Real Madrid C.F. - Company Profile, Information, Business Description, History, Background Information on Real Madrid C.F.

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History of Real Madrid C.F.

Real Madrid C.F. is the entity governing the Real Madrid football (soccer) team, a Spanish club that ranks as one of the two or three most successful teams in the world. Real Madrid operates as a private, nonprofit club supported financially, in part, by more than 100,000 club members. Real Madrid generates roughly 25 percent of its revenue from ticket sales, 36 percent from television agreements, and 38 percent from merchandise and marketing deals.


To be a successful business enterprise, a sports team must first excel at its game. In the decades before sports teams became brands, a record of success offered virtually the only way for a sports team to financially survive. Championships and trophies attracted fans, giving the team the gate receipts to sustain itself. In the era after sports teams were regarded as brands, winning lost none of its importance, driving the marketing campaigns that helped pay for players' seven-figure salaries: the price of success in modern sports. Among all sports, there were few teams who could claim to be as successful at its game as Real Madrid, a team whose record of achievement and, at times, dominance in the most popular sport in the world provided the foundation for its success in the business world.

Despite the regal pedigree of the club, Real Madrid began modestly, playing on dirt fields when Spanish football, as an organized, national association, did not exist. On March 6, 1902, a group of students, led by Juan PadrĂłs Rubio, formed the Madrid Foot Ball Club, establishing the small organization in the back room of the Al Capricho store, which was owned by PadrĂłs and his brother. At the meeting, a board of directors was established, with PadrĂłs appointed president of the four-person governing body. The club began with five members. The board decided on the team's uniform during the first meeting, choosing white shirts and shorts, blue socks and caps--the colors worn by the then-famous London Corinthians--and a coat of arms embroidered in purple. The white uniforms later earned the team one of its nicknames, "Los Blancos," but the club's colors were not worn when the team played its first match three days after the first meeting. For its first match, Madrid Foot Ball Club played itself, separating its players on blue and red teams to determine who should play on the club's first team. Each board member played in the scrimmage.

Madrid Foot Ball Club was not the first club formed in Spain--that distinction went to Recreativo de Huelva--but it came into being well before Spanish football was organized into a national association of clubs. In Spain, as elsewhere, football enthusiasts looked to England, the birthplace of the sport, for an organizational model to emulate. England's domestic league was formed in the early 1880s, nearly a half-century before Spain's clubs played against each other in a league format. Not surprisingly, Madrid Foot Ball Club looked to England as a resource for talent and strategies, hiring an Englishman, Arthur Johnson, as its first manager. When Johnson took charge of the club he served not only as the team's chief strategist, but also spearheaded the first efforts to give Spanish football some cohesion.

In later years, a football team's success was measured by its achievements in three areas: its league standing, its progress in domestic tournaments, or cups, and its progress in continental tournaments. When Madrid Football Club was formed, none of the modern benchmarks of success existed in Spanish football. Within weeks of the club's formation, however, the first yardstick of a Spanish club's success was created, a competition that owed its existence to the group of footballers gathered in the back room of the Al Capricho store. Madrid Foot Ball Club's board of directors went to the office of Madrid's mayor in April 1902, lobbying for the formation of a football tournament to celebrate the coronation of King Alfonso XIII. The following month, the Copa del Rey (the King's Cup) began, starting with a match between Madrid Foot Ball Club and the team that would be its fiercest rival from that point forward, Barcelona. Madrid Foot Ball Club lost the match to the Catalans and it failed to win the Copa del Rey, but in the years ahead the club would establish an impressive record of success.

