FC Barcelona’s Financial Situation: The Truth

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Barcelona’s financial woes have been a topic of interest in the world of football for the past few seasons, especially during the transfer windows. 

Even though the club has been generating one of the top 5 revenues in football since the 2005-06 season, it is struggling to make ends meet. FC Barcelona’s poor management of finances can be attributed to the club’s ex-president Josep Maria Bartomeu and his board.

In this article, we will be discussing the actions that led to this financial crisis, the effect of LaLiga’s Financial Fair Play, and how the club’s current president Joan Laporta and his board are handling it.

The Rise of Bartomeu

Josep Maria Bartomeu is a Spanish CEO, who started serving on FC Barcelona’s board as the Head of Basketball operations during Joan Laporta’s previous term as the president of the club. After Sandro Rosell succeeded Laporta as the president in 2010, Bartomeu was promoted to the office of vice president of the club.

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However, when Rosell resigned in 2014 due to an investigation being conducted on his misappropriation of funds in Neymar’s transfer to Barcelona, Bartomeu was elected as the interim president of the club to see the end of Rosell’s tenure which was ending in 2015.

In the summer transfer window of 2014, Bartomeu and his board hired ex-club legend Luis Enrique as the coach and spent €167 million to purchase players like Suarez, Rakitic, ter Stegen, and Bravo who helped the club win its second treble. With the massive success in the 2014-15 season, the club socios re-elected Bartomeu as the president in the 2015 elections.

Events that led to the Financial Downfall

During his tenure as the president, Bartomeu and his board have made many controversial moves that crippled the club.

1. Abandonment of La Masia

FC Barcelona is renowned for its ability to produce world-class talent in its football academy, La Masia. In 2011, a record 7 La Masia graduates helped FC Barcelona win the Champions League, which was unheard of in football. Many Barcelona football legends like Messi, Xavi, Iniesta, Guardiola, etc. are all products of La Masia.

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However, under Bartomeu’s reign, the club spent massive amounts on signing players and betrayed its philosophy to trust in its youth system. La Masia players were barely given any chance to showcase their skills during this period.

2. High Transfer Spend

Bartomeu and his board preferred to spend money on transfers rather than trusting their youth system. During this tenure, they had a negative net transfer spend of €440 million in transfers.

Despite having a very high transfer spend, they almost always bought players who weren’t a great fit for the team’s needs. 

3. Massive Wages

Barcelona were spending more than 80% of their revenue on paying the wages of their players. They were one of the top 2 clubs with the most wages during every year of Bartomeu’s reign. The players were offered extremely big contracts with high wages for many years, compared to the other European elite football clubs.

While very few players were able to hold up their end of the bargain by performing at a high level considering the wages they were receiving, many players weren’t performing at the level of their wages. This made it difficult to offload players with poor performance as they preferred to stay in Barcelona without any game time while receiving high wages rather than going to other clubs where they can get more minutes but lesser wages.

4. Misappropriation of funds

Bartomeu and some of the members of his board were arrested for participating in an alleged defamation campaign of FC Barcelona on social media. This is more commonly known as ‘Barcagate’.

This defamation campaign would consist of hiring a company called I3Ventures.sl to create states of opinion on social media, through dozens of unofficial accounts of the club that would be dedicated to protecting the image of Bartomeu and at the same time also attacking people from different areas of the Barça environment like players such as Lionel Messi or Gerard Piqué, former players such as Xavi, Puyol and Pep Guardiola and also other presidential candidates such as Víctor Font and Joan Laporta.

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Resentment was slowly growing against Bartomeu’s leadership among the socios of the club because of worsening finances and Barca’s decline on the pitch. The club legend Leo Messi handing in a transfer request was the final straw. Immediately after Messi publicly stated his desire to leave the club, a vote of no confidence was started by the Barcelona socios against Bartomeu.

Bartomeu did not want to be the first president to be kicked out by a vote of no confidence. On 27 October 2020, Bartomeu announced his resignation, along with the entire Board of Directors.

All of these irresponsible actions by Bartomeu and his board left the club in a financial mess.

