Blog #1
Barcelona Eventually Registered All Summer Signings, But What Took So Long?
Introduction
In the summer transfer window of 2022, Barcelona spent a total of €150 million on players, including Robert Lewandowski [1], one of the world's premier strikers.
They also renewed high value player contracts, such as Ousmane Dembélé. Reportedly, the new contract contains a clause which could see the French forward collecting 50% of the release clause in his contract [2], should a club trigger the release clause. Players owning their transfer rights was explained in detail on Daniel Geey’s blog [3].
Barcelona, however, had trouble registering their signings this summer transfer window and were only able to register Jules Kounde, a month after being signed [4]. This resulted in the French defender missing out on the first two games of the LaLiga season. Why did it take so long?
What are La Liga’s regulations on registering players?
La Liga’s player registration system is intrinsically linked to the club’s finances. All clubs in Spain are given a spending cap which signifies the amount they can spend on their first team [5], whether that be on players, coaching staff, academy, physios etc. The figure includes wages and transfer fees and is based on what the club can afford based on its revenue being measured against its outgoings, including any debt.
In terms of transfers, a transfer on all club’s books would be a player’s yearly salary plus a part of his transfer fee. The transfer fee element, for Barcelona’s 2022/23 books, would be based on the full transfer fee of a player divided by the length of his contract [6]. In the case of Lewandowski, his cost on Barça’s books would be his salary, plus €12.5 million, as he cost a reported €50 million and was given a four-year contract.
It has also been outlined by Javier Tebas, La Liga president [7], “When a club goes over its salary cap, it can only include players who represent 25% of the savings.” This means that teams are allowed to use 25% of transfer profits to cover new costs, but 75% must be used to pay off money owed.
Why did Barcelona have trouble registering players?
To simply put it, Barcelona, at one stage, did not have enough money to register their seven summer signings. The reason for the recent financial struggles at Barcelona have been down to a mixture of board level mismanagement and the effects of COVID-19. Then-president of Barcelona, Josep Bartomeu, stated that the after-tax loss of €97 million, for 2019/20, was largely due to a loss of revenue. The revenue generated for 2019/20 was €855 million, but it is estimated that it would’ve been €1.06 billion had it not been for COVID-19. This would have meant that Barcelona would have yielded a €2 million profit for 2019/20 [8].
A helpful Twitter thread from Swiss Ramble [9], posted last summer, outlines how badly Barcelona was mismanaged in the last five years, which resulted in their transfer struggles this year. The thread highlights that in 2019 Barcelona’s wage bill was €501m, the highest in Europe. Although it fell to €443m in 2020, a three-year average up to 2019/20 shows that the club's wages grew by 30%.
Moreover, in terms of transfers, a three-year average up to 2019/20 shows Barcelona spent €320m, which is more than three times as much as the €103m average in the preceding 5-year period. The €960m spent in the three windows was the highest across Europe and also resulted in Barcelona having the third highest net spend in Europe, behind the two Manchester clubs. Much of this spending has been on credit, and as a result Barcelona from 2017 to 2020 had the highest transfer debt in Europe at €323m by 2020, growing from €64 in 2017.
Some may point to the costly sale of Neymar, as a reason spending got so out of control, due to needing to replace the star with the fee received. However, the money arguably was not spent well. Big transfers such as Griezmann, Coutinho, and Dembélé which in total have cost over €400 million have backfired with two of the three players no longer being at the club in Coutinho and Griezmann.
There is a clear link between the upstairs mismanagement and the aura Barcelona possessed on the pitch. Since 2015, the last time Barcelona won the Champions League, they have not gone past the quarter-finals and in 2021 only reached the round of 16. During this time, Barcelona was embarrassed by Bayern Munich 8-2 in 2020, a real nadir in the club’s famous history in Europe. Moreover, in 2020/21, Barcelona finished outside the top two in La Liga for the first time since 2007/08.
Due to Bartomeu’s infamous tenure as Barcelona president, he resigned in October 2020, due to a potential vote of no confidence on the horizon [10]. His successor Joan Laporta, who had been the president at Camp Nou during the Pep Guardiola glory years, said restrictions were caused by “what we have inherited”. One can all but agree. Last August, Laporta gave a press conference in which he revealed a debt of €1.35billion before outlining how the club’s salary obligations accounted for 103 per cent of income and said the club’s net worth stood at negative €451million [11].
