Starting With Real Madrid

Despite mixed reviews from the outside world, all European club operators must admit that the UEFA Financial Fair Play Act, implemented by UEFA in 2010, has completely changed the landscape of European football.

Many people associate the act with balance of payments and late payment penalties, but it actually contains much more detailed regulations.

For instance, regarding balance of payments, UEFA clearly stipulated that starting from 2014, a club's wage expenditure must not exceed 70% of its total revenue.

This provision is especially important.

In August of this year, the Spanish Economist conducted a survey of the 20 La Liga clubs. The only club able to meet this wage-to-revenue ratio was Real Madrid.

At that time, a total of 200 players from La Liga and the Segunda División were owed wages amounting to 52 million euros. This sparked a players' strike that resulted in the postponement of La Liga's opening round.

Media outlets also published financial statistics from the 09/10 season, showing that the total revenue of the 20 La Liga clubs was 1.61 billion euros, while total expenditure reached 1.823 billion euros—a deficit of over 200 million.

It was La Liga's fourth consecutive season in the red.

Among them, only Real Madrid kept wages within 70% of income. Even Barcelona failed to meet this benchmark.

According to Deloitte data, Barcelona's revenue in the 09/10 season reached 415 million euros, becoming the second club in Europe after Real Madrid to surpass the 400 million threshold. However, their pre-tax wages and bonus expenses exceeded 300 million euros, accounting for 77% of revenue.

In other words, Barcelona had already breached UEFA's warning line.

The Economist noted that although two years have passed and Barcelona has worked hard to increase income and reduce expenses—especially under Rosell, who implemented cuts in administration, La Masia, and the first team—the club still posted losses. Renewals with core players like Messi, Iniesta, and Xavi only further increased the wage-to-revenue ratio.

This is a very tricky issue.

Keep the players, and wage pressure rises after contract renewals. Sell them, and the team's competitiveness drops. It's a tough balancing act.

In this regard, Real Madrid can be seen as a model club. Florentino has maintained tight control over the wage structure, always keeping the team within a reasonable range.

Gao Shen told Su Qing and Lucas that they must learn from Real Madrid's financial discipline.

Once the warning line is breached, it's time to sell.

Of course, Leeds United's situation is not that severe yet.

The ratio Su Qing mentioned as being too high is only that way because transfer income was excluded.

If transfer income is added, Leeds United's ratios actually look quite healthy.

However, in European football, player sales are rarely included when assessing a club's financial health, because everyone knows that this kind of income is one-off.

Back when Gao Shen was in the City of London, he heard plenty of amusing tales from bankers about how foreign club owners were duped. For instance, some clubs would sell players year after year to make their finances look good, while using loans or free transfers to fill out their squad and maintain competitiveness.

As a result, their performance seemed solid, they stayed in the league, and their finances looked pristine—like a golden goose—attracting droves of investors.

Just think about it: a club that makes money and plays well? It looks like a top-tier asset.

But once acquired—bam! The trap is sprung.

The loaned players return to their parent clubs, the veterans begin to decline. If you want to avoid relegation, you have to spend.

Over the years, countless investors have been tricked like this.

But anyone who truly understands football would never judge a club solely by its player transfers.

Even a club like Ajax can't guarantee it will successfully sell big-name players every year.

It's just not realistic.

Within the industry, there's another metric that insiders look at: the proportion of match-related income within the club's total income.

It's somewhat similar to the way Ronaldo and Messi earn money. For players at that level, salary income is only a small part—sometimes less than 30%. The bulk of their earnings comes from commercial sponsorships.

By the same logic, the larger and more powerful the club, the lower the proportion of match-day income in its total revenue. Among the three major pillars of revenue—match-day income, broadcasting rights, and commercial operations—match-day revenue should account for the smallest share, while the latter two carry more weight.

But in lower-tier leagues like the Championship, forget it. Match-day revenue dominates.

Still, in the era of capital-driven football, never underestimate the shrewd operators.

Because of the Premier League's parachute payment policy, there's been a rise in "yo-yo clubs."

These clubs exploit the massive income and cost gap between the Premier League and the Championship to turn a profit.

For instance, to earn promotion from the Championship to the Premier League, you need to spend roughly £30 to £40 million—assuming competent management.

