A year ago, the president of FC Barcelona Joan Laporta lamented a “dramatic financial situation” of the Catalan club. Debted to the tune of 1.35 billion euros, Barça depicted a “worrying economic and patrimonial situation”. An abyssal debt, a “accounting bankruptcy situation” and a huge payroll, so many elements which left the club with little option.
But now, a year later, FC Barcelona has become one of the most active clubs in the summer transfer window, with the recruitment of Raphinha and Robert Lewandowski, for several tens of millions of euros each. VSHow was the club able to reverse its economic situation? Franceinfo: sport interviewed Luc Arrondel, economist specializing in football and director of research at the National Center for Scientific Research (CNRS).
By reducing the payroll
Last year, FC Barcelona’s main problem was its payroll. Indeed, La Liga imposes a salary cap which depends on the club’s income. “As revenues had dropped considerably due to the closed doors due to Covid, FC Barcelona was going out of the way a bit with regard to its payroll, which is, I remind you, practically the largest in Europe. So, if the club wanted to get into the nails of La Liga, it had to reduce its payroll”, begin Luc Arrondel, economist specializing in football. This is in particular what explains, for a year now, “the departure of Lionel Messi and the loan of Philippe Coutinho at Aston Villa”, continues the economist.
Through the sale of assets
In the Spanish league, clubs have to prove their income before the start of the season, which is a bit different from Financial Fair Play or the DNCG in France. “If FC Barcelona wanted to spend more on payroll, then it had to increase its cash flow. For that, it had the authorization of the ‘social’ [les supporters-actionnaires] to sell 49.9% of the shares of their commercial company, which manages their commercial income”, details the economist. The process is underway, but has not yet taken place.
The “social” have also validated “the sale of 10% television rights to an American investment fund, Sixth Street, for just over 200 million euros”, adds Luc Arrondel. The Catalan club would also consider parting with an additional 15% in exchange for 330 million euros.
But this choice to sell the “family jewels” is not without consideration. “Selling 10% of television rights to the investment fund increases their income in the short term, but decreases it in the long term. It is a calculation that allows them to pass the current difficulty”, analyzes the economist.
By selling its assets, Barca are following a trend. In Spain, for example, 17 La Liga clubs have signed an agreement with the CVC investment fund, and Real Madrid has sold 20% of the operating income of its soon-to-be-renovated Santiago-Bernabéu stadium at Sixth Street in exchange for 360 million. euros. “We observe a trend in Europe, which is the arrival of investment funds in football, not by buying clubs but by buying shares in leagues, competitions, etc. This is what we observe also in France, where there are cash needs. The league has sold 13% of its future television rights. Like the Spanish league”confirms Luc Arrondel.
By the hope of an economic recovery
FC Barcelona relies above all on the post-Covid-19 economic recovery and is counting on the future income generated by its new stadium to repay its debts. “Before the Covid, the ticket office brought him 150 million euros”, further specifies the economist specializing in football. The goal seems achievable since Barcelona is still one of the clubs that generate the most revenue in the world, with 582 million euros according to figures put forward by Deloitte in January 2022.
Beyond ticketing, the club also relies on revenue from the Champions League, which “have also increased a lot in recent years, and which can reach a hundred million euros if you go to the end of the competition”, adds Luc Arrondel. Moreover, last April, Barça and Spotify signed an agreement, making the Swedish giant the main partner of the club. This contract, which includes the “naming” of the renovated Camp Nou, will bring in around 435 million euros for Barça. This is the biggest sponsorship deal in the club’s history.
Through debt smoothing
Along with the wage bill, the most worrying point for Barca was their colossal debt (including financial debt, transfer debt, and other debts) up to 1.35 billion euros. Without forgetting the urgency of repaying it before June 30, 2021.
But Joan Laporta, elected president four months earlier, and his team of leaders, negotiated with their creditors the smoothing of this debt over several years, a way to save time. “The problem is that when you have short-term debt, there is really a debt load that is significant. If you stagger it, it can help you get over it. In the short term, it gives you more cash, and therefore allows you to have a larger payroll and thus to be able to buy players with a larger envelope”, explains the economist Luc Arrondel. Find out now whether the strategy will still prove to be as profitable for the following years.