At least, by revenue. In 2018, it became the first sports club ever to make more than $1 billion in annual revenue. The
’s Dallas Cowboys make a comparatively paltry $800 million. But unlike the Cowboys, Barcelona posts very little profit. It had an operating loss of €100 million ($118 million) in the 12 months through June 2020.
Even adjusted for the impact of Covid-19 on live sports, the team would only have made an operating profit of €29 million. It expects losses of €487 million this year. Forbes estimates that the Cowboys enjoyed an operating profit of $280 million in 2020. Of course, there are structural reasons that make the finances of American football more stable and secure than football, not least that teams never risk being relegated to a lower competition.
But even compared to its peers in football, Barcelona’s track record is woeful. Joan Laporta, the club president, said on Friday that the salary bill represents a whopping 110% of revenue. And the team’s model of fan ownership is a cause. Most teams in Europe are companies with private owners. But there are exceptions. In Germany, there’s the so-called 50+1 rule, where a controlling stake of most Bundesliga teams must be owned by fan organizations, though private investors can hold the remaining shares.
And in Spain, the two most successful clubs, Barcelona and Real Madrid, are 100% owned by their fans. During the 1990s and 2000s, this gave the Spanish giants a financial edge over their rivals in England and Italy. Because they didn’t need to deliver profits to shareholders, they were able to fund pricey player acquisitions with sizeable piles of debt. But the arrival of billionaire owners like Roman Abramovich at Chelsea, the Qatari sovereign wealth fund at Paris Saint-Germain and Sheikh Mansour bin Zayed Al Nahyan at Manchester City reweighted the scales. They were clubs funded not just by debt, but by equity investments.
The Spanish clubs can’t sell a stake without the fans’ approval, a scenario that is all but unimaginable. So they’ve had to compete with the sport’s new money when it came to signing the top players, but without the same access to capital. That left Real and Barca having to find inventive ways of accessing new funds. The much-maligned European Super League was one way of doing so. The proposal for a closed tournament modeled along similar lines to US sports was structured as a joint venture between the members. That meant they held equity — equity that could be monetized or borrowed against to raise more capital.
The competition died a quick death. Now La Liga is providing Spanish teams with a similar opportunity. The competition has agreed to sell a stake of around 10% of its commercial interests to the private equity giant CVC Capital Partners for some $3.2 billion. Italy’s Serie A and Germany’s Bundesliga already rejected similar proposals. But Barcelona in particular may need this deal more than its continental rivals. Ultimately, because Barcelona has never had to deliver profits to shareholders, it has consistently been run on very tight margins. As long as it could service its debt obligations, most capital was reinvested into the playing squad. That was fine as long as revenue continued to trend upwards. But there was little capital put aside for a rainy day.
And the virus was such a rainy day. Most clubs have managed to weather the downturn. Barcelona hasn’t. The ill-fated Super League prompted some to propose fan ownership as a solution to the overreaches of private capital into the sport. But the Barcelona experience points to its shortcomings. The German model, with its balance between private and fan ownership, seems more sensible. Laporta’s decision to ditch Messi heralds a change in mentality. But as much as he may want to stop mortgaging the club’s future earnings in order to buy top players today, that’s not usually what fans want to hear — they want checkbooks opened for the best players. And it’s the fans that elect the president. Should that wisdom of the masses prevail the next time club elections come around, there’s little reason why Barcelona wouldn’t once again find itself in a similar mess to its current predicament.
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