As a result of all of this, in March 2022, La Liga’s president announced that Barcelona’s spending cap would be negative €144 million. In comparison, their fiercest rivals Real Madrid were given a spending cap of €739 million [12].
How Barcelona managed to register their summer signings
One of the ways to restructure the club's debts of over €1 billion, a line of credit of €550 million was secured from Goldman Sachs [13], to ease the financial burden of the COVID-19 pandemic, in 2021.
In addition, Barcelona was able to generate funds to register players by removing players from their books and generated €30 million in player outgoings including the sale of PhillipeCoutinho for €20,000,000 [14]. Moreover, the club released several players such as Dani Alves, reducing the wage bill at the club.
The main way Barcelona was able to generate funds this summer, which has been one of the summer's biggest football stories, was the triggering of economic levers. To simply put it, an economic lever is using your assets to acquire funds. In total, Barça triggered four economic levers. The four economic levers are [15]:
The sale of the club's domestic TV rights to Sixth Street Partners for the next 25 years. Barça announced that 10% was sold on the 30th of June.
The sale of the club's domestic TV rights to Sixth Street Partners for the next 25 years. Barça announced a further 15% was sold, on the 22nd of July, taking the total sale of their TV rights to 25%.
The sale of 24.5% of Barça Studios for €100 million to Socios. Barcelona announced the deal on the 1st of August.
The sale of 25% of Barça studios for €100 million to Orpheus Media. Barcelona announced the deal on the 9th of August, meaning Barça now only owns 51.5% of Barça studios.
Depending on whom you ask, the triggering of these levers either saved the club or ruined them in the long term. Personally, although this decision will have short term benefits, in the long term Barcelona will have long term financial problems. Selling future revenue streams puts the club in a position of future cashflow issues down the line. What will Barça do when they reach that crossroad? Inevitably sell even more of their rights, in turn creating a never-ending cycle which can only end in one way.
In addition, Barcelona also agreed to rebrand the Camp Nou to the Spotify Camp Nou, an agreement worth a reported €280 million [16], this deal has also seen Spotify become Barça’s main kit sponsor. The selling of the stadium’s rights is a big deal, when you put it into context, that Barcelona did not have a paid sponsor for their kits until 2010 [17]. Real Madrid, in comparison, got its first sponsor in 1982, further showing the magnitude of selling the stadium name rights.
Together, these measures made it possible to register all their signings for the 2022/23 season.
Conclusion
Clearly, La Liga has one of the strictest financial regulations in world football, and certainly the strictest amongst the top five European leagues. As a result, Barcelona are being required to move away from flash name signings on ridiculous wages, such as Antoine Griezmann, and be more shrewd in the market. This has already started to take fruition with smart signings such as Raphinha, a young talent who has the potential to explode. In addition, they must go back to relying on La Masia, the famous youth academy, and put their hopes on young, homegrown talents such as Ansu Fati.
In totality, this recipe may allow Barcelona to become more sustainable in the long run and put them back on the top table of European football.
