Brought to you by Masterworks
Solve your “zero return crisis” with this fintech platform realizing 27.9%
Vanguard, a $7.2 trillion money manager, calculated that stocks will return as little as 3.4% over the next ten years. With 8.5% inflation, that means negative real growth on your money. Yes, less than zero. But there's hope.
Personally, I’m continuing to diversify into alternatives like contemporary art. It’s outperformed the S&P by 164% over the last 25 years, and demand is so high that Deloitte expects the art market to grow nearly 60% within three years.
The smartest way for everyday investors to get in on the action is Masterworks. Despite covid, historic inflation, and the beginning of a recession, their last six exits achieved an impressive 27.9% average net return.
Join me and 500,000+ others investing in multi-million dollar paintings. As a Generalist subscriber, you’re entitled to skip the waitlist using our referral link.
See important Regulation A disclosures.
If you only have a couple of minutes to spare, here's what investors, operators, and founders should know about F.C. Barcelona.
- A highwire act. Barcelona has spent €168.9 million on new players this year, even though the club began the summer more than €1 billion in debt. President Joan Laporta is attempting a high-risk strategy, selling club assets while he continues to spend.
- Four levers. To try and alleviate Barcelona’s financial stress, Laporta has pulled four “levers.” These include selling stakes in broadcasting rights and giving up 49% equity in Barça Studios, an in-house media operation.
- The economics of genius. A year ago, Barcelona parted company with Lionel Messi. As well as being arguably the greatest player of all time, the Argentine forward was a source of considerable revenue, driving as much as €200 million per year by some estimates. He was also a significant cost, receiving €139 million per year in wages.
- Betting on web3. One of Barça Studios’ newest owners is Socios.com. The crypto platform previously partnered with Barcelona to release a fan token. Its new arrangement suggests Barcelona is embracing the revenue potential of web3.
“You know why the Yankees always win, Frank?”
The question comes from Christopher Walken in the 2002 con-man caper Catch Me if You Can. It’s directed at his son, Frank Abagnale Jr., played by Leonardo Di Caprio.
“Because they have Mickey Mantle?” the younger Abagnale offers.
“No,” senior says. “It’s because the other teams can’t stop staring at those damn pinstripes.”
If one football team has evoked the same mixture of fear and reverence in recent years as Abagnale’s Yankees, it is F.C. Barcelona. For more than a decade, the famed maroon and blue stripes have not only conveyed sporting excellence but a kind of total, exhaustive dominance. Competitively, aesthetically, and commercially, Barcelona spent much of this spell at the sport’s zenith: stacking titles, playing with era-defining panache, and becoming the world’s richest club. Even morally, Barcelona has seemingly had the upper hand. The team eschewed paid shirt sponsors until 2010 and favored developing homegrown talent to purchasing highly-paid mercenaries. Barcelona’s motto is “more than a club” – for a period, it truly seemed to be.
Today, Barcelona is an organization in turmoil, battling major debts, a steep wage bill, and an underperforming team. To try and reverse the club’s fortunes, President Joan Laporta has overseen a summer of frenzied activity. On the sporting side, Barcelona has spent richly on new players like Robert Lewandowski, Raphinha, and Jules Koundé. To offset those outgoings, Laporta has activated four “levers,” selling decades' worth of media rights and auctioning off portions of an in-house content arm. It is an unusual, high-risk strategy that gives Barcelona capital today at the expense of future earnings. Laporta’s approach represents a fascinating case study that illuminates the business of sport and the challenges of maintaining a dynasty.
In today’s piece, we’ll discuss:
- The business of football. How do football teams make money? We’ll unpack where revenue comes from for the world’s biggest clubs, how that mix has changed over time, and the impact of the pandemic.
- The rise of Barcelona. Though more than a hundred years old, Barcelona’s status as one of the best clubs in the world is relatively recent. A golden generation of homegrown talent has spurred its contemporary glory.
- Empires fall. Poor transfers, escalating wages, and mounting debt stressed Barcelona’s finances – the pandemic shattered them. Lost revenue forced the club to ask players for pay cuts and salary deferrals.
- Laporta’s levers. President Joan Laporta may have the trickiest job in professional sports management. Not only does he need to renovate a team struggling to live up to expectations, he must balance Barcelona’s disastrous books.
The business of football
Though few fans wish to consider them as such, football clubs operate as businesses – at least in some capacity. To understand Barcelona’s current predicament, we need a clearer picture of the industry writ large. We’ll discuss the size and growth of the space, explore the primary sources of revenue, and outline how this intersects with on-pitch performance.
