In his last year at the helm, Macri faced a particularly tricky decision. He had received calls from several leading European clubs, all of which expressed an interest in Fernando Gago and Rodrigo Palacio, two young but prominent players who were considered instrumental to the team’s bid for continued success in Argentina and abroad. FC Barcelona’s president at the time, Joan Laporta, openly admitted that he was “gaga” over Gago, and he told Macri that he was determined to bring the twenty-year-old midfielder to Spain. But before Laporta could sign Gago, Real Madrid president Calderón swooped in with a $26 million offer. Gago himself jumped into the fray, telling the press that he preferred Madrid: “Between Real Madrid and Barcelona, I choose the white shirt,” he said.
Laporta was also interested in Palacio, after seeing him play in the derby against River Plate. He offered $22 million for the twenty-four-year-old striker, but Palacio seemed far from in a hurry to move to Europe—“I’m comfortable here,” he stated. Through his agent, however, he indicated that if he did stay at Boca Juniors, he now expected to receive a salary that would be substantially higher than that of his teammates.
Either offer was enough to wipe out the loss the club was expected to incur over the current fiscal year. “If we do not sell any players or generate more revenues in another way, we are bound to lose three million dollars over the year,” commented Boca’s general manager. With the pressure mounting and supporters demanding “titles, not money,” Macri was well aware of the difficulty of the challenge. “Whatever we decide,” he said, “there will be very unhappy constituents out there.”
* * *
Should Boca Juniors sell one or more of its players? The answer, as heartbreaking as it may be to Boca’s fans, is “yes.” The club has no choice—Boca Juniors operates a “talent-development” model that thrives on player sales. Like Real Madrid, Boca is in the business of producing soccer games and “selling” those to fans and advertisers. But unlike Real Madrid, it is also in the business of developing players and selling those to richer clubs. Even a cursory look at Boca’s finances reveals that it can only balance its books if it regularly sells its most talented players, often well before they reach the peak of their ability. Over the decade in which Macri was in charge, when the club was firing on all cylinders on the field and saw solid revenue growth as well, Boca would have reported a net loss of nearly $20 million if it had not sold any players. Instead, it earned a net income on player sales of $60 million, which comprised nearly a third of its total operating revenues. The truth is undeniable: Boca would be a perennial money loser if it did not sell at least one major player every year or two.
The same is true for most other clubs in Argentina, as well as in neighboring Brazil—another country known for having generated many world-class players—and indeed South America as a whole. While the continent’s top clubs are a good match for their European counterparts on the field, much less money circulates in competitions in South America. Even though soccer is at least as popular a sport on the continent, its soccer market is worth only $2 billion, whereas Europe’s is worth $17 billion.
Economic conditions are much less favorable in South America, and broadcast rights provide a good case in point. In 2006, the Argentine soccer competitions generated revenues of just over $30 million from television rights—“a small fraction of [the income from broadcast rights] in the main European markets,” as Macri rightly pointed out—and less than a third of what Argentine clubs make from selling players. Boca Juniors and River Plate, the most popular clubs, each received one-eighth of the total broadcast revenues, but that still puts them at a huge disadvantage compared to top European clubs. Real Madrid alone made $90 million from selling broadcast rights that year—and that was just before the club signed a lucrative new deal that brought the annual revenues from broadcasting up to over $200 million.
Similarly, Brazil’s soccer industry would quickly vanish without the sale of players. And this market, like so many others in the sports and entertainment worlds, has a winner-take-all structure: although hundreds of players are sold each year, as much as half of the total amount of transfer fees in 2006 came from one player, star forward Robinho, who moved from Santos to—you guessed it—Real Madrid. South American clubs are also at a significant disadvantage when it comes to international competitions. Prize money in the Copa Libertadores, for instance, is tiny compared to the huge windfall reaped by the top teams in the European Champions League.
