Joanne LaPorta is not one to mince her words. FC Barcelona’s president claimed in June that the club was “clinically dead” when he took the reins in March last year, but it has now been moved into intensive care following some emergency financial surgery.
His goal was to get those before him—an audience of the club’s member owners—to approve measures to repair its battered balance sheet and allow it to “live a normal life” again. Barcelona recently booked a €500 million loss after the 2020/21 season, a record for any football club.
With the blessing of the membership voting on key decisions, Laporta has sold more than €600 million in assets, and many are on the block.
But the expectations of a new Barcelona built on frugality and youth players have proved short-lived. This summer, it has spent more than €150mn on signings – the most in Europe – including the third most expensive transfer for a footballer over 30. The club is still in the market for more players, although none of them could be registered due to Spanish league financial regulations.
The question is whether this spending splurge will allow the pitch to reclaim past glory or store up more financial woes for the future.
Almost a year ago, Lionel Messi bid a tearful farewell to FC Barcelona. The Argentine superstar joined as a child, but became the most high-profile casualty of the financial woes besetting the club. He was also an important factor in these problems. According to a leaked contract published in Spanish magazine El Mundo, Messi earned more than 555 million euros from 2017 to 2021.
The club’s financial problems accumulated slowly, then all at once they took off.
Many years were spent on players with disappointing results on the pitch. Between 2017 and 2021, the club spent more than €1bn on signings, according to figures from football site TransferMart, resulting in a net loss from transfers of €340mn. It also had the highest annual wage bill in Europe, peaking at €575mn in 2019 – €180mn more than arch-rivals Real Madrid.
Revenues were expected to top €1bn in 2019/20, but then the pandemic hit, and the club was forced to close its 99,000-seat stadium.
By the 2020/21 season, the debt had jumped to €1.35bn, according to Laporta. Attempts by Europe’s 12 biggest soccer teams, including Barcelona, to create a breakaway super league with huge sign-on bonuses have dashed hopes of a quick economic recovery.
With huge losses and strict financial rules imposed by La Liga – which calculates an annual budget for each club based on their income and costs to spend on players – Barcelona had no choice but to move Messi, while other players were asked to take salaries. Pay cuts and deferrals in an effort to reduce bills.
The fortunes of the club on the pitch were also affected. It finished third in the Spanish league in the 2020/21 season, its worst performance in more than a decade and has not won Europe’s top club competition, the Champions League, since 2015. Since then, Real Madrid have won four times. Barcelona also suffered an embarrassing 4-1 defeat at home to Paris Saint-Germain in the second leg of the 20/21 Champions League, where Messi went.
Problems on the pitch fed into the boardroom. Then-president Josep Maria Bartomeu resigned ahead of a no-confidence vote, before members voted to bring back Laporta, who presided over Barcelona during a more successful period between 2003 and 2010.
A repair is being attempted
New leadership has taken over a club strapped for cash and struggling to pay wages. Strong action was required. Goldman Sachs, the club’s long-time bankers, moved quickly to restructure nearly €600 million in debt. Under the terms of its 10-year bond deal, Barcelona agreed to pay less than 2 percent interest to a group of American investors, a sign of the club’s strong willingness to lend.
Then came the thought of earning more. Officials scheduled a series of member meetings to allow regular voting on plans to rebuild the balance sheet. A new partnership with Spotify was struck earlier this year, providing the streaming service front with shirt sponsorship and naming rights to the Camp Nou stadium, which is due for a major renovation.
In June, members approved a series of property sales. A month later, American investment firm Six Street agreed to buy 25 percent of La Liga broadcasting rights for 25 years for just €500 million in a deal arranged by Key Capital, a boutique investment firm with close ties to Real Madrid.
At face value, Sixth Street appears to be buying future revenue at a discount. A simple calculation suggests that a 25 per cent share of the rights is sold for around €21m a year. In 2020/21, a quarter of Barcelona’s La Liga rights were worth more than €40mn per year.
