadium renovations required borrowing as much as $1.3 billion. If an economic recession were to occur, there is a risk of the following impacts:

• A decrease in sponsorship contracts

• A decrease in spectator attendance

• Financial pressure due to difficulty in debt repayment

Thus, while Real Madrid has maintained a positive cycle of "revenue → strengthening the squad → winning → increased revenue," there is a potential for this to reverse rapidly depending on their performance.

Real Madrid's rapid growth is not simply because they acquired star players, but the result of a combination of multifaceted strategies such as the following.

• Reform of the stadium's revenue structure through massive investment

• Sponsorship strategy leveraging brand power

• Continuous investment in talent with victory as a prerequisite

This is a new model for "the world's number one sports business," and it will likely serve as a significant reference for other clubs and sports teams in the future.

The reason why it is said that "Real Madrid is the most valuable football team" lies not in the power of Mbappe alone, but in this entire business model.

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