In 2021, Manchester City earned more revenue than any other football club, pulling in €644.9 million. It represented the first time the English club topped Deloitte’s “Football Money League” ranking, besting Real Madrid (€640.7 million), Bayern Munich (€611.4 million), Barcelona (€582.1 million), and Manchester United (€558 million). Last year, the world’s twenty wealthiest clubs surpassed €8 billion in revenue.
Compared to other sectors, and considering these entities' cultural influence, such sums may seem relatively modest. Dozens of esoteric software products, fertilizer makers, restaurant chains, and niche financial institutions make considerably more than franchises with hundreds of millions of supporters around the world, literally cheering for their success.
Broadly speaking, it’s clear that football has become a much larger industry over the past quarter of a century. When Deloitte started publishing its rankings in 1997, revenue from the top twenty clubs totaled a little over €1 billion. It would take until 2008 for a single club to reach €250 million in revenue, with Manchester United first hitting that landmark. Only in 2014 did the group exceed €5 billion in revenue.
Over twenty-five years, this represents an increase of more than 7x, at a compound annual growth rate (CAGR) of approximately 8.4% per annum.
A changing mix
Football clubs earn money through three main avenues: broadcasting revenue, matchday revenue, and commercial revenue. The largest of these is broadcasting. In 2021, total broadcasting revenue reached €4.5 billion, making up 44% of total earnings. Matchday revenue came in at €111 million – still depressed from the pandemic’s impact. Pre-covid matchday earnings were more than ten times as much at €1.5 billion. Commercial revenue, which includes sponsorship and shirt sales, reached €3.5 billion.
The relative importance of these streams has changed over time. In 1997, broadcasting represented the smallest part of the pie, contributing just 20% of total revenue. Matchday and commercial revenue made up 40% each. By 2019, the last true pre-covid season, broadcasting revenue had risen to 44%, with commercial (40%) and matchday (16%) revenue trailing.
Such an evolution reveals globalization’s impact on the game. Whereas once clubs earned the bulk of their money from those sitting in a stadium, their financial health now relies on millions of viewers spread around the world. In this respect, it’s another example of how technology facilitates a monoculture. Just as Netflix’s distribution means that a Korean drama like Squid Game can win over viewers in America, social media and the broader distribution of television rights have created Barcelona fans in Beijing, Chelsea supporters in Chicago, and Liverpool aficionados in Lagos.
A prime example: earlier this year, it was announced that foreign rights were set to eclipse domestic rights in the English Premier League for the first time. Between 2022 and 2025, domestic rights will total approximately $5.92 billion, with foreign rights worth $5.98 billion. Though a slight difference, it nevertheless represented a shift unlikely to reverse. Though teams hail from certain cities, they increasingly belong to the world.
On the pitch
Competitive performance has a significant financial impact on top-tier clubs. Winning the Champions League – Europe’s most prestigious club competition – can deliver nearly €100 million in earnings. Winning just a single game is worth as much as €2.8 million. On a percentage basis, such revenue is considerable. Notably, Spain’s domestic championship, La Liga, does not provide prize money, though successful teams receive a larger portion of broadcasting revenue, meaning that performance nevertheless impacts earnings. (This may be why Deloitte includes competitive bonuses as part of its “broadcasting” category.)
Whatever classification is used, the upshot is clear: performance matters. This is true both in terms of direct prize money, and the lift winning has on broadcasting bounties, matchday sales, and commercial revenue.
So, how do you ensure you have a chance of winning? The most critical factor is talent. Great football teams need a squad of approximately twenty-two elite players, if not more. Critically, football develops and trades talents very differently than American sports like basketball. There is no draft system, no necessity to play in college, and no salary caps. Instead, big clubs rely on a mix of academy products – players trained in-house starting as young as six – and a volatile transfer market.
An excellent academy can be a real advantage. The cost of training a player is relatively low compared to the price elite talent commands in the market. This either saves a club money it ordinarily might have needed to spend to improve its team or creates an asset that can be sold at a profit. Prize assets can yield extraordinary sums. For example, after rising through the ranks of Brazilian team Santos, Neymar was sold to Barcelona for €86.2 million. It likely cost Santos a tiny fraction of that sum to support the star’s maturation.
That Barcelona would eventually sell Neymar for a world-record €222 million to Paris Saint-Germain illustrates the second-way teams can profit from talent. Players not developed in-house may increase their value, allowing their employers to cash in. Of course, it does not always work so smoothly. Often, clubs may find themselves underwater on a deal, saddled with an asset that has depreciated and can only be sold at a significant loss. Last summer, for example, Chelsea spent €115 million to sign Belgian forward Romelu Lukaku from Inter Milan. After an unsuccessful spell, he has been sent back to Inter on loan. When he is inevitably sold, it will be at a much lower price.
