In the Boardroom with Real Mallorca
by Tariq Saleh
Alfonso Díaz, RCD Mallorca's chief executive of business, discusses the team's long-term commercial and internationalization plans, stadium redevelopment with the CVC investment, and economic challenges caused by the pandemic. Author
24th March 2022, 16:27

By Tariq Saleh

After multiple relegations in the last five years - which included a demotion to the Spanish third-tier for the 2017-18 season - Real Mallorca is now searching for a period of stability and is keen to re-establish a status as a top-flight LaLiga soccer club reminiscent of the glory days of the late 1990s and early 2000s.

The club is determined to fuel on-pitch results with shrewd work off it as the team’s American ownership looks to make good on the long-term goals they set after taking over six years ago.

In January 2016, with the team in the second-tier Segunda Division and on the brink of relegation to the third-tier, Mallorca was taken over by a US investment group featuring businessmen Robert Sarver and Andy Kohlberg, who also own the NBA’s Phoenix Suns, and former NBA legend Steve Nash after it went into administration.

Five months later, in the first season of US ownership, Mallorca was relegated to the Segunda Division B (Spain’s third division) for the first time since 1981. The club then secured successive promotions to reach the top-flight.

The concept of promotion and relegation, which does not exist in the major US sports leagues, was something the new owners had to quickly grasp and deal with.

Over the last five years, Los Bermellones (The Vermilions) have managed to improve their economic situation and settle their debts, allowing the club to now focus on growing its brand internationally, particularly on the commercial side.

“The American ownership group knows that these are long-term projects,” Alfonso Díaz, Mallorca’s chief executive of business explains.

“It was six years ago that we started our journey as we tried to bring stability to a club that was in a difficult situation. Bringing that stability and moving forward in a sporting and institutional sense was the first target.

“After stabilizing the club and cleaning it up, having been in administration and only just paying off this aid last season, we then looked to build the most professional and organized structure possible in order to grow.

Díaz continues: “Now, there’s a need to keep investing, but with investment that is made for growth and not just for solving problems that existed when the club was bought. We have put together a three-year plan that consists of trying to ensure we become a top 10 club in the business department.

“We’re close to the objective in sponsorship, while we still have a lot to do in ticketing and the indicators and KPIs in communications tell us that we’re close there. On a sporting level, I hope that in these three years we can be closer and closer to being top 10 in LaLiga.”

In the pandemic-hit 2019-20 season, Mallorca was relegated again to the second-tier. The demotion took a significant toll on the club financially, given the additional impact of the Covid-19 health crisis.

The double blow presented a major challenge for the club and its management team but, given the work put in behind the scenes in the previous seasons with the new ownership, Mallorca was well placed to deal with the circumstances and achieved promotion straight back to LaLiga in the 2020-21 campaign.

Having bounced around the divisions in recent years, the team had put strategic plans in place to deal with various situations.

“We felt an impact of around €7.5m ($8.4 million), which can be very significant for a club of our characteristics,” Díaz notes.

“That was made worse by the relegation to the second division at the same time. Of course, we didn’t like that, but we had become something of a specialist in promotions and relegations. This has led us to plan each season based on two distinct scenarios and to be able to adapt to the situation so that relegation isn’t such a surprise.

“When you are relegated, you have a [economic] support that gives you some leeway to be more competitive sporting-wise that year. Then, in the business department, we tried to remain an attractive brand and, within what was possible, to separate that and make it less susceptible to what happened on the pitch.

“That is difficult, but we managed to do that and we’ve experienced a lot of loyalty from sponsors, who have wanted to stay with us despite the relegation because they believe in the brand and the project.”

Stadium redevelopment

Situated in Palma on the Balearic island of Majorca, the region is one of the most popular tourist locations in Europe. With that in mind, the hierarchy at the LaLiga club believes the time is right for a stadium upgrade that can stage multiple events year-round outside of soccer matches.

Notably, the team’s 23,000-seat home, previously known as San Moix, was renamed the Visit Mallorca Stadium in an effort to reactivate tourism on the island following the pandemic.

The stadium was built in 1999 for the Summer Universiade multi-sport event and was leased to Mallorca for 50 years. It has not undergone any significant changes in over 20 years, much to the frustration of the LaLiga club.

The team has even previously explored the possibility of building its own stadium following disagreements with the owners over renovations.

But, at long last, the two parties have finally overcome that hurdle and agreed to work together on modernizing the venue and its capabilities.

“We’re updating for the 21st century a stadium that isn’t that old but that maybe wasn’t built with a competition as important as LaLiga in mind,” Diaz explains.

“Basically, we want this stadium, which is a major building in the city, to be a venue for the city and its people. Little by little, this is being achieved and this space is being opened up so that it could be used 365 days per year and not just 19 or 20 times when there is a football match. The city and its people should be able to enjoy this venue with facilities that can be used for social, sporting, and entrepreneurial activities.

“We also want to work on sustainability and energy efficiency. Economically, we don’t want to put the future viability of the club at risk and that’s why we have sought a responsible project.

“Then, lastly, if we talk about the actual football match experience, we want to bring back the experience of a stadium with stands that are close to the pitch so that our fans have all they need, as the current situation with the athletics track encircling the pitch can dampen the atmosphere.”