When the newly elected president Joan Laporta took over in March 2021, Barcelona was technically bankrupt. Three months later, the club borrowed $605 million from Goldman Sachs. In October 2021, Barcelona reported $1.56 billion in debt.

The Effect Of La Liga’s Financial Fair Play

The Financial Fair Play (FFP) regulations were strictly enforced in LaLiga under the presidency of Javier Tebas. The Financial Fair Play regulations are a set of regulations established to prevent professional football clubs from spending more than they earn in the pursuit of success, and in doing so not getting into financial problems which might threaten their long-term survival.

One of the regulations of FFP is that the salary cap of the football club is set to 70% of the revenue generated i.e., a club cannot spend more than 70% of its generated revenue on wages/salaries of the players. 

If a club crosses this salary cap of 70%, sanctions will be imposed on the club. A club that crosses the salary cap has to follow a 1:4 rule for registering new signings into the wage bill and for transfer spending.

For example, if a club signs a player called ‘Player A’ for a transfer fee of €20 million on a 5-year contract for €8 million gross salary per year, then the ‘fair play space’ needed to be generated per year to register this player in the wage bill is, amortization quota per year which is €4 million (Transfer Fee/No. of years in contract = €20 million/5 years) plus gross salary per year which is €8 million, that is a total of €12 million.

If a club that breaches the salary cap, wants to sign and register the above-mentioned ‘Player A’, it needs to sell players worth €48 million (€12 million x 4, because of the 1:4 rule) or reduce their player salaries by €48 million for 5 years.

Laporta’s Financial Maneuvers

Considering the massive wages FC Barcelona players were given under Bartomeu, the wages for the 2021/22 season were calculated to be 105% of the expected revenue generated, which is 35% more than the salary cap specified. 

This meant that unless some big changes were made in the wage bill, FC Barcelona would be paying more money to the players than its total revenue generated.

This forced Laporta and his board to let go of their top 2 earners, Lionel Messi and Antoine Griezmann during the summer transfer window of 2021.

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Even after these players were released from the wage bill, FC Barcelona was spending 80% of its revenue on wages, which was still crossing the 70% threshold. This made it quite difficult for Barcelona to sign and register players to help them compete especially since they lost their best players. 

Some of the players with high wages like Pique, Busquets, Alba, and Umtiti stepped up and reduced/deferred their respective wages to register the club’s new signings like Depay and Ferran Torres.

In order to reduce the wage bills and end the season on a profit, Laporta and his board are working overtime. According to the reports, they are providing an ultimatum to players with high wages to either restructure/renew their contracts with massive pay cuts or to be ready to get sold. 

They have recently struck a deal with Spotify as their main kit sponsor (Men’s, Women’s, and Training) and also sold the naming rights to their stadium Camp Nou (now known as Spotify Camp Nou) to provide them with an influx of money.

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In the general assembly conducted on June 16th, 2022, the Barcelona socios voted in favor of the economic levers proposed i.e., to sell 25% of the LaLiga TV rights for the next 25 years and 49.9% of Barcelona Licensing & Merchandising.

On 30th June 2022, FC Barcelona sold 10% of their LaLiga TV rights to Sixth Street Partners, a leading global investment firm highly experienced in the business of sport. Sixth Street has invested €207.5 million in the club’s LaLiga TV rights, which helped the club end the 2021-22 season at a profit. 

According to the reports, the club is also planning to sell the remaining 15% of LaLiga TV rights approved before July 31 for La Liga’s salary limit calculations, which will provide them with approximately another €400 million, out of which 50% (€200 million)  would be used to strengthen the squad with players of better quality.

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Conclusion

Despite going through a major financial setback, Barcelona are trying their best to get back to the top under the presidency of Joan Laporta. 

The sale of future TV rights of the club can be seen as a controversial move as there’s a possibility that this deal might sabotage the future finances of the club. 

However, without this influx of money, it would be extremely difficult for the club to survive in the top flight of European football. 

The club has seen its best success under Laporta in his previous term as the president and with his proclivity to incorporate La Masia, his shrewd business tactics, and surrounding himself with people like Mateu Alemany and Xavi, Laporta is the right person to lead the way again.

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