FC Barcelona: Evolution of financial solidity

By Satvik Shubham

One of the biggest football clubs of all time, accomplished, successful, and a magnet to most players on the planet: FC Barcelona. However, despite the history of the club throughout recent history being relatively successful, many bumps in the road arose when complications regarding their financial situation came to fruition. However, how did this predicament suddenly appear? The club’s debt rose due to a few simple reasons, COVID-19, poor spending models, and institutional misallocation of budget.

The 2016/17 season was record-breaking for Barcelona, with them bringing in (+708) in revenue throughout the campaign, that being a 4% increase from the previous term. The primary source of the revenue was from the stadium, media ventures, and various marketing campaigns, with each of those sectors garnering over (+175) each. Comparably with the losses, Barcelona had (760) in total assets, with (-645) in total liabilities as of June 30th, 2017. This entails that the value of equity for this time was (115). Comparing this to the annual report as of June 30th, 2021, four years from the initial report, Barcelona had (1031) in assets, while contrastingly possessing (-1482) regarding liabilities. Due to this, the equity value would now be (-451). This drastic negative shift in equity took place due to many reasons, one of which would be the great increase in long-term debts. Juxtaposing with the 2017 report of (54) when it came to long-term debts, the 2021 report stated that (554) in long-term debt was prevalent. This seemingly sudden change in equity took place due to investments and measures taken by borrowing to keep the club above the surface due to the repercussions of the COVID-19 pandemic.

The evolution of FC Barcelona’s debt has been something to ponder, from having (8) in debt in the 2016/17 season to (673) as of March 2021 (Sport). However, how did this take place in a matter of four years? Joan Laporta, the new (returning) president of the club as of 2021, stated “Our salaries represent 103% of the club’s total income, that’s 20-25% more than our competitors”. Knowing this, Barcelona utilizing expenditure on providing lucrative contracts to players while simultaneously being in the lurch, is what led to their increased value of liabilities in the four-year interval, due to the necessity of taking in loans from the bank, thus, increasing their long-term debt.

In terms of the current state of FC Barcelona financially, as of June 2022, there has been a shift to selling off assets in the media sector for the Spanish giants. The club has sold 25% of its income from television rights, and a minority share in its merchandise and licensing deals respectively. The side is projected to earn (+605) from these deals, assisting them in overturning the debt garnered over the 2020/21 campaign, which was faced with heavy detriment due to the pandemic. However, before this, in March of 2022, FC Barcelona partnered with music platform Spotify in a (62-75) p/y deal, which included renaming the stadium. Despite a new stadium renovation plan being undertaken, the debt of the Spanish club at one point was (-1350) upon the inheritance of the new board members.

Regarding a solution, FC Barcelona could continue to sell assets as they have done in the past, whether this includes players, non-tangible assets such as valuation regarding contractual agreements, or a more significant share of La Liga television licensing collectively. Shifting non-tangible assets would be a pivotal move for FC Barcelona, as they hold the largest wage bill out of any club on the planet with (-270) paid per annum. Since a large cut of Barcelona’s debt stems from prior obligations made under a different president, this would be an essential change to make, for progression to be made from that billion+ inheritances made under former President Josep Maria Bartomeu.

But all in all, Barcelona seems to be working to reduce its deficit, and is implementing future business models to reduce the damage sustained under the previous presidentship.

Note: All data is taken from Official FC Barcelona annual reports and balance sheets. All values provided are intended in Euros (Million).

(The author is an aspiring journalist from New Delhi, India, and set to go to Michigan State University this fall. Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.)