Perhaps because of this variability, and the need to maintain results on the pitch, the biggest clubs spend aggressively on talent. Of the top ten wealthiest teams, only one ended 2021 in the black when it came to transfers. Real Madrid netted €86.8 million, while Chelsea ended the year with a loss of €214 million. (It should be noted that some clubs' figures are unavailable.) Transfers are viewed as a cost of doing business rather than a revenue opportunity, with earnings reinvested in the squad.
As we’ll learn, Barcelona’s crisis involves many of these different elements. It is a story of incredible academy talent, botched transfers, broadcasting rights, and the cost of staying on top.
The rise of F.C. Barcelona
From humble beginnings, Barcelona became one of the world’s greatest sporting organizations. Its ascent is thanks to the work of an accountant, a prophet, a farmhouse, and a flea.
In 1899, an accountant stopped in Eastern Spain. Hans Kamper wasn’t supposed to stay there long. He intended to spend a few days in the company of his uncle before continuing to Africa, where he planned to set up a sugar trading business.
But Kamper fell in love with Barcelona, a city on the sea. Instead of continuing his journey, he put down roots, finding work at a bank and writing a local sports column. Later that same year, he undertook the project for which he is now known. Looking to play more football, Kamper put an advertisement in a newspaper, sharing his interest in starting a new club. After garnering interest from other readers, the first meeting of Futbol Club Barcelona took place.
In the years that followed, Barcelona developed into something greater than a football club, becoming a symbol of Catalan identity. In part, this political power came from Barcelona’s structure. Unlike many other professional sports teams, Barcelona is not owned by a wealthy individual or investment firm. It is owned and controlled by 144,000 members or “socios.” Members are tasked with choosing Barcelona’s president and weighing in on other club statutes. While becoming a socio today is as simple as filling out an online form and paying €195 per year, it was once harder. To join, you needed familial ties to an existing member, keeping control within a small, local group.
Hans Kamper– who would come to be known by Joan Gamper, the Catalan version of his name – died at fifty-two years old. After playing for the team, serving as president multiple times, and ushering the club into a stadium that generated reliable income, he committed suicide in 1930, depressed by financial and personal problems. Though he had seen Barcelona mature into an important local organization, even Gamper could not have predicted how significant his club would become.
Though Gamper may be the founder of Barcelona, its modern incarnation owes much to a different man.
In 1973, Barcelona signed the best player in the world: Johan Cruyff. It represented a real coup. Not only was Cruyff a generationally gifted attacking midfielder, he had chosen to leave one of the most successful clubs of its era, Ajax, in favor of a Barcelona team that hadn’t won a title in fourteen years. Rivals Real Madrid had vied for Cruyff’s services, too, with the Dutchman turning them down – both since he did not want to comply with Ajax’s wishes and because he refused to join a club with ties to General Franco’s dictatorship.
Though Cruyff did not come cheap – costing roughly $2 million to sign – he transformed Barcelona. The man alternatively nicknamed “the savior” and “the prophet of Betendorp” brought elegance to Barcelona’s play, as well as fierce competitiveness. A former teammate noted that “with Cruyff, everything changed – the club as well as the team.” Players used to taking the field with minimal tactical instruction were suddenly tasked with analyzing opponents and strategically breaking them down.
The same season he arrived, Cruyff drove Barcelona to a league title, defeating Real Madrid 5-0 along the way. He would stay for five years, picking up another trophy and imbricating himself into the club’s DNA. The style, technical brilliance, and positional fluidity that have defined Barcelona in recent decades draw from Cruyff.
But, as sportswriter Sid Lowe said, Johan Cruyff transformed Barcelona “not once but twice.” After retiring from playing, Cruyff returned to Spain in 1988, becoming Barcelona’s manager. The club had been down on its luck when he’d arrived as a player, but they were in even worse health when Cruyff stepped in as manager. Barcelona had finished an anemic sixth the season prior, with disgruntled players turning against the president in an event known as the “Hesperia Mutiny.” Financial issues also plagued the organization.
Yet again, Cruyff changed the team’s fate. Over the next eight years, Cruyff architected a spectacular winning streak that resulted in four league titles, the club’s first-ever European Cup, and a clutch of other honors. As a manager, Cruyff further implemented his philosophy of playing, which drew from the “Total Football” of Dutch manager Rinus Michel, and demanded smooth interchange of positions. Though ill health forced Cruyff to retire in 1996, he later returned as an advisor to President Joan Laporta.