Madrid Foot Ball Club's legacy of success was established with the Copa del Rey. The club won its first cup in 1905, the first of four consecutive cups won by the team in white. In 1917, Madrid Foot Ball Club won its fifth Copa del Rey, which, combined with ten regional championships won during the first two decades of the century, drew the praise of the most well-known figure in Spain. In 1920, King Alfonso XIII granted the title "Real," or "Royal," to the club, marking the debut of Real Madrid, a team that spent its first year under its new name on an international tour in Portugal and Italy, its first serious trip abroad. The decade included several more international tours, including trips to England, Denmark, and France in 1925 that saw Real Madrid lose more matches than it won. The club traveled to the United States in 1927, faring better with a record of nine wins, four draws, and four losses, but it would not begin to perform markedly better until a national league was formed. At the end of the decade, in 1928, Spain at last formed a national league, pitting ten teams against each other. Real Madrid placed second during the inaugural season of the Spanish first division, losing the championship (based on points awarded for wins and draws) to Barcelona--the first of 18 times Real Madrid and Barcelona finished in the top two positions during the 20th century. The club won its first championship during the league's fourth season and emerged victorious the following season, beginning to demonstrate the dominance that would see the club win more league championships than any other club during the 20th century.

1943: The Bernabéu Era Begins

In the history of Real Madrid, no figure played a more prominent role in the club's development than Santiago Bernabéu. Bernabéu's affiliation with Real Madrid began in 1912, when he began playing forward for the club, but his greatest contributions came as its president. Bernabéu was appointed president in 1943, beginning a 35-year tenure at the club that represented Real Madrid's definitive era of development. His greatest legacy to the club was one of his first actions undertaken as president: constructing a stadium to befit the royal club from Madrid. Real Madrid spent its first two decades playing on dirt fields before establishing a grass pitch in 1923. The team's home field was destroyed during the Spanish Civil War and rebuilt in 1939, but the new facility, in Bernabéu's estimation, lacked the scale and panache to house what he intended to make the preeminent club in Europe. Bernabéu purchased the land for the club's new stadium in June 1944, broke ground with a symbolic pick in October, and watched his club play its first match in the stadium, originally named La Castellana, in December 1947; Real Madrid won. The stadium, which originally held mostly standing crowds of 75,000, became one of the most famous football grounds in the world, but not as La Castellana. In 1955, when the stadium could accommodate 120,000 fans, La Castellana was renamed Estadio Santiago Bernabéu as a tribute to the individual who was in the process of making Real Madrid the most successful club in Europe.

Real Madrid's claim of superiority was confirmed during the 1950s and reaffirmed during ensuing decades. In 1955, the same year the club's stadium was rechristened as the Bernabéu, a new European tournament was created, one that would represent the ultimate achievement of any club's season. The tournament, known as the European Cup until it was re-branded as the Champions League in the 1990s, ran concurrent with the football season (August to May), pitting the continent's best clubs against one another. Real Madrid won the first tournament and proceeded to win the next four, quickly distinguishing itself as the most successful club in the most prestigious tournament. The club also began asserting itself in its domestic league during the 1950s, winning its first league championship in 21 years during the 1953-54 season. Real Madrid won three more league championships during the 1950s and thoroughly dominated the Spanish first division during the 1960s, securing eight league championships during the decade.

When Bernabéu's presidency ended in 1978, Real Madrid held sway as the champion of champions, boasting a record of success that only one or two clubs in the world came close to emulating. During Bernabéu's 35-year presidency, the club won six European Cups, six Spanish Cups, and 16 league championships: trophies that earned the club an enormous fan base whose presence gave Bernabéu's successors the leverage flourish in the modern era of football. In the decades following Bernabéu's seminal leadership, Real Madrid built on the legacy of its most influential leader, adding four Spanish cup titles by the early 1990s and winning five consecutive league championships during the second half of the 1980s.