Despite not being able to carry out major renovations to the stadium, the LaLiga side has looked for innovative ways to generate additional matchday revenue, notably through the creation of premium hospitality spaces and matchday packages.

The packages include Spanish soccer's first ‘tunnel club’ and a ‘VIP corner’ - known as the Footprint corner with the US engineering company holding naming rights - with additional benefits such as pitchside seats and post-match meet and greet opportunities with the players.

“We started to do this when we were playing in the Segunda B and it has become a part of the culture of the club,” Diaz notes.

“We have to be a different and innovative club and we can’t be scared to try new things. As a matchday experience, it allows you to attract the types of clients who want something different and who aren’t interested in sitting in the normal stands, as they want to experience something unique.

“Here on the island, given the demographics we have, there are many people who might want this. What we want is for there to be spaces for all types of possible fans.”

The refurbishment of the Visit Mallorca Stadium will largely be funded by capital from the LaLiga Impulso project, the recently struck 50-year commercial partnership between the league and the private equity firm.

Mallorca was one of 38 teams across Spain’s top two divisions to vote in favor of the tie-up and will benefit financially as the firm is due to invest a total of €1.99 billion into the league and its clubs.

The 38 clubs received an initial financial injection of €400 million ($433 million) from the deal in January and a further €298 million ($322 million) in early February.

LaLiga and CVC recently formed a new holding company known as LaLiga Group, in which CVC will hold an 8% stake for the next 50 years.

The first two financial payments made to clubs represent 35% of the €1.99 billion figure. The first €1 billion of investment will have been received by July 2022, with the remaining capital due across 2023 and 2024.

“We supported the deal with CVC 100%,” Diaz says. “It’s more than an economic issue, as it is an agreement with an industry partner that is going to collaborate with us and that wants LaLiga to grow its structure even further.

“This is a long-term project in which the clubs need to grow structurally so that LaLiga can get better, be stronger, and have more capacity for outreach. As for investing in projects, when it comes to infrastructure, we want to grow through the redevelopment of our stadium and through the development of facilities at our sporting complex.

“Having a better stadium will allow us to grow the fanbase, to attract different kinds of fans, and to increase revenues, while the audiovisual offering will be much better for LaLiga. Then, a sporting complex with better facilities and more technology will help to attract better players to the club and, consequently, to LaLiga. The digitalization and technology area is fundamental, as is the internationalization project with the Mallorca brand.”

Commercial growth

One way the club is seeking to grow its brand globally is through increased commercial activity.

Diaz outlines that since the American ownership took charge, the club’s management team has been working to restore the Mallorca brand after multiple relegations.

Mallorca’s business lead works closely with Kohlberg, who serves as the club’s president, on commercial matters and has been keenly focusing on internationalization efforts in recent years.

A key target market for the club is Asia and signed Japan’s Take Kubo and South Korea’s Kang-In Lee in an effort to boost its profile in the region.

After the arrival of Kubo in the 2019-20 season, Diaz claims Mallorca was the team with “the greatest television audience in Japan” but admits the team did not capitalize at that moment, particularly in terms of fan engagement.

But the club eventually worked with Amazon to create digital content and launched social media profiles in Japan this season, while also securing key commercial agreements in Asia.  

Japanese technology company Taica Corporation signed up as Mallorca’s principal shirt sponsor this season, with its technology, multi-functional material brand αGEL (Alpha GEL) adorning the front of the team’s kits.

“When the club is stabilized, we can start to think about growth,” Diaz says.

“Obviously, part of this growth comes with the internationalization of the Mallorca brand. We have been working since the 2019-20 season on this, especially in the Asian market. With the arrival of Kubo, we got to work and the results were very good.

“We are close to finishing a docuseries with a Japanese company, where we’ll talk about the club. Having Kubo is important, but our focus is for the content to revolve around the club as a whole so that we can consolidate our brand, our vision, and our philosophy to be able to grow in that region.

“In terms of sponsors, we’re seeing that the internationalization of the brand that we want to happen is truly taking place.”

Diaz added that the natural next step for the club is to expand into the US due to the ownership group.

Mallorca already has a knowledge-sharing agreement with the Suns which has helped boost commercial activities. Footprint and online payments system PayPal have sponsorship deals with both the LaLiga outfit and the NBA franchise.

The Spanish league is also reaching more eyeballs in the US this year through its new eight-year broadcast rights deal with major sports network ESPN.  

Following six years of work behind the scenes, Diaz ultimately believes Mallorca is now in a position to thrive commercially.

“From the first day we arrived, we have been working to recover the Mallorca brand, which had been weakened,” he outlines.

“We believe that we’re now an attractive brand internationally and that this has worth to the brands that work with us. The pandemic had an impact on all companies around the world, along with the difficulty that comes from the drastic reduction in businesses’ marketing efforts. What we have tried to do is show that we are a good place to enjoy a good return on brand investment.

“Having a product like LaLiga means it makes sense for sponsors to get involved. There are various strengths, such as this being a destination that is touristic, sporting and international and the fact that the club has such well-established owners who also have an NBA team, where three-way agreements could be reached.”