No wonder, then, that Real Madrid was rumored to have offered Fernando Gago a salary of $3.5 million per year—fourteen times his salary at Boca. Confronted with such vast differences, Boca can do little to hang on to its players. “Transfers end up being a necessity for the clubs and for the players themselves,” Boca’s general manager told me. “At Boca, we can only pay one hundred thousand dollars per year to our young players, and five hundred thousand dollars to acclaimed stars. They can make ten times that kind of money at European clubs.”
The same inequality profoundly affects other sectors of the entertainment economy. Smaller film and television producers often cannot compete with the larger studios when hiring popular actors, and the same issue torments small “indie” labels when they try to counter the bargaining power of the major record labels. The bigger point, though, is that the factors that cause the inequality are often largely outside the control of any individual company. This is certainly the case in soccer: because of the wide gap between economic conditions in South America and those in Europe, clubs are inevitably dependent on the income from the “export” of players. It is difficult to envision a situation in which superstar players in their prime play in Argentina or Brazil. (The young Brazilian star Neymar seemed to be one player intent on bucking the trend, but even he could not keep declining offers from European clubs—he agreed to join FC Barcelona in June 2013.) With star players moving to Europe and transfer money flowing back to South America, a talent-development model seems the logical choice for a club like Boca Juniors.
As it often does, context dictates strategy. It is not a coincidence that the biggest media market in the world spawned Hollywood, the biggest magnet for film talent. Operating in a larger home market means that Hollywood studios can shoulder more expensive productions and more effectively compete with rivals in other countries—and get a head start on those rivals in the effort to build an international distribution infrastructure. Likewise, operating in a smaller home market puts Boca Juniors at a substantial disadvantage in the international competition for talent. What is perhaps most remarkable about Boca is that it has managed to compete with European clubs at all.
What is the secret to Boca Juniors’ success? First, just like Real Madrid, Boca has found a branding model that, if all goes well, is self-reinforcing. The club identifies and attracts promising young soccer players, and it employs a much-touted system to develop these players into professionals. Ultimately, a select number of superstars are sold to richer clubs, mostly in Europe. The resulting resources are fed back into the club, and the cachet of having its players reach the top of their profession helps Boca build its brand as a world-class developer of talent, which in turn allows the club to repeat the cycle. If Boca continues to execute the model well, its effectiveness and reputation as a talent “factory” will get even stronger over time.
Second, Boca Juniors is extraordinarily well positioned to execute every stage of this talent-development strategy, from unearthing talented youngsters to showcasing them to potential buyers. Argentina’s fascination with soccer assures Boca a large base of players to draw from, and the country’s culture supports the attempt by gifted athletes to become professional soccer players. Because of Boca’s enormous popularity, many young players are fans of the club, increasing the likelihood that, when given the chance, they will choose Boca Juniors over other clubs vying for their attention. As one young player put it to me when I visited La Cantera a few years ago, “We are Boca fans, and always dreamed of playing for Boca. It is
what we live for.”
Although soccer icon Maradona was not a product of Boca’s youth division, he has become a symbol of the club’s success. “The best soccer player of all time had to be a Boca man,” declared Boca’s centennial publication. Even when his active playing days were long behind him, Maradona remained a key figure at the club during Macri’s tenure. He could often be seen hanging out of his private box at the stadium to cheer Boca on—and what young player would not be inspired by the idea of one the greatest stars of all time urging him on?
Once at the club, young players have excellent opportunities to succeed precisely because Boca is such a strong exporter of talent. The frequent sale of stars creates openings for new players; at the time Macri was weighing the possible sale of Gago and Palacio, eight of the twenty players on the roster had come up through the youth academy. At home matches, Boca Juniors’ players are supported by one of the most enthusiastic fan groups in the world. The club’s hard-line fans—known as “La Numero 12” (meaning “the twelfth player”)—taunt opponents, creating an intimidating experience that gives the home team an undeniable advantage. Boca is also a mainstay in international competitions, which means that its players gain the experience of participating in highly competitive matches and also get more exposure among potential buying clubs. And Boca’s world-famous crosstown rivalry with River Plate helps, too: FC Barcelona officials came to pursue Gago only after they accepted an invitation from River Plate to attend the derby.