Real Madrid Preparing for the 21st Century

As Real Madrid entered the 1990s, the club, along with the ranks of other top-tier clubs, also entered the age of high-stakes football. The financial rewards to be won both on the pitch and on the business front grew enormously during the 1990s, becoming a new benchmark of success for the world's elite football organizations. Transfer fees--the amount paid for one club to purchase another club's player--salaries, and television revenues increased exponentially during the decade, driving the development of the sport into the realm of big business. To reap the financial rewards of the club's success and to pay for the talent to ensure its continued dominance, Real Madrid's management needed to market the Real Madrid name with the same zeal accorded to a consumer product. The club needed to be popular not only in Spain but also throughout the world. "These days football clubs are marketing brands, not just teams," Real Madrid's general director said in a June 22, 2003 interview with the Washington Times. "It is no longer just a case of doing well or not on the pitch; that is not the only thing that matters now. It is not just what happens that matters, it's what you say happens. The image is important." Real Madrid, the brand, needed to have appeal in Africa, North America, and Asia, the expansive battleground of the world's leading football clubs as the 21st century neared.

At the turn of the century, Real Madrid's success on the pitch did much to promote the club's success as a brand name. It ranked as the second richest football club in the world, trailing only England-based Manchester United. The club's ownership structure as a private, supporter-based operation helped it defray debt among more than 100,000 Real Madrid club members and freed it from investor scrutiny, facilitating the purchase of the best players in the world. (Manchester United, in contrast, operated as a publicly traded company). "They are the best team and that sells itself. Players go where the money is," a Madrid sportswriter said in the April-May 2003 issue of Soccer Digest. "Real Madrid, apart from being a soccer team, is also an economic force." The prestige of the club, coupled with its supporter-owned structure, aided in the purchase of star players nicknamed "Galacticos" by the Spanish media, players such as Brazil's Ronaldo, France's Zinedine Zidane, and Portugal's Luis Figo, each a winner of the Fédération Internationale de Football Association (FIFA) Player of the Year Award. With the skills of such players, Real Madrid celebrated its centennial season by beating Germany's Bayer Leverkusen to win its ninth European Cup, the third European Cup won by the club in the previous six years.

Off the pitch, Real Madrid's greatest challenge during the first years of the 21st century was executing a global marketing strategy. Despite its stellar achievements, the club had a weakness. Its closest rival in terms of fiscal dominance was Manchester United, a club that had spent the late 1990s and the first years of the 21st century expanding its television exposure, completing international tours, and marketing troves of merchandise to ensure that the Manchester United brand name penetrated markets throughout the world. Real Madrid, in contrast, lacked marketing muscle in the United States, Africa, and the Far East, thereby reducing the revenue-producing potential of the club. In mid-2003, in one of a string of high-profile player acquisitions completed during Florentino PĂ©rez's presidency, Real Madrid strengthened its position overseas, signing Manchester United midfielder David Beckham in a $41 million deal. The acquisition made sense for several reasons, giving Real Madrid a player with an enormous fan base cutting across all demographic, geographic, and socioeconomic lines. Beckham, for instance, made his Real Madrid debut during a tour in Asia, where he was hugely popular, boosting the esteem of the club in an important market. Further, Real Madrid, unlike most clubs, insisted upon retaining 50 percent of the "image rights" for each of its players, which meant that half of every endorsement deal Beckham signed as a Real Madrid player went to the club. Finally, Beckham was a talented player, skilled at free kicks and crosses, giving Real Madrid yet another superstar to ensure its supremacy on the pitch.

As Real Madrid prepared for its future, the club was guided by Florentino PĂ©rez. Elected president in 2000, PĂ©rez was re-elected by an overwhelming margin in 2004, but confidence in his abilities began to wane in 2005 when Real Madrid for the second consecutive season failed to win a major trophy. Not winning a major trophy for two years hardly represented a failure for any club in the world, but at Real Madrid expectations ran exceedingly high. PĂ©rez vowed to stay on, however. "Until 2008," he said in a March 15, 2005 interview with the America's Intelligence Wire, "I will continue here because club members are with us."

Principal Subsidiaries: Real Madrid Television.

Principal Competitors: F.C. Barcelona; Manchester United PLC; Milan A.C., S.p.A.


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