For those less familiar with the sport, it’s hard to emphasize just how profound Cruyff’s influence was on Barcelona and the game at large. He is one of football’s great players, thinkers, stylists, tacticians, and organizational architects, rolled into one. “Cruyff built the cathedral,” former Barcelona player and manager Pep Guardiola once said, “It is our job to maintain it.”
If Barcelona is, indeed, a cathedral, much of its beauty comes from local artisans. More than any other team in the past quarter century, Barcelona has benefited from the talent in its academy.
La Masia, or “the farmhouse,” opened its doors in 1979, the year after Cruyff departed for the first time. The 18th-century building housed junior players and has come to serve as the metonym for Barcelona’s youth program.
As we discussed earlier, an effective academy can make a significant financial and sporting difference for a team. Not only does it save a club from spending money on external transfers, it also offers the chance to sculpt talent in the club's image. No one managed this quite so well as Barcelona. Despite historically focusing most of its scouting efforts on the relatively small area of Catalonia, La Masia’s staff has identified some of the best players of the past few decades. Critically, Barcelona trains these prospects in a consistent style of play, coaching particular formations and patterns inspired by Cruyffian ideals. Though not every La Masia graduate will enter the first team or even play at the sport’s top level, all have exceptional technique, a clear philosophy, and a sophisticated tactical understanding.
In the early 2000s, a crop of talent emerged that validated this systematic approach and illustrated its benefits. Over the course of a decade, an astonishing string of La Masia talent made their Barcelona debuts including Lionel Messi, Xavier Hernández (Xavi), Sergio Busquets, Andrés Iniesta, Gerard Piqué, Carles Puyol, Víctor Valdés, and Pedro. Talents like Cesc Fàbregas were also developed during this time. Though Fàbregas initially left the club, he returned later in his career.
It’s hard to overstate just how insane this is. Barcelona did not just strike oil; they did so again and again. The result was an extraordinarily talented team assembled at a fraction of the cost it would have taken in the open market. Better still, La Masia graduates understood Barcelona’s philosophy and system, and shared fans’ bonds with the club.
La Masia’s remarkable class drove the most prosperous spell in Barcelona’s history. In 2008, Pep Guardiola – a product of the farmhouse himself – took over as manager. Over four years, his team picked up three La Liga titles, five domestic cups, and two Champions League trophies. In the process, Barcelona played miraculous, breathtaking football that – for a time – seemed genuinely unstoppable. Even the great Sir Alex Ferguson, manager of Manchester United, saw his team humbled by Guardiola’s. “They gave us a hiding,” Ferguson said of the 2009 Champions League final. In that match, seven of Barcelona’s starting eleven had come through La Masia – another two sat on the bench.
Transfermarkt, a platform that estimates the market value of players, pegged that starting eleven’s worth at approximately €304 million. More than €220 million, or 72%, of that value, came from La Masia players – developed for next to nothing. Many of those mentioned, like Sergio Busquets, would see their worth increase tenfold in the years ahead. From a business perspective, it was almost akin to a series of high-risk R&D projects all paying off at once.
Even after Guardiola departed, this core talent ensured Barcelona remained competitive. In the years that followed, Barcelona became European champions once more and continued to stack domestic honors. This on-pitch performance – and the style in which the team achieved it – grew Barcelona’s profile and global following. Between 2003 and 2010, revenue grew from €123 million to €387 million, an increase of 215%. This growth continued into the next decade, reaching a high of €814 million in 2019. In the process, Barcelona eclipsed Real Madrid from a revenue generation perspective. However, as we’ll discuss, the club's ability to bring money in didn’t solve its financial problems.
Nevertheless, Barcelona could not have reached such heights on and off the field without the help of its farmhouse.
Lionel Messi both defined La Masia’s golden generation and transcended it. Though the diminutive forward nicknamed “the flea” came through Barcelona’s academy, he grew to become the sport’s defining star. Not only is he the most talented player of his generation but the greatest footballer of all-time – an appraisal that risks summoning an army of Cristiano Ronaldo devotees. (To risk their ire further, I would argue the matter is not even particularly close; Messi operates on a different plane.)
Messi’s lustrous skill illuminated seventeen seasons at Barcelona, a period that coincided with the rise of social media. Though Messi first appeared in 2004, before Twitter, Facebook, or Instagram had been founded, his most productive years occurred after 2010, carrying through the rest of the decade. Messi’s feats suited social media. Though skilled in subtler arts, too, the Argentine mesmerized with close control, rapid, balletic dribbling, precise passing, and absurd goals. He scored from every conceivable angle and many inconceivable ones. In an era when it was easier to share highlights worldwide, Barcelona had the most watchable player on the planet.
