Barcelona is a city of high art and higher aspirations. From the Dalí’s surrealism to the curved windows of Casa Batlló, there is an adherence to transcendent artistic expression, physical beauty, and a sense of timeless grandeur while in the towering spires of La Sagrada Familia, there remains the push to become ever more, reach ever higher into both the physical and artistic worlds. These works of art transport you, into an idea of a city, and you can stare all day at the way the light plays across the floor, across a canvas, down a central staircase, but visiting them come at a cost. At Casa Batlló, you can enter for €35 per person and please don’t forget to visit the shop on your way out.
FC Barcelona–Barça, mes que un club–is no stranger to these same emotional and commercial measures. It is a member-owned club with the board elected in a popular vote, meaning that, as with all democracies, for those who would take it there is room to maneuver in the gray areas between fact and narrative. For the last 19 years, the club has been run mainly on a platform consisting of two major planks: first is that it is not the plutocratic vision of a single man and second is that it is the Catalan-centric distillation of a set of universal values. It relies heavily on charisma to sell the image of a club above and beyond the usual riff raff you find lying around the domestic leagues of Europe and that storytelling ability lies with one man: Joan Laporta. And what Lapora sells, more than anything else, is that most human of cravings: a sense of belonging to an elite group. That, in a nutshell, is laportisme.
A Brief History of Internal Conflict
To understand the current version of FC Barcelona, in which Joan Laporta can surge to the presidency on the back of a campaign that basically said “I’m going to bring the good times back,” it’s important to understand how it all began.
In 2003, Joan Laporta was elected president, 3 years after the downfall of long-serving Josep Lluís Núñez. Laporta himself was instrumental in the collapse of Núñez’s hegemony and, as a young, brash lawyer with charisma to spare, he walked into the club promising just a few things: David Beckham, modernization of the club, and, trophies.
By the end of the 2004-05 season, those promises were paying off, although in ways that weren’t originally foreseen. Instead of Beckham, it was World Cup winner Ronaldinho who helped to reinvigorate the team and instead of true modernization, it was a reliance on an old trick that did it: buying players. It wasn’t just Ronaldinho that arrived; it was Rafa Marquez and Ricardo Quaresma in the summer of 2003 and it was Deco, Maxi Lopez, Edmilson, Sylvinho, Juliano Belletti, Henrik Larsson, and a young man named Samuel Eto’o in 2004. Prior generation stars, like the Dutch contingent of Frank de Boer, Patrick Kluivert, Phillip Cocu, and Michael Reiziger were offloaded alongside other surplus-to-requirement players like Alfonso and Juan Roman Riqulme while Luis Enrique and Marc Overmars added to the departures list through retirement.
By 2005, however, there were questions about where all this money was coming from. Who was going to pay for this giant yacht made out of discarded players? Sandro Rosell chose that moment to resign, saying, in effect, that Laporta was not just building atop a sinking ship, but piloting it over the edge of the world.
In 2011, I wrote a piece titled “The (Private) War for FC Barcelona” in which I chronicled the schism that had formed between Laporta and Rosell. The latter’s resignation ignited a internecine conflict in the blaugrana faithful ranks, but a timely Champions League victory in Paris in 2006 kept the dogs at bay for a little while. By 2008, however, Laporta was forced to narrowly survive a vote of no confidence backed by Rosell when the club’s fortunes were cast into further doubt by on-field “failure” and the sense that the club was buying players as show ponies rather than quality additions to the squad. What happened next was, of course, almost scripted: by June 2009 the team was champions of Spain and Europe, winning the first ever domestic and European triple under the tutelage of Pep Guardiola. The club was suddenly the best in the world, with a core of home-grown talent, and a coterie of international superstars to fill out the ranks.
The following year, after another strong showing from the team, including winning La Liga and coming agonizingly close to making the Champions League final again, Laporta’s time in office was up and Rosell himself was elected to replace his former boss. Haymakers continued between the pair, with Rosell accusing the prior administration and Laporta personally of having cooked the books to the point of potential insolvency, only for Rosell’s administration to magically produce a string of profitable years. The club was in such great financial shape that it was well within budget when then-vice-president Josep Maria Bartomeu–you’ll probably want to remember his name for later–announced that the club had signed Neymar from Santos for €57.1 million.
