Top Ad
I DIG Radio
www.idigradio.com
Listen live to the best music from around the world!
I DIG Style
www.idigstyle.com
Learn about the latest fashion styles and more...

Barcelona's financial plans a massive gamble on their future

Written by 
Published in Soccer
Monday, 20 June 2022 13:54

Last week, Barcelona members greenlighted a proposal by the club's board to sell future merchandising and TV rights in exchange for immediate cold, hard cash. They hope to generate up to €700 million ("possibly more" according to president Joan Laporta) which must surely be some kind of record.

It's money Barcelona desperately needed, because as of right now, they're way over LaLiga's spending limits. Their spending maximum for next season is currently negative to the tune of -€144m. This doesn't quite mean -- as might be implied -- that players have to pay to play for the club, but it's not far off and, as it stands, would mean that Barca would need to shed players and salaries in order to bring anybody in.

The club have basically taken out a massive mortgage on their future, to a degree no other team has done in the past. They are basically saying: "We're going to make so much money going forward, why don't you, dear investor, give us an advance on it now."

It's not necessarily a bad move; it could work out great. It's just that it's a risky one. And what's suboptimal in this case is the fact that the people making the decisions -- Laporta and his board -- likely won't be around to face the fallout if they get it wrong, whereas they will be there to reap the short-term benefits.

I'm not an expert on medium and long-term trend forecasting when it comes to the value of media rights and merchandising/licensing. I can't tell you whether Barcelona got themselves a good deal. But we can go through the architecture of each and better understand the risks involved.

- Stream ESPN FC Daily on ESPN+ (U.S. only)
- Don't have ESPN? Get instant access

First, the broadcast deal. Laporta is open to selling up to 25% of Barcelona's domestic league broadcast revenue for up to 25 years. He has said that, for every 10% that is sold, Barca could rake in some €200m. By that metric, if they sell the full 25%, they could earn €500m. Laporta has said they are working on four separate deals and that they hope to wrap them up quickly in order to get out from under the spending cap limits.

Barcelona earned around €165m from the LaLiga deal in 2020-21. If they made that amount for the next 25 years and they sold 25% of their rights, they would end up giving away more than €1 billion. But, of course, the argument is that sometimes it's better to have €500m now rather than €41m a year for the next 25 years. After all, inflation is a real thing -- stuff cost a lot less money 25 years ago.

On the flip side, LaLiga's domestic TV deal will presumably rise in value -- and, with it, the amount that Barcelona receive -- over the next decades. And that means they will probably give away more than €41m a year (probably much more) in that time period (they'll also, of course, be making more, because they get to keep the other 75%).

The issue, too, is that as LaLiga's rights deal increases in value (assuming it does), it won't just increase for Barca -- it will increase for every other team too. Barca still get a bigger share, provided they finish at or near the top of the table, but the competition's amounts will also increase proportionally.

There's no right answer here. Unless you're a time traveller from the future, you don't know what the numbers will look like down the road, but if you can forecast things and are reasonably confident in your predictions, you can do a proper cost-benefit analysis.

It's a similar story with the Barcelona Licensing and Merchandising, the subsidiary that sells and licenses Barca-branded goods. In 2018-19, the last year pre-pandemic, they earned €63m. The pandemic meant shutting the stores, no fans in the stadiums and closing the Barcelona Museum (which happens to be the second-most-visited in Spain, after the Prado in Madrid), so that €63m is the only reliable benchmark we have. Laporta is confident that number can rise if they get the right strategic partner (they reportedly turned down an offer from Fanatics worth €200m, plus up to €75m in bonuses), pointing out that around 75% of that revenue comes from local shops and, of course, Barca fans exist all over the world.

But even if they boost licensing and merchandising revenues to €100m (and that means increasing them by nearly 70%, which isn't easy), they're giving half of it away to their new partner. So if somebody pays them €250m and they do get to €100m in revenues, after just five years, whoever acquired the 49.9% will have made their money back. (And if the revenue stays around the €60m mark, sure, Barca will come out ahead vis-a-vis the upfront money they get, but they'll only be getting €30m from licensing, rather than €50m.)

