FC Barcelona finished the 20/21 season in deep financial distress. They had take several million Euros worth of impairment losses and with a squad impacted by years of poor recuitment were forced into releasing Lionel MEssi to meet LaLiga's ffp mandate. a change in leadership ensued and multiple financial levers were deployed to address the bleeding, most notably the sale of a 25% stake in their LaLiga TV rights for the next 25 years. A couple of seasons have since passed, but have things really changed financially?Are FC Barcelona still in financial distress?
Barcelona's financial predicament a couple of seasons ago was best summarized by Joan Laporta ,who described predecessor Josep Bartomeu's spending as " too much and the speed of light" leaving them in a "dramatic financial crisis" . He called it a " dreadful inheritance" at the time ,but ressured fans that he was " not scared" . He said : " the situation is dramatic but we have good news: the strategic plan based on our credibility and experience, on the assets that Barca have , makes this situation temporary. But what is temporary?
It's important to start by understanding exactly what Laporta and his team did to try and rectify the situation . Most notably, three things - first , they sold 20% of their domestic TV rights to US investment firm sixth Street for the next 25 years in a deal totalling over 500 million Euros. This is basically giving up a sizeable chunk of TV revenues for the next quarter of a century ( which would well add up to a lot more than 500 million euros ) to book higher revenues today. This was necessary to comply with LaLiga's FFP rules and enabled them to raise the allowed spending limit so theu could spend 150 million pounds last summer to sign the likes of Robert Lawandowski, Rafinha and Jules Kounde, and complete register free transfers for Andreas Christensen , Franck Kessie, Hector Bellerin and Marcos Alonso.
Second, they sold a 49% stake in their media company , Barca Studios, over two separate transactions totalling around 200 million euros.
And thirdly, they signed a huge long-term shirt and stadium sponsorship deal with Spotify worth to 280 million euros.
In addition to this , they managed to negociate down player contracts - asking players to defer wages and / or take dramatic pay cuts to stay at the club. Gerard Pique being the most noteworthy example. Most ambitiously, they closed renegociations recently on a 1.45 billion euro financing deal to renovate their iconic Camp Nou Stadium. The deal is around 30 years long, with Barca making the final repayment in 2052. This will doubless impact cash flow and the interest payments ( Barca's annual interest payments are already the highest in Europe at 30 million euros ) will affect profits for the better part of the next three decades . We'll see the full impact of this when this season's (22/23) financials are released later this year, but it is likely to be a sizeable on the club's resources. The club does extimate however the new stadium will generate roughly 200 million euros worth of additional revenue each year through sponsorship and naming rights , ticketing , catering, VIP boxes, hospitality , meetings and events . That's a lot of steps taken, then - so what's been the impact and how are FC Barcelona positioned now?
In the 21-22 season financials released in September last year, the impact of some of these levers showed and the high one-time costs of 2021 ( especially massive player impairment costs and one-time provisions because of tax cases and law suits ) also disappeared. FC Barcelona finished with a negative 7 million euros EBITDA ( or earnings before interest, taxes, depreciation and amortization ) in 21-22, which was still significantly better than the negative 63 million euro EBITDA that Barcelona had in the previous season. The first tranche of the TV rights sale impact ( totalling 267 million euros) kicked in , with an additional 400 million euros expected to flow through into the 20-23 financials. The 200 million euros' worth of Barca stidios' stake sale will also flow through in 22-23. FCB have not ruled out the deployment of more such 'levers' , including a rumoured 49% stake sale in Barca Licensing & Merchandising, which would be worth 300 million euros. Player sale are another lever that the club might yet exploit, especially for potenntially high value assents sich as Frenkie de Jong. Years of poor recuitment though have impacted revenue from player sales, and Barcelona's performance in this regard has been poor in the last five years. FCB's profit taxt in 21-22 was 98 million pounds, which was comfortably the highest In LaLiga.
The club estimated 274 million pounds of profit after tax in 22-23, with the assumption they'd reach the quarter finals of the Champions Leugue. Crashing out in the group stage , and then losing to Manchester United in the Europa League was not foreseen.
In the present day ,we'd argue that while Barca are seeing short-term relief with these 'levers' kicking in , the longer-term financial health of the club is still not good. Snowed under by debt ( the club's gross debt stood at 841 million euros in the latest financials, which will increase with the new financing deal on the stadium ), the club also have an enormous wage bill ( 402 million euros in 21-22 ) and are reportedly around 200 million euros over the LaLiga FFP cap. They are thus unable currently to register new contracts signed months ago with defender Ronald Araujo and midfielder Gavi, both key players for their future. In more positive news, high earners Segio Busquests and Jordi Alba will be leaving the club this summer , and Gerard Pique has already retired. Nevertheless, they also cannot keep finding one-time/innovative financial levers and will evnetually need to fix the operating engine. FCB had the second lowest operating profit ( or profit generated through the football club's day to day operations excluding one-time exceptional items ) in LaLiga at negative 146 million euros, which is typical sign or poor financial health.
While Barcelona fans ( and indeed the hierarchy ) are highly celebrating the LaLiga win, it helped paper over cracks that continue to exist and in some cases grow wider.
Football Manager