The political struggle between the Laporta and Rosell was, I wrote back in that 2011 post, “the classic tale of two men waging a private war using a public institution,” but it might be another line from that article that is more pertinent now: “Barça is in the midst of a crisis of its own making that threatens to tear the club apart both financially and politically.”
The sands of time are quick to cover the traces of financial misdeeds, especially if they are accompanied by trophies, but it’s notable that no one has been formally charged with corruption based on Barça’s finances nor, as far as I know, has anyone lost the deposit required to run for president or be on the club’s board. Certainly Rosell tried to pin some financial malfeasance on the prior administration, going so far as to have the General Assembly hold Laporta personally accountable and then releasing a meaningless bit of documentation as a nod towards “transparency” before letting the whole thing drop.
Whatever the balance sheets said, it may have been a masterstroke for Laporta to leave when he did, even if he didn’t want to: the club was increasingly tied to its specifically Catalan identity, to an arms race with Real Madrid for the “new galactico” title, and to a “Masia first” ethos that was pushing the limits of credulity and self-regeneration. It is one thing to do marketing campaigns based on local players like Xavi, Carles Puyol, Gerard Pique, and even Victor Valdes and an altogether different thing to tie the club to a Catalan independence movement with increasing visibility and decreasing subtlety. The situation was ripe for a reckoning, regardless of whether anyone had cooked the books in any meaningful way.
A Fear of Heights
While the most recent club administration is currently viewed as an absolute disaster, much of the approach was originally set in place by Laporta: buy stars with debt, increase revenue to cover payments, repeat. It’s hard to look at the winning run by Laporta and not think “this was the right thing to do” simply because the purpose of FC Barcelona is, by and large, to win football trophies. And, at first, the small financial setbacks the club was facing were waved off as necessary bonus payments to players for trophies won or the risks inherent in trying to build a winning team. Fans could accept that easily enough and could also stomach that players with bright futures should be enticed to join by dangling incredible contracts. In the background, going almost unnoticed, was that it had become a race, not to rejuvenate the squad, but to reward stars, even in decline. This, of course, attracts more stars, but misfires will happen and they’ll happen more when a team is terrified of falling from the summit.
You cannot operate a club on fear any more than you can operate a car on empty. Those bonuses became permanent features of giant extension contracts for players whose usefulness had not changed. Lionel Messi, the greatest player in the history of the game, was given ludicrous amounts of money and extended—with commensurate salary bumps—even before his contract was due for renegotiation, all because management was too scared to even enter into the arena of losing him.
We should take a step back here, for just a moment, to talk about where some of that fear came from. First, it came from looking around Europe and seeing other teams catching up to Barça’s on-field level. Inter Milan and Bayern Munich both won triples after 2009 and the German took over from Spain’s golden generation in a few short years. Tiki-taka was taking a brutal beating as its main protagonists aged out of their prime. Those same stars, however, remained incredibly marketable and obscenely talented.
The second thing was Neymar.
While Rosell was quick to blame financial profligacy on the prior administration, conveniently out of the picture and unable to defend itself, the wheels of ever-greater spending were put in motion mostly by him. It is not a small number and increased as time went on, but the sum total of transfer fees paid by Laporta in the 7 years of his original administration was just shy of €400 million. Compare that to the 4 subsequent years: a combined total of €410 million in transfer fees. This included the arrivals of Neymar for €57.1 million and Luis Suarez for €82 million.
The wheels came off the bus for Rosell in 2014, as that Neymar money was scrutinized and serious allegations were levelled at the board and its president: tax fraud, secret payments, putting fingers on financial scales to show profits when there was, in fact, no money at all. Rosell resigned and was replaced by the very person who announced Neymar’s transfer to the world: Josep Bartomeu. And, once again, it was on-field performance that saved a tottering presidency, with Bartomeu elected in a landslide in the summer of 2015 after Luis Enrique led the team to another triplete.
How To Go Bankrupt In 222 Million Easy Steps
On August 3, 2017, Paris Saint-Germain paid Neymar’s €222 million release clause and Barcelona was officially rich rich, albeit down a player they’d expected to stay in Catalunya for the majority of his remaining yeas as a professional footballer. That feeling of sudden loss was probably the thing that ended up hurting the club more than the Neymar-sized hole in the squad simply because the administration completely and utterly panicked.
