Alejandro is wondering if Barcelona will be able to maintain their quality of play. There is a time and a place for this. Barcelona members approved a proposal by the club's board to sell future merchandising and TV rights in exchange for immediate cold hard cash last week. According to president Joan Laporta, they hope to make up to 700 million dollars. Barcelona are way over LaLiga's spending limits and need the money. Next season's spending is currently negative. This doesn't mean that players have to pay to play for the club, but it's not far away and, as it stands, would mean that Barcelona would need to shed players and salaries in order to bring anyone in. No other team has taken out a mortgage like the club has. They are asking the investor to give them an advance on the money they are going to make. It could work out well. It's just that it's a risk. If Laporta and his board make a mistake, they won't be around to face the consequences, but they will be there to make up for it. I am not an expert on medium and long term trend forecasting when it comes to the value of media rights. I'm not sure if Barcelona got themselves a good deal. We can better understand the risks by going through the architecture of each. On the U.S. only, you can stream the daily edition of ESPN FC.
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The broadcast deal was the first thing that came to mind. Up to 25% of Barcelona's domestic league broadcast revenue could be sold by Laporta. According to him, for every 10% that is sold, Barcelona could make 200m. They could make 500m if they sold 25%. According to Laporta, they are working on four separate deals to get out of the spending cap limits.
In the first two years of the deal, Barcelona earned around 165m. They would end up giving away more than a billion dollars if they made that amount for 25 years. It is argued that it is better to have 500m now rather than 41m a year for the next 25 years. Things cost less money 25 years ago.
LaLiga's domestic TV deal will likely increase in value and amount that Barcelona receive over the next decades. They'll probably give away more than 41m a year in that time period, and they'll make more, because they get to keep the other 75%.
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The issue is that as the rights deal increases in value, it will also increase for other teams. If Barcelona finish at or near the top of the table, they will get a bigger share.
There is no correct answer here. Unless you're a time traveller from the future, you don't know what the numbers will look like, but if you're confident in your predictions, you can do a cost-benefit analysis.
The Barcelona Licensing and Merchandising is a subsidiary that sells and licenses Barcelona- branded goods. Pre-pandemic, they earned 63m. The Barcelona Museum, which is the second-most-visited museum in Spain after the Prado, was closed because of the Pandemic. According to Laporta, around 75% of the revenue comes from local shops and they are confident that number can rise if they get the right strategic partner.
Even if they increase licensing and merchandising revenues to 100m, they will give half of it away to their new partner. Whoever acquires the 49.9% will make their money back after five years if they pay them 250m. If revenue stays around the 60m mark, Barcelona will come out ahead, but they won't be getting as much upfront money as they would have liked.
It is clear that this is a big gamble. We don't know the terms of the purchase of the TV rights and the share in Barcelona Licensing and merchandising. It is safe to say that no investor will tie up hundreds of millions of dollars without a guarantee that they will get most of their money back if the deal goes bad.
You're left with the question of if this is necessary. The answer is yes, because Barcelona have a huge amount of debt, of which more than 300m is due in the next year. It's difficult for them to refinance their debt because they don't have a wealthy owner who can make an equity injection, and they also don't want to have to let their best young players go.
What's the longer answer? It is hard to say. We don't know the terms of the deals Laporta wants to do and we don't know what the future holds. It feels like kicking the can down the road since we know that Barcelona could be giving away close to 100m a season for the foreseeable future.
They are taking a risk. It is a huge risk. Other top clubs would be abandoning this if it wasn't for it. You are uneasy about the fact that Laporta and his board won't be there for the long term. They will either be remembered as geniuses who saved the club or as the man who oversaw the financial crisis. It's best to be cautious when you have people making huge financial decisions that have nothing to lose.
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