Messi’s eminence translated into success on the pitch, as well as an enhanced profile. Today, he is the second-most followed athlete on social media, with 358 million Instagram followers. Only Cristiano Ronaldo betters him with 477 million. Both eclipse other elite athletes like LeBron James (131 million) and even super influencers such as Kim Kardashian (329 million). Messi and Ronaldo are megabrands as much as footballers.
One expert on the sector, who asked to remain anonymous, highlighted social media and the rivalry between Messi and Ronaldo as a key factor behind Barcelona’s ascent.
“There were two players that grew along with social media: Messi and Ronaldo,” they said. “While Ronaldo moved around – going from United to Madrid to Juventus – Messi stayed put, wearing a Barcelona jersey week in, week out. That helped seal the brand and give it the power to rival Real Madrid and Manchester United – and arguably the chance to take them over.”
This exposure translated into real revenue. Economists estimated Messi to be worth €130 million to €200 million per year. Before he departed for Paris Saint-Germain (PSG), nine out of ten shirts bought at the club store bore the famous number 10’s name. His commercial impact on new club PSG is another indication of the value he once gave Barcelona. PSG’s social media accounts grew by 20 million within a week of his signing. In his first year, shirt sales increased by 30-40%, and the club signed a flurry of new, lucrative sponsorships.
Arguably, no player had such a pronounced economic impact on a club as Lionel Messi on Barcelona.
“Great teams do go in cycles and they're at the peak of the cycle they're in at the moment,” Sir Alex Ferguson said after his team’s loss to Barcelona in that famous 2009 final. "But how long it lasts…” he wondered aloud, “whether they can replace the team at some point…it’s always difficult to find players like Xavi, Iniesta, and Messi.”
It took some time, but within twelve years, all three of those players had left the club. However, the cracks in Barcelona’s foundation had started to appear several years earlier. A confluence of factors, including the club’s structure, incoherent recruitment, escalating wage demands, and the pandemic, brought that cycle to an end.
Stymied by structure
Barcelona’s member-controlled structure cemented it as a club with a social conscience and sincere local identity. It has also thwarted investment – this is not an organization in which you can buy equity. The football expert mentioned earlier noted this as an impediment to Barcelona’s growth and a factor in its decline.
“Their structure did not allow Barcelona to bring in new investors like many other clubs did – think the Glazers at Manchester United or Roman Abromovich at Chelsea,” they said. “But Barcelona wanted to compete. They saw themselves as a Grade-A institution and so they began to take on significant debt like any entity looking to grow aggressively would.”
Between the summer of 2019 and 2022, Barcelona’s debt distended from €217 million to more than €1.3 billion. As much as 60% of it was considered short-term as of mid-2021. Though precise details are scarce, much of it seems to have been used to start redeveloping Barcelona's grounds and finance high-profile transfers. Indeed, Goldman Sachs loaned the club €815 million as part of the revitalization plan for the Camp Nou stadium. The bank would go on to assist with several other loans, too.
While Barcelona’s structure hindered it from accepting outside investment, it also thwarted effective operations. “It keeps it from progressing,” our expert mentioned. “For any major decision, multiple teams have to be consulted, it has to be taken to the general assembly of socios, and the president may have to sign off on it.” Leadership changes also contribute to organizational turmoil, as new presidents and CEOs favor distinct management styles. “If this happened at a corporate institution, people would consider it troubling.”
During Barcelona’s heyday, such inefficiencies were easy to ignore – winning is a good distraction. But as results have faltered, these managerial issues have attracted attention. Perhaps the function Barcelona’s leadership failed most spectacularly at during this period was player recruitment.
Between 2012 and 2022, Barcelona spent €1.63 billion on players – more than any club except Manchester City, a team that partially operates as a soft power initiative for Abu Dhabi. On a net basis, Barcelona’s recruitment over this period led to a loss of €650 million. By comparison, over the same period, Real Madrid had a total spend of €1.16 billion, but a net spend of just €179 million. Though Barcelona won five league titles and one Champions League trophy over that period, Madrid fans were much happier with their haul, landing three league titles and five Champions Leagues.
Barcelona’s steep net spend hints at its profligate, scattergun recruitment during this period. The expert mentioned earlier described the club’s transfer strategy as “incoherent.” They noted that under then-president Josep María Bartomeu, Barcelona churned through four sporting directors – the position charged with recruitment. This partially explains the club’s parade of expensive but unsuccessful signings. Players like Philippe Coutinho, Ousmane Dembele, Antoine Griezmann, and Frenkie de Jong were recruited for rich sums, but none reached expected performance levels.