In quick succession, before the window was closed, Paulinho and Ousmane Dembele arrived (Nelson Semedo had already arrived by the Neymar departure). In January, another pallet of cash brought in Coutinho. And just like that, €222 million had evaporated, with €100 million more going out with it. Bartomeu emerged from the transfer market probably feeling like he’d been mugged, but also, like he’d avoided the worst possible outcome: looking like a failure. He replaced a splashy player with two splashy players, after all. A year and a half later, a similar dynamic would unfold during the Antoine Griezmman saga. A win is a win, sometimes, even when it’s a loss.
Naturally, the spending did not stop there, not by any means, because the fear of failure did not stop there. Over the course of his 6 years in charge, Bartomeu’s Barça put €1.17 billion—that’s right, with a B—into the market. Of the players that that were purchased during that time, just 6 remain: Dembele, Frenkie de Jong, Martin Braithwaite, Pedri, Miralem Pjanić, and Ronald Araujo (if you’re counting loan returns and B teamers). The net losses from transfers alone were €415 million over that time and that’s without considering add-ons, which could have totaled another €80 million or so just for Dembele and Coutinho.
There were some wins in the outbound market during those years, with Barça getting better at selling assets. Whereas Zlatan was brought in during the 2009 summer window for €46 million plus Samuel Eto’o and then jettisoned a year later (eventually bring in €24 million in 2011), Yerry Mina came in for roughly €12 million in January 2018, played 6 matches, and moved to Everton for €30 million in the very next transfer window. Instead of making just 30% of transfer fees paid out back in sales, the club was making 65% back under Bartomeu.
As a quick aside, no accountant of value would write about the transfers like I do. Swiss Ramble is at pains to point out in his mid-July discussion of the club that Barcelona that makes a regular profit on player sales. Despite obviously paying far more than they’re bringing in, the club amortizes the cost of each player (for example, Coutinho’s €160m isn’t lumped into 2017-18’s budget, but instead spread across the duration of his contract) and that changes the numbers from a budgetary standpoint while mainly increasing one specific thing: debt.
Ah yes, debt. It is no secret that Barça has a lot of debt: €1.2 billion. They’re not the worst offenders in this category, sitting third in the world behind Chelsea (€1.5 billion) and Tottenham (€1.35 billion), but it’s worse debt. Chelsea had Abramovich funding them through loans, which he promised to forgive when he was selling the club (I don’t know the latest on that) and Tottenham were financing a world-class stadium. Barça still has €1.5 billion euros of debt to account for when the Camp Nou gets remodeled, so this is all just the worst kind of debt to have: the type that has to be repaid based on existing revenue.
What this means, in short, is that Barcelona owed gargantuan amounts of money on short-term debt. You take a payday loan, well, eventually it catches up to you. So what do you do? You restructure; in effect, you refinance. You take out a long-term loan to shift short-term debt and it happens to be that the club was able to do that during an extremely low interest rate period, grabbing 1.98% on a 10-year deal, according to Swiss Ramble. That reduces short-term liability to manageable amounts and lets the club move on to other matters, like, you know, the requirements the league has put on the club for registering new players.
Given that contracts expire, it’s important to maintain some wiggle room for any renewals or acquisitions, but as we saw with Messi last August, Barça could in no way hand out any sort of offer to anyone at all, much less Messi. Two important points: for our purposes, we can say that a player cannot renew for less than 50% of his prior wages, meaning Messi had a bottom end contract of €50-60 million euros a year. Additionally, the club has a salary cap derived from a somewhat complex formula based on revenue minus debt repayments and non-sporting expenses. With debt repayments rising at the same time as salaries were ballooning, Barça was being crunched from both ends. When the bottom fell out of the revenue bucket thanks to COVID-19, suddenly it wasn’t a question of making the numbers work, but instead one of being able to field a squad.
The team appealed to the league to let them sign some players—specifically Messi—and were told, flatly, no. The rules are the rules, intoned Javier Tebas, which is fair enough on the surface. But then he added, unless you agree to a financial plan I’ve devised. That plan was the CVC deal, officially known as La Liga Impulso (Boost, in Spanish). The deal didn’t sound great—money meant for “technology, innovation, internationalization, and sporting growth initiatives” but only “up to 15% can be used to sign players, with the remaining 15% for reducing debt” at the cost of TV rights and sponsorship revenue for 50 years. That alone is questionable, but there was a kicker: in order to sign on, Barcelona had to give up its interest in the European Super League. It felt like a well-timed kick in the nuts from La Liga and Tebas because the ESL was in its death throes. Barça didn’t bite, preferring to shuffle various bits and bobs around to free up salary cap space. A year later and Barça is still technically a member of the ESL (which has promised to pay both Real Madrid and Barcelona extra money compared to everyone else, so that’s an added incentive to stay in).
