Last week, Barcelona members gave the go-ahead to a proposal from the club’s board to sell future merchandising and television rights in exchange for immediate cash. They hope to generate up to €700m (“maybe more” according to chairman Joan Laporta), which must surely be something of a record.
It’s money Barcelona desperately needed as at the moment they are well over La Liga’s spending limits. Their maximum spend for next season is currently negative at -€144m. It 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 things stand it would mean Barca should get rid of players and salaries in order to get anyone in.
The club have essentially taken a massive mortgage on their future, to a degree that no other team has done in the past. Basically, they say, “We are going to make so much money in the future, why don’t you, dear investor, give us an advance now.”
It’s not necessarily a bad move; it might just work. It’s just that it’s risky. And what’s suboptimal about this is the fact that the people making the decisions – Laporta and his board – are unlikely to be there to deal with the fallout if they get it wrong, whereas they will be there to reap the short term. advantages.
I am not an expert in predicting medium to long term trends in the value of media rights and merchandising/licensing. I can’t tell you if Barcelona got a good deal. But we can walk through the architecture of each and better understand the risks involved.
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First, the broadcast deal. Laporta is ready to sell up to 25% of Barcelona’s domestic league broadcast revenue for up to 25 years. He said that for every 10% sold, Barca could raise around €200m. According to this metric, if they sell the whole 25%, they could earn 500 million euros. Laporta said they were working on four separate deals and hoped to close them quickly in order to get out of the spending caps.
Barcelona earned around €165m from La Liga deal in 2020-21. If they earned that amount for the next 25 years and sold 25% of their rights, they would end up giving away over $1 billion. But, of course, the argument is that sometimes it’s better to have €500m now than €41m a year for the next 25 years. After all, inflation is a reality – things cost a lot less 25 years ago.
On the other hand, LaLiga’s national television deal is likely to increase in value – and, with it, the amount Barcelona will receive – over the coming decades. And that means they’ll probably give over €41m a year (probably a lot more) over that period (they’ll also, of course, earn more, as they’ll keep the remaining 75%).
The problem too is that as the LaLiga rights deal increases in value (assuming it does), it won’t just increase for Barca – it will also increase for all the other teams. Barca always get a bigger share, provided they finish at or near the top of the table, but the competition amounts will also increase proportionally.
There is no right answer here. Unless you’re a time traveler from the future, you don’t know what the numbers will look like, but if you can predict things and are reasonably confident in your predictions, you can do a proper cost-benefit analysis.
It’s a similar story with Barcelona Licensing and Merchandising, the subsidiary that sells and licenses Barca-branded products. In 2018-19, the last pre-pandemic year, they earned 63 million euros. The pandemic has meant shops closed, no fans in stadiums and the closure of the Barcelona museum (which happens to be the second most visited in Spain, after the Prado in Madrid), so that 63 million euros are the only reliable reference we have. Laporta is confident that number can increase 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 ‘about 75% of this income comes from local stores and, of course, Barça fans exist all over the world.
But even if they increase licensing and merchandising revenue to 100 million euros (which means increasing it by almost 70%, which is not easy), they donate half of it to their new partner . So if someone pays them 250 million euros and they get 100 million euros in revenue, after only five years, whoever acquired the 49.9% will have their money back. (And if the revenue remains around the €60m mark, of course Barca will win against the initial money they will receive, but they will only receive €30m from licenses, instead of 50 million euros.)
All this indicates that it is indeed a bet. Laporta says Barca will have the option to buy back both the TV rights share and the Barcelona Licensing and Merchandising share, but again, we don’t know the terms. It’s safe to say, however, that no investor is going to tie up hundreds of millions of dollars without some sort of guarantee that he’ll get most of his money back if the deal fails before it becomes profitable for him.
So you are left with the question: is it necessary? The short answer is yes, because not only do Barcelona have diabolical spending restrictions, but they also have nearly €800m in debt, of which more than €310m are due over the next 12 months. Barca don’t have a wealthy owner who can inject equity, 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) go, not least because their value transfer will probably be worth more in a few years.
The longest answer? It’s really hard to say. The deals Laporta wants to make have not yet been done, we don’t know the terms and, more importantly, we don’t know what the future holds. We know that Barcelona, swapping the cash injection now, could give away close to €100m per season (and possibly a lot more than that) for the foreseeable future, and that looks like a kick in the ass. the road.
So they take that bet. And make no mistake, it’s a huge bet. If it wasn’t, other big clubs would do it with abandon, and they don’t. What makes you uncomfortable is that the people who decide to roll the dice — Laporta and his board — won’t be around for the long-term payoffs five or 10 years from now. They will be remembered as the geniuses who saved the club or they will be talked about the way Barca fans talk about Jose Maria Bartomeu, Laporta’s predecessor and the man who oversaw the financial crisis. And anytime you have people making huge financial decisions and losing nothing but their legacy and reputation, it’s best to be skeptical.