That estimate includes player and coach salaries.

If managed properly, your wage bill often reflects your level and competitiveness.

But once you're in the Premier League, your annual cost balloons to over £100 million.

Many clubs, after being promoted, don't spend much. They hold on for a season, then get relegated. But thanks to the parachute payment scheme, they thrive in the Championship.

The net profit? Around £100 million.

If that club is relatively young, and the players have gained experience in the Premier League before being relegated, it's still a success story. If one of those young players gets picked up by a Premier League side, that's another £10 to £20 million in the bank.

Thanks to the parachute policy, these clubs can still outperform their Championship rivals after relegation. They have a much higher chance of bouncing back.

So, in a way, running a club can be profitable—it just depends on how you want to make money.

For Gao Shen and Leeds United, the worst-case scenario is turning into a yo-yo club, cashing in on short-term gains each year. Once they reach a certain valuation and find a buyer, they can cash out.

But that clearly isn't what Gao Shen is after.

If he were purely chasing profits, he wouldn't be operating the way he is now.

For example, he wouldn't be pouring so much money into transforming the club or recruiting elite staff—raising Leeds United's staff salary bill above that of the players.

The reason he's doing all this is simple. He's laying the foundation.

Since taking over Leeds United, Gao Shen has been building for the long term.

From training facilities to the big data center, the methodology department to the scouting network—it's all part of a long-term vision.

If it were about making money, he wouldn't need to do any of that. He could have used his connections to loan players from major clubs, gained promotion, then taken the club public or sold it for a high price in the City of London.

With his network, that wouldn't be difficult.

…

"By the way, how's our documentary project progressing?" Gao Shen asked with interest.

He had always placed great importance on the documentary.

When Leeds United first expressed interest in creating a documentary, Gao Shen and Lucas immediately reached out to contacts at Channel 4. Known for its experimental, reformist, and innovative programming, Channel 4 had recently turned its focus to the internet and mobile content.

Once Gao Shen and Lucas proposed the idea, Channel 4 jumped at the opportunity and partnered with Leeds United. Both sides invested equally in a documentary about Leeds United's push for the Premier League. They even brought in Louise Osmond, the International Emmy Award-winning documentary director.

This female director had a longstanding relationship with Channel 4 but was low-profile. Many didn't even know her name, but her storytelling ability was top-notch, especially in male-centered documentaries.

As a woman, she brought a unique perspective and subtlety in deconstructing men and the worlds they live in.

For example, her Emmy-winning The Call of Silence, based on the bestselling book, followed climber Joe Simpson's attempt to scale the north face of the Eiger, a mountain that had claimed more than sixty lives.

Gao Shen and Su Qing watched the documentary and were blown away. When they spoke with Osmond, she was also very intrigued by the project. After all, what's a more dramatic and masculine story than football?

The entire Leeds United team gave full support to the filming. Osmond's crew even entered the dressing room before and during the Leeds vs. Manchester United match—proof of the club's commitment.

The first episode of the documentary starts with the Leeds vs. Manchester United derby.

That game provided a natural storyline. It was dramatic and emotionally charged, especially given the state Leeds was in at the time.

During that period, Osmond and her team roamed the streets of Leeds, mingling with fans from all walks of life and capturing a wealth of engaging footage.

She said that she didn't just want to record matches—she wanted to show the culture of Leeds United, and why these fans still stood by a club that had gone bankrupt.

Ultimately, her goal was to illustrate the close bond between football and community in the UK.

That's the kind of ambition you'd expect from an International Emmy Award winner.

The documentary is already titled Elland Road.

"Since the Manchester United game, they've been filming non-stop. They want to capture the promotion journey, as well as Leeds United's history and football culture, from the perspectives of fans, players, and club executives. They've recorded a lot of material," Lucas said excitedly.

At first, it was just Gao Shen's idea, but once it took off—and especially after Osmond came on board—the entire project rose to a whole new level.

The investment stayed within the club's budget, and with Channel 4 involved, the quality and scope were miles above what anyone expected.

"I spoke to Channel 4. They've decided to air the first episode, Rose Derby, on Boxing Day, right after Christmas. It'll also be released on various online platforms, including in China."

Gao Shen nodded, full of anticipation.

(To be continued.)