References
[1] ‘FC Barcelona transfers 22/23’, Transfermarkt, https://www.transfermarkt.co.uk/fc-barcelona/transfers/verein/131 (last accessed 13 September 2022)
[2] Toni Frieros, ‘We reveal Dembele’s new contract with Barca’, Sport, published on 11 August 2022, https://www.sport.es/es/noticias/barca/desvelamos-nuevo-contrato-dembele-barca-14264243 (last accessed 13 September 2022)
[3] Daniel Geey and Alex Harvey, ‘Third Party Investment Update: Players can own their transfer rights’, https://www.danielgeey.com/post/third-party-investment-update-players-can-own-their-transfer-rights/ (last accessed 13 September 2022)
[4] Alex Kirkland, ‘Barcelona register Jules Kounde a month after signing defender from Sevilla’ ESPN, published on 27 August 2022, https://www.espn.co.uk/football/soccer-transfers/story/4730226/barcelona-register-jules-kounde-a-month-after-signing-defender-from-sevilla (last accessed 13 September 2022)
[5] Sam Marsden, ‘Why can’t Barcelona register their summer signings yet? Explaining their financial crunch before LaLiga start’ ESPN, published on 12 August 2022, https://www.espn.co.uk/football/barcelona-espbarcelona/story/4717944/why-cant-barcelona-register-their-summer-signings-yet-explaining-their-financial-crunch-before-laliga-start (last accessed on 13 September 2022)
[6] Sam Marsden, ‘Why can’t Barcelona register their summer signings yet? Explaining their financial crunch before LaLiga start’ ESPN, published on 12 August 2022, https://www.espn.co.uk/football/barcelona-espbarcelona/story/4717944/why-cant-barcelona-register-their-summer-signings-yet-explaining-their-financial-crunch-before-laliga-start (last accessed on 13 September 2022)
[7] Swiss Ramble, ‘2021 Twitter thread on Barcelona’s economics’ Twitter, published on 26 July 2021, https://twitter.com/SwissRamble/status/1419540799440707584?s=20&t=EPB9_dhT1kBETmXYeDswhg (last accessed on 13 September 2022)
[8] FC Barcelona 2019/20 Economic report, www.fcbarcelona.com, published on 5 October 2020, https://www.fcbarcelona.com/fcbarcelona/document/2021/01/21/5b3141b5-2f06-4d02-8d10-e262df0b6063/BALANC_ECONOMIC_ENG_compressed.pdf (last accessed on 4th October 2022)
[9] Swiss Ramble, ‘2021 Twitter thread on Barcelona’s economics’ Twitter, published on 26 July 2021, https://twitter.com/SwissRamble/status/1419540799440707584?s=20&t=EPB9_dhT1kBETmXYeDswhg (last accessed on 13 September 2022)
[10] ‘Barcelona president Josep Maria Bartomeu resigns’, BBC Sport, published on 27 October, https://www.bbc.co.uk/sport/football/54713209 (last accessed on 13 September 2022)
[11] Adan Crafton, Pol Ballus and more, ‘Investigation: Barcelona’s financial crisis and what the rest of football thinks of it’, The Athletic, published on 3 August 2022, https://theathletic.com/3468740/2022/08/03/barcelona-money-finances-crisis/ (last accessed on 13 September)
[12] Thomas Gualtieri, ‘Barcelona Is Only Spanish Club With Negative Spending Limit’ Bloomberg UK, published on 14 March 2022, https://www.bloomberg.com/news/articles/2022-03-14/barcelona-is-only-spanish-club-with-a-negative-spending-limit#:~:text=Spanish%20competition%20LaLiga%20announced%20the,a%20news%20conference%20on%20Monday (last accessed on 13 September)
[13] Holly Hunt, ‘FC Barcelona secures ‘€500 million’ Goldman Sachs loan’ Insider Sport, published on 19 May 2021, https://insidersport.com/2021/05/19/fc-barcelona-secures-e500-million-goldman-sachs-loan/ (last accessed 13 September 2022)
[14] ‘FC Barcelona transfers 22/23’, Transfermarkt, https://www.transfermarkt.co.uk/fc-barcelona/transfers/verein/131 (last accessed 13 September 2022)
[15] ‘Barca’s four levers: what they are and how much the club have earned’, Sport, published on 12 August 2022, https://www.sport.es/en/news/barca/barcas-four-levers-what-they-are-and-how-much-the-club-have-earned-14267524 (last accessed 13 September 2022)
[16] Matthew Strauss, ‘Spotify to Become FC Barcelona Main Shirt Sponsor’, PitchFork, published on 16 March 2022, https://pitchfork.com/news/spotify-to-become-fc-barcelonas-main-shirt-sponsor/#:~:text=FC%20Barcelona%2C%20founded%20in%201899,to%20an%20agreement%20with%20UNICEF (last accessed 13 September 2022)
[17] Andre Rojter, ‘Barcelona Announce First Shirt Sponsor’, Bleacher Report, published on 10 December 2010, https://bleacherreport.com/articles/540361-barcelona-announce-first-ever-shirt-sponsor (last accessed on 13 September 2022)