Dembele’s transfer is perhaps most emblematic of Barcelona’s dysfunction. After selling Neymar to PSG for €222 million in 2018, Bartomeu’s Barça set about reinvesting its windfall. Its primary target was Dembele, a talented French winger playing for Borussia Dortmund. As the story goes, Bartomeu and a lieutenant flew to Monte Carlo to negotiate the deal. Before walking into the meeting, the pair set their ceiling price: €80 million. By the time they’d left, they’d agreed to pay a total of €147 million. “Every transfer Barcelona made was totally above value because clubs knew they could leverage the situation,” our expert noted.
For a club that prides itself on clarity and identity, Barcelona’s transfers showed no cogent plan.
At the same time as Barcelona struggled to add to its roster, its existing players began jockeying for their piece of the pie. Though La Masia graduates may have cost little to develop, they were not cheap to retain.
None were more expensive than Lionel Messi. His last, four-year contract between 2017 and 2021 was rumored to be worth €555 million, or €138.75 million a year. That’s slightly more than the low-end of Messi’s estimated worth to Barcelona per year, meaning that despite having an incredible money-spinning asset, the club may have profited next to nothing. When Messi’s contract ended in 2021, Barcelona chose not to renew it; such was the financial burden of keeping the world’s greatest player. (Messi was reportedly willing to take a significant pay cut to stay; Barcelona seems to have decided a clean break was necessary.) A player trained at La Masia and worth an estimated €75 million left for free. Sequoia Capital’s Michael Moritz noted that Barcelona’s handling of the situation “provided the fodder for a Harvard Business School case about how not to manage an investment portfolio or an organization.”
Versions of the Messi drama played out in miniature elsewhere. Players demanded increasingly high salaries and as Barcelona struggled to recruit talent effectively, retaining them became even more critical. “Players from La Masia realized how important they were,” our expert noted, “Their salaries kept growing larger and larger.” Exacerbating the issue was the fact that La Masia was unable to develop new talent that matched the skills of the preceding generation. Though some gifted players did make it into the first team, the glut of the early 2000s appeared increasingly anomalous.
Between 2016 and 2020, Barcelona’s salaries grew by 61%, nearing €350 million per year. The club’s then-CEO estimated that similar teams were spending 30% to 50% as much as Barça. Indeed, that same year, Real Madrid spent €314 million while Atletico Madrid managed on €170 million.
These high salaries strained the organization’s finances. Despite bringing in more money than any club on earth, Barcelona’s margins were slim and growing slimmer.
Net income of €29 million in 2016 shrunk to €5 million by 2019. Soon enough, losses began to mount.
No club could have planned for covid. But some were better equipped to handle the disruption than others. Among big teams, the financial circumstances outlined meant that Barcelona was most vulnerable. The 16% of revenue clubs averaged from matchdays shrunk to nothing. Sponsorships and merchandise sales also suffered. Barcelona’s wage bill meant these were losses the club could ill-afford.
To counteract the immediate damage, Barcelona’s players agreed to take a 70% pay cut and put a further portion of their wages toward ensuring non-playing staff could continue to receive their full salaries. In November 2020, the club asked certain players to defer their wages to free up €172 million. Nearly two years later, several of them have yet to be paid back. In the case of Dutch midfielder Frenkie de Jong, not only has he failed to be reimbursed, Barcelona has pressured the player to forgo €17 million in deferred earnings and take a less lucrative contract. It is an extraordinary demand that illustrates the club's financial desperation.
Barcelona exited the pandemic much worse off than it had entered. Though its problems predated stadium shutdowns, lost revenue highlighted the disastrous state of Barça’s books. To stay afloat, the club piled on more debt. In 2021, the club took out €80 million to pay players; it was aided by a further €550 million from Goldman Sachs to help with debt restructuring.
In August 2021, returning president Joan Laporta outlined the sheer magnitude of the problem he had inherited: Barcelona was €1.3 billion in the hole. Righting the ship has required drastic action.
Every Sunday, we unpack the trends, businesses, and leaders shaping the future. Join 63,000 others today.
Put yourself in the shoes of Joan Laporta. It’s May 2022, and you’re about to embark on the most critical summer in recent club history. You have two equally important tasks:
- Make Barcelona more competitive. You can’t have another trophyless season. A distant second to Real Madrid in La Liga and crashing out of the Champions League in the group stage is not good enough. If you want to be the biggest club in the world, you have to play like it.
- Get the club’s finances under control. You need to raise money fast. League rules mean you can’t register new players unless you bring enough cash through the door. At the same time, you need to get a hold of that €1.3 billion in debt and create a long-term plan to pay it down.
What do you do?
At first glance, austerity seems like a sensible approach. Though Barcelona has bought badly in recent years, it nevertheless has attractive assets that could fetch decent fees in the transfer market. Laporta could have chosen to sell these players, bringing money in and reducing the wage burden.
