15 “Ranking Sports Popularity: And the silver goes to . . .”. Economist. http://www.economist.com/blogs/gametheory/2011/09/ranking-sports’-popularity.
16 I spoke to a leading sports industry mergers and acquisitions expert who has sold many leading sports franchises. He agreed that theoretically Real Madrid should be the most valuable sport team because of their sustainable economic-sport model, differentiated brand, and large global fan base in the world’s most popular sport. The potential buyers could be larger and more global than those for North American sports teams. A possible list would not only include billionaires who could leverage the sports team and its stars playing friendly games abroad to help their image and companies but also sovereign wealth funds, such as Qatar Investment Authority buying Paris Saint-Germain to help promote a country. In addition, unlike North American sports leagues where other owners must approve a potential buyer (which could restrict interest or those eligible), there are no such restrictions in European soccer. However, he raised the issue that at some point the potential valuation amount is so large that the potential buyers for the entire amount become limited, which could restrict the valuation.
17 The revenues by given years can differ or be inconsistent because of different season ends, different fiscal years, and currency exchange moves. The revenues for Real Madrid’s 2013–14 season were €550 million ($726 million).
18 Games between two rivals of close geographical proximity are usually called a “local derby,” or simply “derby.” In North America, the term “crosstown rivalry” is used.
19 This example is illustrative, but can be a little misleading. It is important to note that teams in the lower divisions in European soccer are not farm teams and are independent. Affiliated teams cannot be in the same division or league.
20 In the English Premier League, for example, there is a “parachute system” of payments for a few years to smooth out the financial impact of relegation.
AT THE CENTER of the Real Madrid way for success on and off the field are the values of their community and the resulting culture. Simply put, the shared ethos, expectations, and values of the Real Madrid community dictate the operations, behavior, and mission of every aspect of the entire club. The values and expectations of the community drive the decision-making throughout the organization, from on the field (in player selection, player behavior expectations, style of play, and priorities) to off the field (in business and management characteristics, strategy, marketing, investments, financial reporting, human resources, and technology). The Real Madrid management team spends their time reinforcing and solidifying increased personal connections, relationships, and communication directly with their community members. Management also pushes the community’s values throughout the organization and to their players. Management’s goal is to help the community connect to their intense passion of living Real Madrid.
Real Madrid’s management team believes that the community does not exist to serve the business or management; rather, the club exists to serve the Real Madrid community. While the community has a shared identity as Real Madrid fans, the club recognizes that members and fans are individuals with a wide variety of needs, interests, and responsibilities.
Professor Susan Fournier from Boston University and Lara Lee, former executive at Harley-Davidson, wrote an article titled “Getting Brand Communities Right” in the April 2009 issue of Harvard Business Review. According to them, “A community-based brand builds loyalty not by driving sales transactions but by helping people meet their needs.”21 Essentially, that is what Real Madrid is doing. The club is constantly trying to better understand their community members’ values, give them what they want, and improve and inspire their lives. They learned that those needs are not just about gaining status or identity through brand affiliation. Fournier and Lee wrote, “People participate in communities for a wide variety of reasons—to find emotional support and encouragement, to explore ways to contribute to the greater good, and to cultivate interests and skills, to name a few. For members, brand communities are a means to an end, not an end in themselves.” To this idea, Real Madrid would most likely add that their members participate in their community to be empowered, inspired, escape, enjoy, celebrate, connect, share, and socialize. Real Madrid seeks to help raise the self-esteem, self-confidence, joy, and happiness of hundreds of millions of people around the world. The community—the people—is the foundation. The reasons why Real Madrid’s community members participate are different, but the jubilation—and sometimes tears—unites them all. For Real Madrid’s fans and members, the community is a “means to an end, not the end itself.”22
Therefore, the management team put at the center of their strategy the members’ and fans’ values and expectations. For example, if the community wants content to share, Real Madrid seeks to provide the best and most relevant exclusive content in the best and most convenient ways through Realmadrid.com and their social media accounts. Technology enables the content for experiences and engagement to be scalable around the world. The access fuels the connection and passion, while the club’s traditions and rituals reinforce the identity association. Thus, Real Madrid’s community’s values, expectations, and desires became the touchstone for developing and aligning strategy, culture, and identity to win on the field and in business.23
With this approach, Real Madrid was able to bring together a passionate global community by creating a sense of belonging and shared values felt so deeply by fans around the world that they are synonymous with one’s identity and much more. It is impossible to tell where the fan’s identity and life as a Madridista and the club’s identity and purpose start and stop. There is no question that the identity of a Madridista and the club is one and the same. The history, feelings, and emotions are intertwined. The closest corporate examples would be Harley-Davidson, Ferrari, and IRONMAN, where in each case the brand and the identity, life, and lifestyle are absolutely intertwined. Owning a Harley-Davidson motorcycle allows you to be a member of the “HOG” (Harley Owners Group); buying a Ferrari allows you to be called a “Ferrarista”; finishing a 140.6-mile IRONMAN race allows you to call yourself an “Ironman.”24 The commercial power of the identity, life, and lifestyle is demonstrated by the fact that all three brands have thriving global apparel sales, sold both online and in specialized stores, yet none of them are apparel companies. A HOG, Ferrarista, Ironman, or Madridista benefits from the community with new friendships, a sense of belonging, shared experiences, recognition, and increased self-esteem. In addition, the internet and digital technology have allowed sophisticated, active community engagement.
At the center of everything Real Madrid is and does is their relationship with the community. The Real Madrid management team cares as much about bringing joy to the community and spreading and sharing the community’s positive values (far beyond the ninety minutes of a game) as they do about winning championships, in their unique way. In addition, they make efforts to reach well beyond their brick-and-mortar stadium venue via digital technology, social media, and a partnership with Microsoft; international and friendly exhibition games around the world; and Real Madrid supporters clubs to reinforce and intensify interaction and engagement.
The secret of the Real Madrid way is creating enterprise value from community values and expectations. Florentino and his Real Madrid leadership team figured out a sustainable, circular model to win both on and off the field (this is my interpretation and representation, not Real Madrid’s). The word
