Cristiano Ronaldo is celebrating his 30th birthday today. He's worth $250 million, he's dating one of the hottest women in the world and was recently awarded his second consecutive Ballon d'Or, which is given annually by FIFA to the best player of the year. His club Real Madrid is very happy with his performance. Seems like he is large and in charge, yet thanks to some absolutely insane contract stipulations, I don't think you'll see Ronaldo wear any other uniform for the rest of his life…
Earlier this week, we posted an article detailing the ins and outs of soccer loans and transfer fees, but we really didn't delve into the concept of "buyout clauses." Buyout clauses are common in many professional soccer contracts. In fact, they are mandatory for all players on Spanish teams like Ronaldo's Real Madrid or Lionel Messi's Barcelona.
The buyout clause is exactly what it sounds like. It's an amount of money a player would have to pay his team if he ever wanted to jump ship. There are positives and negatives for both sides. For the team, the buyout clause provides extra layer of protection so their best players won't leave. And if they do leave, the team gets some money. For the player, the buyout clause offers a level of flexibility that doesn't exist in any American sports contract. If an American football player is upset with his team and wants out, tough luck. If a soccer player in Spain desperately wants to go somewhere else, he can make a move even if his contract is nowhere close to being up for renewal.
The challenge for the player is that buyout clauses are typically set at astronomically high prices. To make it even more complicated and expensive, the player technically has to pay the fee himself. Typically, the acquiring team fronts the money, but it ends up getting taxed TWICE. Once when the player receives the money, and again when it is transferred to the current contract owner. By the way, this is all before the transfer fee is paid or before a contract is offered to the actual player.
Here's how crazy this gets for superstar players like Ronaldo:
Yesterday, Ronaldo's agent Jorge Mendes, explained to BBC Sport that it would be essentially impossible for his client to ever leave Real Madrid. Why? Because Ronaldo's buyout clause is £1 billion pounds. That's roughly $1.51 billion. So if Ronaldo wanted to leave Real Madrid, he'd have to pony up $1.5 billion from one of his own bank accounts.
At that point, Ronaldo would be free to seek offers from any other team in the world. But then, according to Mendes, the acquiring team would have to pay Real Madrid a transfer fee of £300 million pounds. That's $455 million dollars. Add the two fees together, and that's nearly $2 billion. And it's not over! After paying Real Madrid $2 billion, the pursuing club wouldn't have Ronaldo on their roster until they also offered him a contract, which would likely be another several hundred million dollars.
On the flip side, if Real Madrid ever wanted to voluntarily let Ronaldo go, they could do that and the buyout clause would be waived. The acquiring team would "only" have to come up with the transfer fee and Ronaldo's contract money.
FYI, in 2009, Real Madrid paid a then record setting £80 million pounds to snatch Ronaldo from Manchester United. The current record for a transfer fee is the £85 million pounds Real Madrid paid in 2013 to acquire Gareth Bale from Tottenham Hotspur.
Only a few Premier League transfers have reportedly had release clauses. Striker Demba Ba transferred from Newcastle to Chelsea for £4.5 million pounds, or about $7.3 million, and midfielder Joe Allen transferred from Swansea City to Liverpool for £13.5 million pounds, or roughly $21 million U.S. In Allen's case, the bid could only trigger the release clause if it came from one of five clubs, including Liverpool. Adding in the wages, Liverpool had to pay over £15 million pounds for Allen.
No other contract comes anywhere close to Cristiano Ronaldo's in terms of the buyout clause and transfer fee. So I hope he's happy in Madrid!