By: Rohan Bhagat
With 26 Spanish First Division, 30 Copa Del Rey, and 5 Champions League titles, FC Barcelona is widely recognized as one of the biggest football clubs in the world. Alongside Real Madrid, they have dominated Spanish and European football for more than 70 years. And with the likes of Lionel Messi, Johan Cruyff, Andres Iniesta, Ronaldinho, and Xavi having put on the famous red and blue, it is no wonder the Blaugrana have built an international brand. It is that brand that allowed the club to rake in over $1B during the 2018/19 season, an all-time record [1].
Despite its enormous success and marketability, the club is facing a startling amount of debt. It is not unheard of for big clubs to owe millions to creditors. Clubs like Juventus, Tottenham Hotspur, and Valencia, for example, have taken on huge debts to finance the construction of larger stadiums. But Barcelona is simply on another level. After months of rumors that they owed more than they were letting on, the club finally disclosed that they were in approximately 1.4 billion dollars in debt [2]. Worse, $900 million is owed in the short term, with $322 million expected to be paid by the end of June.
So how could this happen? To understand, it is essential to understand how football clubs are financed.
Revenue Streams
Clubs have three primary sources of income. The first is matchday income. For most big clubs, matchday income represents the smallest portion of their revenue and primarily comes from ticket sales, including season tickets, as well as memberships, and concessions. Barcelona manages to maximize its revenue in this respect, seating over 99,000 in its Camp Nou stadium, and pulling over $130 million in matchday revenue each season [3].
The second income source is commercial revenue, supplied by sponsorships, partnerships, and merchandising. Barcelona has one of the largest kit sponsor deals in the world, with Rakuten paying them an estimated $70 million annually [4]. The club’s big-name stars make it easy to sell jerseys and merchandise and further contribute to the massive revenue stream. Furthermore, the club operates a museum that brought in an additional $65 million in the 2019 season [5].
The third and final income source is broadcasting revenue. In La Liga, the top division of Spanish football, league broadcasting revenue distribution is skewed heavily towards the top clubs, unlike in England’s Premier League. As a result, FC Barcelona brought in La Liga broadcasting rights nearly $190 million in the 2019/20 season, the most of any Spanish club [6]. The club’s participation and success in non-league tournaments, such as the Copa del Rey and especially the UEFA Champions League, bring in even more broadcasting and prize money.
Spending
Most clubs end up spending their revenue on operations and upkeep, wages, and transfers. Transfer fees are the fees paid by one club to another in order to sign a player currently under contract. If a player is not under contract, they are a free agent, and can sign with any club with no fee, or on what is known as “a free”. This rarely occurs as teams miss out on the chance to make a profit on the player.
Most large clubs have plenty of excess revenue that they use on transfers to constantly improve their squad, and it is rare for these teams to turn a profit in the transfer market. But Barcelona’s transfer spending has been dangerous, erratic, and out of control.
The Problems Begin
In April 2014, FIFA issued a two-window (fourteen-month) transfer ban to Barcelona after they were found to have violated regulations regarding the registration of underage players. Barcelona unsuccessfully appealed, but in doing so, postponed the ban to 2015 [7], allowing the club to make key signings that summer, including Ivan Rakitic, Marc-André ter Stegen, and, for a whopping $90 million, Luis Suarez [8]. The reinforcements would help to create one of the most formidable Barcelona sides ever. But the downfall would soon commence. After serving their transfer ban, Barcelona began a spending frenzy in an effort to “catch up” to rivals. Things worsened after Paris Saint-Germain activated Neymar’s $250 million release clause. The clause allows a player to buy themselves out of their contract, paying the release clause to the club and thereby terminating the contract. But in practice, it is used by teams looking to avoid negotiating a transfer fee. PSG the release clause and agreed to personal terms with Neymar, and Barcelona could do nothing but watch their star leave.
Transfer Nightmares
Despite making a quarter of a billion dollars off the sale of Neymar, Barcelona sustained heavy losses in the transfer market in an effort to replace the brilliant Brazilian. That summer, in the two biggest transfers in club history, they brought in Phillippe Coutinho ($159.5 million, $35 of which remains unpaid) [9] and Ousmane Dembélé ($148.5 million). They would bring in Antoine Griezmann two years later ($132 million). All three signings have flopped. Despite their impressive play on their former clubs and international teams, they have never seemed to fit in the Barcelona system. Moreover, Dembélé and Coutinho have struggled mightily with injuries.
The club also spent heavily on other positions, bringing in Malcolm ($45.1 million), Arthur ($34.1 million), Arturo Vidal ($19.8 million), Martin Braithwaite ($19.8 million), Miralem Pjanić ($66.0 million), and Frenkie de Jong ($94.6 million) [8]. Remarkably, Barcelona still owes money on the deals for Malcolm, Arthur, Vidal, and de Jong, despite the first three having already left the club.
The Coutinho disaster is particularly noteworthy. As the Brazilian failed to perform, he was loaned out to German club Bayern Munich for the 2019/20 season. At Bayern, Coutinho played brilliantly, and in a Champions League Quarterfinal match against his parent club, he came on with 15 minutes left to play, assisted one goal, and scored two more, in an 8–2 embarrassment of the Catalan giants. Now back at Barcelona, the club is prepared to keep him out of the lineup. A clause in Coutinho’s transfer from Liverpool to Barcelona in 2018 stipulated that if Coutinho were to play a certain number of games for the Blaugrana, Liverpool would collect an additional $6 million. It appears Barcelona is too deep in debt to meet that hefty price, a far cry from their spending sprees of not too long ago.
The Future
So Barça sits in a bleak situation, unable to improve their underperforming players or pay them, according to recent reports [9]. And despite the reassuring words of La Liga President Javier Tebas [10], things could get worse. The club sits in third in the La Liga table, two points behind rebuilding rivals Real Madrid, and eight points behind runaway leaders Atlético Madrid, who also have a game in hand. In the Champions League, they fare no better, having been humiliated 4–1 in the first leg of their two-game elimination tie with Paris Saint Germain. Meanwhile, the COVID-19 pandemic has kept stadiums (and museums) closed, essentially eliminating matchday revenue. And with fans under greater financial stress, they are less likely to buy club merchandise. With club president Josep Maria Bartomeu handing in his resignation last October and club legend Lionel Messi set to leave the club on a free, it seems Barça is a club spiraling out of control, falling further and further from the glories of their past.