Over the years, Boca’s managers continued to make every effort to further strengthen the club’s position as a talent factory for soccer superstars. Pledging to bring along new players in a more systematic way, Macri invested heavily in La Cantera, beefed up the club’s scouting network, and opened a youth clubhouse next to Boca’s first team’s training ground. By 2006, the club hosted 120 young players between the ages of twelve and sixteen, the large majority of whom lived in its dormitories for free. All the players were initially enrolled in a ten-month program; those that performed up to expectations were invited to re-enroll. Beyond their training on the field, education was a constant focus: players were required to go to school and received supplementary classes in mathematics and English. “Only three out of every thirty players make it all the way to the top,” one of La Cantera’s coaches said. “Psychological balance is of critical importance for players who aspire to become international stars. We need to prepare them for the pressures they will encounter when they evolve in their careers. Education plays a key role in that character formation.”
* * *
Talent-development models can be found throughout the entertainment industry. Saturday Night Live, NBC’s long-running weekly late-night television program, is to aspiring comedians what Boca Juniors is to those seeking a career as professional soccer players. Joining the cast of SNL is often a stepping-stone to a career in television and film; on the long list of actors and actresses who got their start on the show are Jimmy Fallon, Will Ferrell, Tina Fey, Eddie Murphy, Bill Murray, Conan O’Brien, Amy Poehler, and Chris Rock. Lorne Michaels, the show’s executive producer, is known for having a keen eye for talent. His decisions can make or break careers. “Lorne has had a seismic impact on comedy,” Conan O’Brien once told the Hollywood Reporter, “but in my opinion his legacy, very simply, is that he has good taste.” Michaels elevated O’Brien from SNL writer to host of his own late-night venture in 1993. (Michaels’s deal with NBC gave him the right to name the host.) Another star who credits Michaels with her big break is Tina Fey, who after a long stint on SNL wrote and produced the NBC sitcom 30 Rock (a show about the network) and starred in several films. As Fey put it to an interviewer, “He put me on television, and no one else would have done that.” The success of SNL and its cast members has made Michaels a central figure at NBC Universal.
Disney’s cable network the Disney Channel is another striking example of a creative-talent factory. The Mickey Mouse Club, the program that kicked off the Disney Channel’s first broadcast in 1983, introduced stars such as Christina Aguilera, Ryan Gosling, Shia LaBeouf, Britney Spears, and Justin Timberlake. In more recent years, the channel has given teen stars Miley Cyrus, Zac Efron, Vanessa Hudgens, and Selena Gomez their first shot at fame. Many children hoping for a career in show business now dream of being chosen as a cast member on a Disney Channel show, and the channel holds open auditions every year, attracting thousands of hopefuls. All those contenders, in fact, have spawned a cottage industry that feeds off their dream: casting agents masquerading as talent feeders for Disney, events targeted at kids that promise to increase their chances of getting cast, and acting schools led by actors with “the slimmest of Disney credentials,” as a reporter documenting some of the more questionable practices around the casting process put it. Every time a young actor is fashioned into a star by the channel, and every time a former child star makes it big in a subsequent move in the world of television, movies, music, or Broadway, the Disney Channel brand as an originator of such talent becomes stronger, giving it a greater pull with the newest crop of hopefuls.
Smart managers will find ways to capitalize on their companies’ talent-development prowess and benefit from whatever next steps their talent chooses to take—indeed, this is the only way to sustain such development efforts over a long period. Disney’s executives, for instance, see the Disney Channel as a launching pad for its stars’ careers within the wider organization. It is no accident that Walt Disney Pictures produced and released a successful concert movie, Hannah Montana & Miley Cyrus: Best of Both Worlds Concert, based on Miley Cyrus and the character she plays on her show. Similarly, Cyrus was for a time one of the biggest stars on the roster of Disney’s record label, Hollywood Records. (She left the label in the summer of 2012.) Because Disney’s executives have an inside look at which children show star potential and can collect a wealth of information on how their young actors work (whether, say, they can memorize hundreds of lines or deal with an especially challenging dance number), they can move faster and more confidently when signing them up for other projects. And because Disney executives control which shows the young actors are cast in—or even which formats are developed for certain actors—the executives are in a unique position to mold those child stars’ brands.