Some worry that the deal is a one-time patch for ongoing problems. “My concern now is that they are using these long-term assets to invest in it [transfer] window, and that’s not smart,” said a person with close ties to the club’s management.
However, both sides dismiss the comparison. Instead they say the deal is more akin to a strategic partnership – it is structured as a joint venture – and that Sixth Street, which also has a large international events business, will help Barcelona grow its revenue in the long term.
This week the club also said it had agreed to sell a 25 percent stake in Barça Studios, its video and audio platform, to crypto business Socios for 100 million euros. Up to 49 percent of the club’s merchandising business is also up for sale.
Andrea Sartori, chief executive of football consultancy Benchmark, said the club’s finances were in such a bad place last year that broadcasting rights had to be sold.
“They didn’t have much of a choice – what else could they do in such a bad situation? Yes, they sold the family jewels, but that was probably the only thing they could do,” he said. “Hopefully they can win on the pitch so they can generate more revenue in the years to come. If not, in three to five years we could see some new problems coming to the club.
Summer spending flow
While money has flooded in from asset sales, most of it goes straight back out. Last month, Barcelona signed Brazilian winger Rafinha from Leeds and Polish striker Robert Lewandowski from Bayern Munich for around 100 million euros. On Monday, it won Chelsea’s Jules Conde from Sevilla, in another €50 million deal. Two more players have been signed on free transfers, while others are expected to join before the September 1 deadline.
This all comes as the club continues to try to negotiate a pay cut for existing players.
Lewandowski’s signing on a four-year deal has raised eyebrows, particularly as he turns 34 this month. Only Cristiano Ronaldo has taken a huge salary for a player of this age.
Asked about the transfer, Bayern manager Julian Nagelsmann said: “It’s the only club in the world that doesn’t have money, but [can] Buy each player. It’s weird and kind of crazy to me, but in the end they find solutions. “
No new players have been registered in the Spanish league yet. This is likely to happen later this summer when the club sells some of its existing squad to meet La Liga’s rules on spending on players. However, player sales have been complicated by deferred wage arrangements.
The club says the signings are part of a “virtuous cycle strategy” in which better players lead to better results, and better results help generate more income. A Barcelona official said, ‘Our fans’ desire is to have the best players in the world and to win.
Others say that it is politics rather than economics that require the club to spend because the club president is elected by the members.
“At Barcelona, if you are the president and you don’t perform from a sporting point of view, the pressure is huge,” said a person with close ties to the club’s management.
Lessons for the future
Although the club has received an injection of cash, there are still issues that need to be managed. Next summer it will begin repaying its bonds after a two-year hiatus. Meanwhile, it no longer gets 100 percent of its revenue from broadcast matches.
The Camp Nou redevelopment is expected to cost up to €1.5bn, although the financing has already been arranged by Goldman and the costs will not impact the club’s balance sheet.
Not all the new cash has gone to the team – €125 million of the loan has already been repaid.
This year’s squad includes a handful of youngsters, some from Barcelona’s academy, a sign that the club is mixing big-name players with homegrown talent. The 19-year-old Pedri was signed by Barcelona from Las Palmas in 2020 for just 5 million euros. He is now the fourth most valuable player in the world, worth more than €135mn, according to the CIES Football Observatory.
The club is also signing other players that are seen as valuable assets: some are in demand from Premier League rivals, and it has introduced a new salary structure to keep the wage bill under control.
“We learned our lesson. . . We will not try to repeat the same mistakes,” said the club official. “It is like a big boat. You have to move in the right direction, and then it starts to accelerate.”
However, ratings agency Fitch cut its outlook for the club on Friday, citing poor financial performance last season, less than expected debt reduction, and the potential impact on ticket sales as construction work begins on the stadium.
However, a person with close knowledge of the club’s finances said that the broadcast rights sold represent less than 5 percent of Barcelona’s total revenue and that this income could be recovered quickly if pitch performance improves or the value of the rights goes up. above.
“They have to perform … but they have plenty of room for war,” the person said. “I think people are making too much of an ad about nothing.”