But though that would help right Barcelona’s finances in the short-term, it would jeopardize the team’s on-pitch activities and long-term revenue generation. Though Barcelona has young talent like Ansu Fati and Pedri coming through, its squad at the end of the 2021/22 season did not look capable of winning in the late stages of the Champions League without further investment. Failing to compete at football’s highest echelon would not only represent a sporting decline, it would damage broadcasting, commercial, and matchday revenues. The best performing teams get a larger portion of broadcasting money, sponsors want to work with successful clubs, and winning teams sell tickets. Austerity might seem sensible, but in truth, it could worsen matters.
Laporta has chosen a different approach – to spend and sell his way out of a crisis. Over the past four months, Barça’s president has financed a stunning recruitment drive while simultaneously mortgaging future revenues.
Strengthening the squad
Barcelona is once again among Europe’s big spenders. The club has forked out €168.9 million, second to Chelsea’s €222.5 million. The club has also picked up high-profile free agents who required no transfer fee. In total, Barça has brought in five new players, with several more rumored to be on their way.
In many respects, it sounds like a typical Barcelona summer: hyperactive and high-spending. But there’s reason to believe this time may be different. For one thing, Laporta is back in charge. The president oversaw Barcelona’s most successful ever period between 2003 and 2010 and has navigated a financial crisis before. Our expert described Laporta as “a dealmaker” and “a phenomenal political operator,” likening his return to Joe Biden’s election. “The socios wanted the comfort of his leadership after so much craze and chaos,” they said.
Laporta has a strong relationship with La Masia’s golden generation, thanks to his previous tenure. Many of those stars still hold significant power. Xavi Hernández (Xavi), one of the club’s greatest players, is now manager. Sergio Busquets is the team captain. And Gerard Piqué is not only still playing but is widely considered Barça’s president in waiting. It would be no surprise to see him taking over from Laporta in a few years. Barcelona looks like an organization with some identity again.
The signings themselves seem promising. Four of the five look like clear upgrades. Robert Lewandoski and Raphinha will improve Barcelona’s attack while Andreas Christensen and Jules Koundé add to the defensive line. Though perhaps not an automatic starter, Frank Kessié may displace existing midfielders or, at the very least, add depth.
Though attracting these players shows Barcelona retains considerable market appeal, getting them onto the pitch has been another challenge. La Liga rules around spending meant Barça could not register their new signings until late in the season, with Jules Koundé’s participation ratified only yesterday.
With players at his disposal, Xavi must ensure his team performs. “On-pitch results are key this season to beat back the public media craze and spotlight on them,” our expert said. A lousy run would increase the pressure on the club and limit performance-related earnings in domestic and continental competitions. There’s no substitute for a winning team.
La Liga rights
None of Barcelona’s new players could have joined had Laporta not pulled four “levers.” Over the course of the summer, Laporta has brought in €700 million by selling ownership of core assets to private equity firm Sixth Street, crypto platform Socios.com, and media entity Orpheus Media. The transactions are as follows:
- Lever one. Sixth Street purchases 10% of Barcelona’s La Liga rights for 25 years, for north of €200 million.
- Lever two. Sixth Street purchases a further 15% of Barcelona’s La Liga rights for 25 years for €300 million.
- Lever three. Socios purchases 24.5% of Barça Studios for €100 million.
- Lever four. Orpheus Media purchases 24.5% of Barça Studios for €100 million.
The first two are most significant, at least in the short term. As we’ve discussed, broadcasting is the largest revenue driver for football clubs, including Barcelona. Losing out on future earnings is a considerable blow. “The club’s most valuable assets from a balance sheet standpoint are media rights, and it’s not even close,” Liam Killingstad, Head of Insights at industry publication Front of Sports, said. “Selling 25% to Sixth Street dilutes ownership in their most important asset.”
On an annual basis, Barcelona earns roughly €165 million from its La Liga rights. Assuming Barcelona maintained its performance and that the value of rights stayed static, the value of this asset over the next quarter century comes to €4.125 billion, making Sixth Street’s stake worth €1.03 billion. Of course, the value of these rights is likely to increase, though it's unclear by how much. Indeed, a decade ago, Barcelona’s share was €163 million, close to current figures.
Barcelona clearly recognizes the value of the asset. Earlier in the year, the club chose not to participate in a league-wide private equity deal with CVC Capital Partners. That arrangement would have given Barcelona €270 million in exchange for 10% of its La Liga rights for 50 years. Such reluctance suggests the club was keen to avoid diluting the asset, or, at least, determined to maximize its value.