In much the same way, Lorne Michaels and NBC have over the years found ways to benefit from SNL’s function as a stepping-stone for comedians. First-year cast members are asked to sign strict contracts that effectively allow Michaels and NBC to shape and make money from the next steps in their careers. Precise details regarding these agreements are hard to come by, but the journalist Peter Bogdanovich disclosed some years ago that anyone joining the SNL cast for the 1999–2000 season had to sign a contract with NBC that could tie them to the network for as long as twelve years. Many of the terms shocked agents and their clients—as one agent said: “It’s like SNL puts a gun to your head and says, ‘You’re auditioning. Sign this!’”
Under the contract described by Bogdanovich, NBC could take SNL cast members off the show any time after their second year on the program and put them in an NBC sitcom. A cast member had the option of saying no to the first two shows proposed by NBC but had to accept the third. And NBC dictated the length of the sitcom contract, which could run as long as six years. The contract with SNL even gave NBC and Michaels considerable say in the cast members’ film careers: SNL Films (a production company co-owned by Paramount Pictures), NBC, and Michaels had a three-movie option that would pay the star a set $75,000 for the first film, $150,000 for the second, and $300,000 for the third. By offering these amounts, NBC could potentially prevent a cast member from earning a multimillion-dollar salary on a film for another studio.
The goal for NBC and Michaels is evident: they wanted to make sure their efforts to turn up-and-coming comedians into household names would not go unrewarded, and to make it difficult for rival media companies to steal them away. “What I was trying to do was to have some ability to keep unknown t
alent—and they are all unknown before Saturday Night Live—on the network after we make them stars,” Garth Ancier, a former NBC executive who crafted the SNL contracts for the 1999–2000 season, told me. “We wanted to prevent a situation in which they would become very well known comedians on our air, but then would leave to do something else.” Another executive involved in the contract negotiations described new cast members as “the not-ready-for-prime-time players.… These are people who are just starting out.” He added: “I challenge you to name a network, much less a show, that has created this many stars, ever.”
Ancier admitted that the contracts offered that year met a good deal of resistance. “The agents and managers didn’t like the new contracts because they limited their ability to use [the show] to make their clients famous and then use that fame to mine other offerings and leave the Saturday Night Live/Lorne Michaels family.” Even so, Ancier told me, all but one of the hopefuls signed the contract for the 1999–2000 season, and the one holdout was not allowed to audition for the show.
A cursory look at the projects of Saturday Night Live’s former cast members suggests that Lorne Michaels’s grip on the SNL performers continues to this day. His name appears as executive producer on Late Night with Jimmy Fallon, 30 Rock, and several other projects. “I think Michaels has a better hold on the talent now than in the past—otherwise you would not see 30 Rock and all those other shows that are starring SNL talent popping up on NBC,” Ancier noted.
Contracts that lock new talent into long-term deals are now standard across the television industry. “If we are casting any prime-time television show, actors—before they can even audition—have to sign a contract that gives the network the option to secure their services for a total of seven years at a specified rate,” said Ancier, who now serves as an adviser to several broadcast and cable networks. “We won’t let them read until they have signed onto that deal.” When studios or networks want even more control, they push for so-called talent-holding deals. Under these contracts, the studio pays an actor a certain amount of money, in return for which the actor, for a specified number of years, agrees to sign on to projects the studio brings to the actor. The actor can turn down a certain number of projects (usually two), but he or she has to accept the next one. “We would allocate six million dollars a year to a talent-holding-deal fund,” said Ancier about his tenure at NBC. “If we thought people were interesting and about to star in television shows, we would offer them a deal—those with leading roles in shows. One of the people we did that with when I was at NBC was [comedian] Steve Carell. It was a very effective way of grooming talent, by making an investment before anyone really knew who they were.”
Blockbusters: Hit-making, Risk-taking, and the Big Business of Entertainment Page 12