The cutthroat art of the deal

When Zinedine Zidane’s nuclear volley rocketed into Bayer Leverkusen’s goal shortly before halftime, securing a record ninth European championship for Real Madrid last week, it only added to his legend as the world’s best soccer player. It also fueled the argument over whether Zidane’s excellence can ever approach the price Real Madrid paid for him.

Unlike athletes in the United States, who often join new teams in exchange for other players, soccer players around the world are almost always bought and sold for cash, straight up. Zidane, in other words, is a pure commodity, examined as much for his impact on Real’s balance sheet as he is for how many trophies he puts on its mantel.

The biggest trader in the specialized commodity of soccer superstars is Real Madrid’s 70 year-old president, Florentino Pérez, the wealthiest construction magnate in Spain.

In 2000, Pérez set a world record by paying Real’s biggest enemy, FC Barcelona, $57 million for Luis Figo, the Portuguese star who went on to become world player of the year.

Then he smashed that record last summer by shelling out more than $65 million to pry Zidane — Figo’s two-time predecessor as player of the year and the centerpiece of France’s reigning World Cup champions — from Juventus, the giant club in Turin, Italy.

It was the sixth straight year that the world transfer record had been broken.

Only the best will do
Real Madrid officials declined to be interviewed about the finances behind Zidane’s transfer. In a statement, the club said: “There are players who are born to play at Real Madrid and he is one of them. He fits perfectly into the culture of this club. The best team in the world must have the best players.”

 That policy comes at a price. As recently as last year, Real, which operated in the red for most of a decade, reported debts of $246 million, which it was able to wipe out only by selling its training field to the city government and by negotiating creative marketing deals that leverage the popularity of Zidane and Figo.

But it also comes with great rewards. Besides its nine European championships, Real has twice won the World Club Championship, and at home, it has won 28 Spanish league titles.

Such success leaves a lot of bruised feelings, not least because the international soccer market rewards rich clubs disproportionately.

Barcelona did not want to sell Figo two years ago; indeed, it threatened to go to court to prevent the sale. Neither did Juventus want to sell Zidane.

But both deals were such forgone conclusions that Figo and Zidane signed contracts with Real while still under contract with their old clubs. In fact, Pérez announced his agreement with Figo before he had even been elected Real’s president — he made the prospect of Figo’s donning Real’s pristine white uniform the main plank in his campaign.

Although both Barcelona and Juventus are powerhouses, they are not in Real Madrid’s league financially, and they essentially had no choice but to relinquish the players when Real came calling.

 All they could do was hold out for the best deal, for which they were harshly criticized. Zidane’s agent, Alain Miglaccio, told a Spanish newspaper last June: “The decision has already been taken to leave, and I can’t understand why [Juventus] will not accept it.”

No choice in the matter
Eventually, Juventus had to surrender, said Dr. Bill Gerrard, an economist at the University of Leeds Business School in England, whose areas of specialty include the finances of international soccer.

“It would appear that Juventus were prepared to let the player go and hence allowed him to negotiate with Real Madrid,” Gerrard said.

The irony, Gerrard said in an interview, is that the European transfer system, which dates almost to the beginning of soccer as a professional sport, was meant to “encourage competitive balance by ... limiting the concentration of talent in top teams.”

The system “went hand-in-hand with limits on player wages,” he said, but economic forces in recent years and a key legal ruling eliminated those limits and knocked the structure out of balance.

The turning point came in 1995 when the European Court of Justice found in favor of a complaint by Jean-Marc Bosman of RC Liege in the Belgian league.

When Bosman’s contract expired in 1990, Liege refused to sell him to a rival team and merely offered him a new contract at a dramatically lower salary.

At that time, European soccer players remained the property of their clubs when their contracts ran out, much as U.S. baseball players did before the landmark Supreme Court ruling in the Curt Flood case granted them free agency in 1972. That meant that Bosman seemingly had no options other than to accept the new deal or retire.

Instead, he sued, arguing, as did Flood, that the system amounted to restraint of trade. The European court agreed, and since then, such players have been free to move on to new clubs without compensation for their former clubs.