All of this points to the fact that this is very much a gamble. Laporta says Barca will have the option to buy back both the share in the TV rights and the share in Barcelona Licensing and Merchandising, but again, we don't know the terms. It's safe to say though that no investor is going to tie up hundreds of millions of euros without some sort of guarantee that they will get most of their money back if the deal goes south before it becomes profitable for them.

So then you're left with the question: Is this necessary? The short answer is yes, because not only do Barcelona have the fiendish spending restrictions, they also have nearly €800m worth of debt, of which more than €310m is due in the next 12 months. Barca don't have a wealthy owner who can make an equity injection, and it's difficult for them to refinance their debt (plus, interest rates are rising).They need to generate cash somehow, and they (rightly) don't want to have to consider letting their best young stars (Pedri, Gavi, Ansu Fati) depart, not least because their transfer value is likely to be worth more in a few years' time.

The longer answer? It's really difficult to say. The deals Laporta wants to do haven't been struck yet, we don't know the terms, and, more importantly, we don't know what the future will bring. We do know that Barcelona, in exchanging for the cash injection now, could be giving away close to €100m a season (and possibly substantially more than that) for the foreseeable future, and that feels like kicking the can down the road.

So they're taking this gamble. And make no mistake about it, it is a massive gamble. If it wasn't, other top clubs would be doing this with abandon, and they're not. What makes you uneasy is that the people deciding to roll the dice -- Laporta and his board -- won't be there for the long-term fallout in five or 10 years. They'll either be remembered as geniuses who saved the club or be spoken of in the same way Barca fans speak of Jose Maria Bartomeu, Laporta's predecessor and the man who oversaw the financial meltdown. And whenever you have people making huge financial decisions without anything to lose -- other than their legacy and reputation -- it's best to be sceptical.

Read 149 times

Soccer

USWNT's Albert apologizes after Rapinoe criticism

USWNT's Albert apologizes after Rapinoe criticism

EmailPrintUnited States women's national team midfielder Korbin Albert apologized on Thursday for pr...

Leicester sack women's boss for breach of conduct

Leicester sack women's boss for breach of conduct

EmailPrintLeicester City manager Willie Kirk has been dismissed from his position after an internal...

Davies' agent blasts Bayern's contract 'ultimatum'

Davies' agent blasts Bayern's contract 'ultimatum'

EmailPrintOpen Extended ReactionsThe agent of Bayern Munich star Alphonso Davies has criticised the...

2026 FIFA


2028 LOS ANGELES OLYMPIC

UEFA

Basketball

Hornets shut down LaMelo (ankle) for season

Hornets shut down LaMelo (ankle) for season

EmailPrintOpen Extended ReactionsCharlotte Hornets guard LaMelo Ball will not play again this season...

Lawyer: Ex-G Leaguer won't face death penalty

Lawyer: Ex-G Leaguer won't face death penalty

EmailPrintFormer G League player Chance Comanche, who was charged with the murder of a woman whose b...

Baseball

Heroic debut: Soto's throw saves Yankees in 9th

Heroic debut: Soto's throw saves Yankees in 9th

EmailPrintOpen Extended ReactionsHOUSTON -- That Juan Soto's first signature Yankee moment happened...

Ohtani welcomed, helps Betts, Freeman drive win

Ohtani welcomed, helps Betts, Freeman drive win

EmailPrintOpen Extended ReactionsLOS ANGELES -- Shohei Ohtani was pleased with the quality of his at...

Sports Leagues

  • FIFA

    Fédération Internationale de Football Association
  • NBA

    National Basketball Association
  • ATP

    Association of Tennis Professionals
  • MLB

    Major League Baseball
  • ITTF

    International Table Tennis Federation
  • NFL

    Nactional Football Leagues
  • FISB

    Federation Internationale de Speedball

About Us

I Dig® is a leading global brand that makes it more enjoyable to surf the internet, conduct transactions and access, share, and create information.  Today I Dig® attracts millions of users every month.r

 

Phone: (800) 737. 6040
Fax: (800) 825 5558
Website: www.idig.com
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

Affiliated