The other thing that has happened a year later is that Barcelona sold a batch of its TV rights to an investment firm called Sixth Street.
There’s Always Money in the [TV rights] Stand
These palancas, or “economic levers,” are to 2022 what the Burofax was to 2021. It’s an old thing turned new again and we’ve got to talk about it because the last time these things were used, half the people on Twitter weren’t alive yet because it was 2006. But we’ll get there in a minute.
Here’s what happened: Barcelona sold 25% of their domestic TV rights revenue to Sixth Street for €517 million and 24.5% of Barça Studios to whatever the hell Socios.com is for €100 million (it’s a fan token/crypto site, yes, I know). The Sixth Street agreement lasts for 25 years and the Barça Studios agreement is, in effect, permanent. The concept is simple: get cash right now for an asset that will appreciate and give Sixth Street an ample return over time. Roughly speaking, 25% of Barça’s domestic rights should be about €40 million a year under the current contract. That number will almost certainly grow over the years as new TV deals are signed, so Sixth Street is looking at a minimum of €500 million in profit for their efforts.
If you read various media outlets, especially in English-language ones, you’ll see hysterical questions along the lines of “What are Barça doing!?” and “How can they get away with this financial suicide!?” and other a few other exclamation-point-worthy queries that, in essence, insult the intelligence of their readers. But, okay, what are Barça doing?
The contents are on the tin, as they say: they’re selling TV rights for immediate cash. Remember how they wrote off player impairments? Well, that meant a massive loss on the books and a huge hole to overcome in order to sign players. Remember the massive loan they took to shore up short-term debt problems? That meant a lot less cash on-hand for things like transfers. Remember the giant extension contracts for players? That meant a lot less flexibility in the transfer market both because who is going to pick up an aging or questionable player on a long-term bloated contract and how can you attract talent when you can’t register new players? You are, again, being burned on both ends.
As with most things, there are options. You could certainly shut down and put yourself in austerity mode, keeping your current squad together and riding out whatever the league, Copa, and Champions League dish out. There are some solid arguments to be made for this approach, chief among them that if one major shortfall was a lack of matchday income, well revenue is likely to rise “organically” over the coming year as pandemic-related attendance restrictions are lifted. The other side is that you will naturally lose salary as contracts expire and you cannot renew them. This would have meant, for this season at least, that Dembele would be out of contract and moving on, while loaned players would have to return to their clubs (Luuk de Jong, Adama Traore, and Yusuf Demir) or find new homes in an inhospitable environment (Trincao, Rey Manaj, Pjanic, Alex Collado, Phillipe Coutinho, and Iñaki Peña). Dani Alves, that good crazy king amongst mere mortals, would also be out of contract, a thing that always warrants its own sentence. Any renegotiation of Sergi Roberto’s contract would have been out of the question as well.
You can also make the case that Xavi can produce a Champions League qualifying campaign with the same squad he had last year (minus the players listed above) and that case rests on the fact that in the second half of last season, Xavi put together a string of results that netted the same number of points as Real Madrid’s title-winning campaign. It saw Barça not just qualify for the Champions League, but qualify in 2nd. Theoretically, there would be enough points available from simply not having as bad a start to the season as the team did under Ronald Koeman, but it’s also hard to imagine Barça scoring enough goals. Luuk de Jong had 7 goals, enough to give him 3rd most in the squad. The team managed just 2 goals in Champions League group play (3 matches under Koeman, 3 under Xavi).
And so we’re at the option that was taken. The gamble strikes me as extremely simple: push revenue to where it was before. This is done mainly by remaining competitive on the field. It’s not just qualifying for the Champions League, it’s create a team that can challenge for the league title, make a run in the domestic cup, and at least put on a show in the Champions League rather than peter out like last season. The reason why that is crucial is because of one of the major losses over the last few years: no culers in seats.
Last year we should have seen a rebound (which we’ll see in the upcoming annual report due out in the fall), but we also saw tepid attendance as the team was clearly not really going for any trophies. With high ticket prices and low match value, it’s hard to convince someone to watch in the stadium when you could watch at home. With a team that’s competing on 3 fronts, or even just 2, there will be plenty of high-profile matches before and after the World Cup that will entice locals as well as tourists to attend.