Ultimately, Barcelona’s agreement with Sixth Street shows there was likely no better alternative. “Selling the media rights and restructuring the debt was a necessary evil that puts them into a more stable financial position,” Killingstad said, “It is 100% a ‘the ship is burning we need to do something’ type of move.” Though it will not have been easy to stomach, the Sixth Street deal has helped the club's financial flames from rising.
Football fans will worry that lost broadcasting revenue will increase Barcelona's interest in a European Super League (ESL). In April 2021, twelve of the continent's biggest teams announced their intent to found a breakaway competition. As one of the founding members, Barcelona would have be entitled to a €300 million “welcome bonus” from the league's financial backer JP Morgan. Universal opposition from fans scuppered the project, with many lobbying their clubs to drop out. But though chatter about the ESL has mostly died out, Laporta remains a vocal proponent. Given the potential economic upside, his support unsurprising. “Barcelona helps carry the value of La Liga media rights,” Killingstad said. “If they were part of a Super League they could earn way more. It’s a structure that’s good for clubs that get eyeballs, and the lump sum payment structure would help solve Barcelona’s specific financial issues.”
Though a deeply unpopular idea, Laporta will hope the ESL can be revived.
Before this summer, few football fans had heard of Barça Studios. The club’s media arm creates programming for the local Barça TV channel, streaming platform Barça TV+, and social media accounts. It seems to be a relatively small, unprofitable operation, though one with an eye on the future. Few other football clubs have attempted a streaming play, for example.
Barcelona’s decision to sell equity in this entity looks like a shrewd move. Cashing in €200 million on an unproven project helps the club’s current predicament while partnering with a crypto firm enhances its chances of finding the next big revenue stream. “It’s closer to a venture bet,” Killingstad explained, referencing Barça Studios' potential upside.
Socios and Barcelona are no strangers to one another. The duo first partnered in early 2020 to launch the club’s fan token, $BAR. Paco Roche, PR Manager at Socios, explains that the token lets fans interact with the team in different ways, “taking part in decisions such as the design of the captain’s armband or the stadium’s match-day playlist.”
While it remains to be seen what the long-term impact of a fan token is, having a partner dedicated to exploring opportunities in web3 seems worthwhile. “I think there’s a lot of room for innovation in this space,” the football expert mentioned earlier noted. Roche remarked that Socios sees its engagement as “a truly long-term partnership focused on accelerating Barcelona’s blockchain, NFT, and web3 strategies.” Though details are slim for now, you can imagine a world in which Barcelona creates its version of Top Shot, the NFT project that showcases memorable NBA highlights and players. How much would a fan be willing to pay for Messi’s absurd chipped finish against Real Betis? How about his mazy solo goal against Getafe?
Beyond web3, there are other media opportunities to explore – likely with the club’s greatest-ever player. “I think the capacity to utilize content from Messi is very high,” our expert noted. “The club could develop something in tandem with him that chronicles his life properly, both as a documentary and perhaps a separate fictionalized drama. Barcelona is still totally attached to the Messi brand and I have a feeling he’ll do something with them irrespective of whether he returns as a player.”
Though competing against content giants like Netflix and Amazon is unlikely to be easy, Barça Studios gives the club an avenue through which it can try to create the next All or Nothing or a football version of Drive to Survive.
A caper down the right wing. A pass inside. Control, flick, backheel. Turn and finish.
Barcelona’s third goal against Real Sociedad on August 21 showed what their future might look like. Raphinha, purchased for €55 million, scampering down the right wing, Robert Lewandowski recruited for €50 million delivering a backheel, and Ansu Fati, a product of La Masia, closing the move with a composure that makes the nineteen-year-old look much older than he is. Though not a goal that will live long in the minds of the Camp Nou watchers – they have seen many finer finishes than this – it nevertheless shows what success might look like for Laporta: expensive signings actually making an impact, homegrown talent maintaining the club’s identity, and a team that wins. If Barcelona can get these things right, its business convolutions will look much more manageable.
The old red and blue do not conjure quite the same awe as they once did. Top teams do not step into Camp Nou with quite the same trepidation. However, returning to such levels may not be as far off as it seems. Barcelona has, at times, looked like the worst version of itself this summer – spending money, pressuring players to take wage cuts, and registering its newcomers at the last moment. Closer analysis suggests the club is acting with a coherent approach for the first time in some while. Laporta’s plan is not pretty, but it does seem necessary. At the very least, his administration seems deadset on ensuring the Blaugrana means as much as it ever did.
The Generalist’s work is provided for informational purposes only and should not be construed as legal, business, investment, or tax advice. You should always do your own research and consult advisors on these subjects. Our work may feature entities in which Generalist Capital, LLC or the author has invested.