The Business of Barcelona
The $5 billion football club is amidst a high-risk transformation. Its strategy reveals the tricky economics of running a sports franchise and the potential teams see in web3.
Brought to you by Masterworks
Solve your “zero return crisis” with this fintech platform realizing 27.9%
Vanguard, a $7.2 trillion money manager, calculated that stocks will return as little as 3.4% over the next ten years. With 8.5% inflation, that means negative real growth on your money. Yes, less than zero. But there's hope.
Personally, I’m continuing to diversify into alternatives like contemporary art. It’s outperformed the S&P by 164% over the last 25 years, and demand is so high that Deloitte expects the art market to grow nearly 60% within three years.
The smartest way for everyday investors to get in on the action is Masterworks. Despite covid, historic inflation, and the beginning of a recession, their last six exits achieved an impressive 27.9% average net return.
Join me and 500,000+ others investing in multi-million dollar paintings. As a Generalist subscriber, you’re entitled to skip the waitlist using our referral link.
See important Regulation A disclosures.
Actionable insights
If you only have a couple of minutes to spare, here's what investors, operators, and founders should know about F.C. Barcelona.
A highwire act. Barcelona has spent €168.9 million on new players this year, even though the club began the summer more than €1 billion in debt. President Joan Laporta is attempting a high-risk strategy, selling club assets while he continues to spend.
Four levers. To try and alleviate Barcelona’s financial stress, Laporta has pulled four “levers.” These include selling stakes in broadcasting rights and giving up 49% equity in Barça Studios, an in-house media operation.
The economics of genius. A year ago, Barcelona parted company with Lionel Messi. As well as being arguably the greatest player of all time, the Argentine forward was a source of considerable revenue, driving as much as €200 million per year by some estimates. He was also a significant cost, receiving €139 million per year in wages.
Betting on web3. One of Barça Studios’ newest owners is Socios.com. The crypto platform previously partnered with Barcelona to release a fan token. Its new arrangement suggests Barcelona is embracing the revenue potential of web3.
You know why the Yankees always win, Frank?”
The question comes from Christopher Walken in the 2002 con-man caper Catch Me if You Can. It’s directed at his son, Frank Abagnale Jr., played by Leonardo Di Caprio.
“Because they have Mickey Mantle?” the younger Abagnale offers.
“No,” senior says. “It’s because the other teams can’t stop staring at those damn pinstripes.”
If one football team has evoked the same mixture of fear and reverence in recent years as Abagnale’s Yankees, it is F.C. Barcelona. For more than a decade, the famed maroon and blue stripes have not only conveyed sporting excellence but a kind of total, exhaustive dominance. Competitively, aesthetically, and commercially, Barcelona spent much of this spell at the sport’s zenith: stacking titles, playing with era-defining panache, and becoming the world’s richest club. Even morally, Barcelona has seemingly had the upper hand. The team eschewed paid shirt sponsors until 2010 and favored developing homegrown talent to purchasing highly-paid mercenaries. Barcelona’s motto is “more than a club” – for a period, it truly seemed to be.
Today, Barcelona is an organization in turmoil, battling major debts, a steep wage bill, and an underperforming team. To try and reverse the club’s fortunes, President Joan Laporta has overseen a summer of frenzied activity. On the sporting side, Barcelona has spent richly on new players like Robert Lewandowski, Raphinha, and Jules Koundé. To offset those outgoings, Laporta has activated four “levers,” selling decades' worth of media rights and auctioning off portions of an in-house content arm. It is an unusual, high-risk strategy that gives Barcelona capital today at the expense of future earnings. Laporta’s approach represents a fascinating case study that illuminates the business of sport and the challenges of maintaining a dynasty.
In today’s piece, we’ll discuss:
The business of football. How do football teams make money? We’ll unpack where revenue comes from for the world’s biggest clubs, how that mix has changed over time, and the impact of the pandemic.
The rise of Barcelona. Though more than a hundred years old, Barcelona’s status as one of the best clubs in the world is relatively recent. A golden generation of homegrown talent has spurred its contemporary glory.
Empires fall. Poor transfers, escalating wages, and mounting debt stressed Barcelona’s finances – the pandemic shattered them. Lost revenue forced the club to ask players for pay cuts and salary deferrals.
Laporta’s levers. President Joan Laporta may have the trickiest job in professional sports management. Not only does he need to renovate a team struggling to live up to expectations, he must balance Barcelona’s disastrous books.
The business of football
Though few fans wish to consider them as such, football clubs operate as businesses – at least in some capacity. To understand Barcelona’s current predicament, we need a clearer picture of the industry writ large. We’ll discuss the size and growth of the space, explore the primary sources of revenue, and outline how this intersects with on-pitch performance.