If the team is competitive, Laporta’s other plan will pay off too: increased membership. Once again, anyone in the world can become a Barça member and if the club has success on the field, it is likely to drive off-the-field financial success as well as more fans are attracted, sponsorship deals can be signed, and even TV rights can grow. It seems somewhat silly to hitch your club to the motto “spend money to make money” but in this case there’s very little to suggest that not spending money will create the equivalent revenue growth. Perhaps in the long-term, if you were austere to the point of mania and got a couple of lucky breaks, you could pull it off, but you could easily find yourself simply being bad at the whole point: winning football matches.
There’s No Such Thing As A Free Palanca
Are there risks here? Absolutely. Anyone who tells you there are no risks is not just wrong, but also dumb. Do not listen to the wrong, dumb people. One very obvious risk is that the team simply does not compete for trophies. That could lead to a complete lack of revenue growth as fans don’t buy tickets, sponsors don’t come flocking, and the ample European competition rewards remain miniscule. The team could then find itself looking down the barrel of the exact same scenario next year when an attempted rebuild is begun again.
If the club finds itself needing funds, it has already broken the glass on the “selling club assets in case of emergency” box and will almost assuredly simply plunge its hand into the kitty again. For a member-owned club, this is not a great prospect as it pushes the entity further toward a simple takeover by some wealthy investor. Why would a member-owned club do such a thing? The cash cannot possibly be worth the lack of revenue from the TV rights, especially not when coupled with the potential for opening Pandora’s box. I mean, right? Look what happened when we put UNICEF on our shirt: we eventually sold the front once members were used to seeing a logo on there.
One thing to note: in 2006, Real Madrid sold 100% of their TV rights to Mediapro €1.1 billion (€1.5 billion today’s euros). You read that right. 100%. All of it. Not 25% for €517 million. The difference is that Madrid sold theirs for 7 years instead of for 25, so the return on investment for Sixth Street should be higher and thus their paid a little more up front. Barcelona is not in uncharted waters, even this summer, as Real Betis have announced they too are “pulling an economic lever” to get onto Tebas’ Nice List and register 6 of their players.
Another risk is that the club finds itself staring at some other catastrophe that makes it hard to meet payments on the stadium renovation loans (which are, again, €1.5 billion on top of what we already owe) and the potential cash injections start off with a 25% hole in them. The club desperately needs this plan to succeed in the short term because of the future payments based on those forthcoming loans. We own our house, we’ll tell ourselves, as we pay through the nose to do so.
This is Laportisme
It is entirely possible that you can read all of this and conclude that the cost of shoring up the team do not outweigh the risks in the financing. That would be a fair reading and one that I would likely have agreed with had it not been clear that the club will be in dire financial straits in the next few years. It was (and is) a horror on the world, but COVID-19 absolutely gutted Barça’s chance to get through Bartomeu’s regime without needing catastrophic surgery. The other side of that is that the fanbase saw mediocrity approaching and has demanded its leader do something about it. Mediocrity is not terrible thing, but it is certainly a thing that has momentum. Once you’re mediocre, you’re likely going to stay that way for a very long time.
And one thing Joan Laporta is not is mediocre. He may be bombastic and enjoy living on a political and economic knife edge, but he is not mediocre. He may play fast and loose with some of the rules, he may push the bounds of decency and ethics, and he will absolutely be a showman about every aspect of his tenure, but he is not aiming for midtable. Call it delusion, call it entitlement, call it whatever you wish, but when Barcelona’s socis elected Joan Laporta, they knew he wasn’t a changed man or an austere technocrat. When you elect Joan Laporta, you know what you are getting.
Laporta is fighting La Liga on what, exactly, counts towards the team’s salary cap. This is laportisme. Laporta is saying he will sign Bernardo Silva and Marcos Alonso even as the club is scrambling to register the players they’ve already purchased or renewed. This is laportisme. This is the burning need to win now and win forever. This is throwing caution to the wind in both a hurricane and the doldrums. This is laportisme.
This is FC Barcelona, the images and statements said, but this is also laportisme. We will climb the mountain again and it will be beautiful. Tickets are €35 and please don’t forget to visit the shop on your way out.