Numbers go through the roof
Although the ruling applied only to nations in the European Community, the confederation of European soccer, known as UEFA for its initials in French, insisted on a uniform transfer system and applied the ruling to its much larger membership.

Confirming the fears of many clubs, players’ salaries skyrocketed as superstar free agents were free to negotiate their own deals with the highest bidder, just as they did in the United States.

But there was a less expected and even more important effect. Since 1995, transfer fees for the best players have also exploded as many European clubs became the prey of richer clubs that came waving their checkbooks.

Faced with bankrupting themselves in a spending war to re-sign their stars or ripping the heart out of their teams for mountains of cash, many smaller clubs conclude that there is no choice at all.

As a result, the best players are increasingly congregating at a handful of the richest clubs in Europe. Real Madrid, for example, has accumulated so many stars that some who will start for their national teams at the World Cup next month don’t even make the bench at Real.

The extreme case of Luis Figo
Pérez announced himself with the transfer of Figo two years ago. It was a personal triumph, a breathtaking coup in which he managed to wrest a player generally considered one of the five best in the world away from his club’s bitterest rivals, who didn’t want to sell him in the first place.

 The deal cemented Pérez’s reputation as a force of nature intent on winning, no matter who got in the way.

When Juventus sold Zidane to Real, General Manager Luciano Moggi complained that “Perez is always trying to force situations.” But, Moggi told reporters at the time, “when he was trying to sign Luis Figo, his behavior was even worse.”

Unlike Juventus, which eventually agreed to let Zidane negotiate a deal with Real, Barcelona fiercely fought Pérez’s campaign to buy Figo. At one point, Barcelona threatened to report Real to FIFA, the world governing body of soccer, for negotiating with Figo while his contract was still in force.

Pérez took advantage of a loophole in Spanish soccer that says a player must be released from his contract for a predetermined fee. The fees are essentially indemnities, set exorbitantly high to abort missions like Real’s.

In Figo’s case, it was $57 million, but even though Real was deeply in debt, Pérez decided Figo was worth it.

Then Pérez inserted an astonishing clause in his personal contract with Figo to ensure that the player would show up. If either side backed out of the deal, it would have to pay the other $28 million, which Figo did not have.

With Figo bound in a financial straitjacket, and with Barcelona’s indemnity clause deemed to be no obstacle, Barcelona was backed into a corner, even though it had negotiated a massive new contract with Figo only the year before.

Complicating matters further was that Barcelona’s presidency was up for election at the same time. Although both leading candidates promised to fight to keep Figo, neither of them had the job yet. And the outgoing president washed his hands of the matter, leaving the club’s board of directors to sort things out.

 Result: a then-world record $57 million transfer, and even worse relations between the two giants of Spanish soccer. Figo, once the centerpiece of a great Barcelona team, today is so hated at the Camp Nou stadium that he has managed to be either injured or suspended almost every time Real has played there, thereby avoiding the abuse of 100,000 fans convinced to their cores that he betrayed them.

No end in sight
FIFA has taken a stab at reforming the transfer mess, but most experts see the effort as ineffectual.

“The long-term trend is towards domestic leagues being dominated by the biggest teams and European tournaments dominated by teams from the Big 3 leagues — England, Italy and Spain,” said Gerrard, the University of Leeds expert.

“Clearly, to the extent that fans ... value competitive balance, there are significant long-term concerns for the sporting and financial viability of European soccer,” he said.

Meanwhile, even as it celebrates its ninth European championship and as most attention is focused on the World Cup, Real Madrid is up to its old tricks.

Real is trying to pry French national team star Patrick Vieira away from Arsenal, the new English Premier League champion, to the tune of $42 million — even though he has two years left on his contract.

This time, Real may not get its man. Unlike Figo and Zidane, Vieira does not want to leave. And with a new stadium in the works, Arsenal, already a powerfully rich club, probably has enough financial clout to withstand Real’s pressure.

But never fear. As a backup strategy, Real already has its sights set on Andrei Shevchenko, the superstar Ukrainian striker for AC Milan.