Since the start of the summer transfer window, FC Barcelona have already spent more than 100 million euros on Raphinha and Robert Lewandowski, freely signed Andreas Christensen and Franck Kessié and extended Dembélé. A spendthrift summer that questions even Julian Nagelsmann, who himself does not understand how a Barça over-indebted six months ago can afford to slam at all costs. Little bit of fact-checking.
by Anna Carreau
Sunday July 24
To be able to sign all these players, FC Barcelona had to sell assets. That is to say, sell property that the club already owned to private companies. In this case, Barça sold 25% of its TV rights to Sixth Street for the next 25 years, in two successive sales of 10% on June 30 and 15% on July 22, against a check for almost 600 million euros. euros. In exchange, the club therefore undertakes to pay what it receives as TV rights from La Liga to the American investment fund, i.e. 25% of 166 million euros (what Barça currently receives) on 25 years, so more than 1000 million euros. An agreement which had previously been validated by the the partners at a general meeting. A sale of assets as Real Madrid was able to do by selling 20% of the future operating revenues of the Santiago-Bernabéu under construction against 360 million euros. Or as Ligue 1 clubs did by selling 13% of its future television rights. A way to increase income in the short term while decreasing it in the long term. Thus, after the two successive sales of these TV rights shares added to the very lucrative Spotify sponsorship contract estimated at 70 million euros annually for four years, Barça has cash and can afford to recruit massively this summer. And still has a recourse to raise funds: the sale of 49% of Barça Studio, which manages the entire universe of the media around the club, approved in October by the the partners and estimated at 300 million euros.
As explained, selling assets has become common practice in the world of football. The principle allows clubs to have immediate cash to finance transfers and current needs. On the Barça side, the contract signed with Sixth Street provides that the club can buy back its shares at any time and that the inflation of TV rights goes to the club. However, the 25% of TV rights represent 5% of Barça’s annual income, so a way must be found to compensate for this loss. The Blaugrana are counting on several things: the post-Covid economic recovery with a full Camp Nou all season (150 million euros in ticketing per season before the pandemic), a more competitive team that will bring in more income and the future income of the Espai Barça, the stadium renovation project. This also obliges the club to sporting successes, otherwise it could not make up for this loss.
Last season, we remember that several players had to lower their salaries so that new recruits could be registered in La Liga. The problem is therefore less about Barça’s concern to finance salaries than to fit into the nails set by the salary cap of the League. This supervision of the wage bill is a particularity of the Spanish championship which, depending on the income (advertising, sale of players, sponsorship contracts, income from TV rights, subscriptions, ticketing, competition bonuses, etc.) minus the structural costs ( salaries of non-sporting employees, operating costs, player purchases, etc.) of each club, sets a maximum amount of possible salary expenditure. The amount of this salary capwhich includes bonuses, salaries and the annual amortization of transfers, is scalable according to increases and decreases in income. In normal times, Barça had around 550-660 million euros in salary cap set by La Liga, the highest in the league. For years, the Blaugrana have a high payroll, but this was not a problem, since the salary cap was still superior to him. Only, the economic mismanagement of the last years with huge salaries given to some players and the drop in income due to the Covid caused Barca to suffer more losses than expected. The club thus ended its 2020-2021 season with 481 million euros in net losses. Small calculation: in December 2021, the salary cap was therefore… -144 million euros.
Under these conditions of salary cap negative, Barça had very limited leeway to recruit and register their players in the league. According to La Liga rules, the club was subject to the 1/4 rule, meaning for every euro spent, they must save four. A way to reorganize the accounts, but which is not viable in the long term, since the Catalan club would be forced to lose players with a large salary to finance those of others. FC Barcelona’s objective is therefore to go from a salary limit of -144 million euros to at least 500 million. For this, he must find 700 million euros. To be able to register its new players, Barça has therefore accumulated salary cuts, the departures of Coutinho and Griezmann, the downward extension of Dembélé, the sponsorship contract with Spotify and … the sale of the famous TV rights. A set of factors that allowed Barça to finish in the green on June 30, and therefore to see its wage bill increased by La Liga. With the sale of the last 15% this Friday, the club raised the 500 million euros that Javier Tebas demanded at the start of the summer to register players and could therefore sign newcomers without problems. Today, FC Barcelona’s payroll is estimated at 560 million euros by the club’s economic director, and this should increase further with the latest transfers. However, with this increase in salary cap added to the next departures of players and the possibility of selling half of Barça Studio, Barça should return to the nails at the end of the summer. Knowing that President Joan Laporta still wants to reduce the wage bill to 400 million, betting on the departure of players with large salaries like Frenkie de Jong (and his 20 million euros planned for this season) and a strict salary scale: none player will not earn more than 10 million and a large part of the salary is linked to individual and collective performance.
If Julian Nagelsmann was greatly annoyed during his press conference, it is undoubtedly because he has in mind this image of Joan Laporta who lamented the “dramatic financial situation” of the club, in debt to the tune of 1.35 billion euros. Barça had an obligation to repay part of this debt before June 30, 2021 and was unable to do so, which prompted the Catalan president to mention a “accounting bankruptcy” . Freshly elected, he and his team hastened to negotiate with the organizations to which they owed money in order to transform this short-term debt into long-term debt, and to smooth it over several years. Another part of the debt absolutely had to be paid on time, so Barca took out a €595m loan from Goldman Sachs bank last August to repay it. All this in order to avoid bankruptcy. This cash inflow had also made it possible to finance the transfer of Ferran Torres this winter. However, the club again went into debt to the tune of €1.5 billion for the Camp Nou renovation. Today, Barca have restructured their debt and are, for now, out of danger of bankruptcy.
by Anna Carreau