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Explained: Why, despite a €1.3 billion debt, Barcelona are on a summer spending spree

The economics and sociology of football mega stars with big price tags — Raphinha and Robert Lewandowski — making their way to the Nou Camp.

Barcelona's Raphael Dias, right, celebrates after scoring against Real Madrid during the first half of a friendly soccer match Saturday, July 23, 2022, in Las Vegas. (AP Photo/John Locher)

Less than a year ago, Barcelona were faced with the biggest disappointment in their modern history – losing their greatest-ever icon, Lionel Messi.

Messi’s trademark blend of sporting greatness and global superstardom, of tantalising talent and machine-like output, of genius and joy, became central not only to Barcelona’s sporting legacy, but also to their brand. So, once images of the teary-eyed Argentine announcing his departure began doing the rounds across the world, doomsday was being signalled. Their over-reliance on Messi — for both commercial and sporting reasons — and the financial ruin that led to his departure were causes for concern. And the prediction held for a few months.

The Spanish giants had a woeful start to the last season, which saw manager Ronald Koeman sacked and the Nou Camp hold Europa League fixtures. But it didn’t take long for things to turn around. Over the last six months, they have consolidated second place in La Liga and signed Robert Lewandowski, Raphinha, Ferran Torres, Pierre-Emerick Aubameyang, and others.

Things may be looking up at the Nou Camp now and their shiny new signings have fans brimming with excitement, but at what cost? There has been conjecture over the exact figure of the debt they are under, and the estimated total put forward by club president Joan Laporta following Messi’s departure is €1.3 billion. On top of that, La Liga’s limite salarial, which exactly defines how much a club can spend on their first team in accordance to the revenue they make, has put the Blaugrana’s limit as negative €144 million. So, how are they able to afford these deals?

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TV rights, BLM & Spotify

Last year, Barcelona survived by primarily restructuring their short-term debt to long-term debt. They did so through a loan of €600 million from Goldman Sachs that effectively gives them another 10 years to repay with interest. That was the first ‘economic lever’ that made possible the deals that followed in the summer.

Cricket fans — particularly those in India — would be aware how lucrative sports television and media rights are, given the massive figures paid to air the IPL recently. Barcelona’s resurgence in the transfer market, in the short term at least, has hinged on the value of their media rights.

Clubs in Spain are allowed to put a chunk of the income they make from their domestic league rights on sale. The club initially sold 10% of the money from their TV rights for the next 25 years to investment firm Sixth Street for €207 million, and then a few weeks later, sold another 15% to the same firm for an undisclosed fee, presumably bringing the total to the figure of €450 million that Laporta had got approval from the club members for last year, according to AP.

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This, in essence, is a gamble on the club’s future to ensure survival in the present. Add to this Laporta’s proposal to sell 49% of BLM, the company in charge of their licensing and merchandising, for a figure in the range of €300 million.

Other ways to raise capital have also been found, like the lucrative sponsorship deal with Spotify, which has paid a reported fee of €280 million to get the naming rights to the Nou Camp and sponsor their kits, hoardings, etc.

Spectacle over substance

For a club that has had to take such drastic measures for financial survival, plunged into so much debt due to inflated transfer fees and wages paid in the previous regime, why is making multi-million-euro signings such a priority?

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To say that Barcelona need to make flashy new signings to compete on the pitch is misleading to say the least. The club, arguably reeling from its worst season in modern history, finished second in the Spanish first division, and with a young squad under a young and exciting new manager, battered champions Real Madrid 4-0 in the last El Clasico.

The Blaugrana have long prided themselves on the development of players in their youth system, La Masia, of which manager Xavi is himself a product, and so too are the likes of Pedri, Gavi, and Ansu Fati.

Yet, they felt it was imperative to spend €112 million on Raphinha and Lewandowski in a forward line they have already spent heavily on, bringing in Memphis Depay, Torres, and Aubameyang recently, and to bring in Andreas Christensen and Franck Kessie on free transfers rather than to promote young talent or even to keep a generational talent like Frenkie de Jong, whose big money move to Manchester United has reportedly been stalled due to the €17 million in deferred wages the club still owes him.

Barcelona’s financial irresponsibility defies sound business sense, but these decisions are indicative of where modern football is today. The spectacle is just as, if not more, important than success on the pitch. Neither match day revenue nor silverware prize money can build a club’s brand like big-name transfers.

What else explains Manchester United’s lust for stardom and their Paul Pogba, Alexis Sanchez, and Cristiano Ronaldo-flavoured experiments at a time when they have not won a league title in nearly a decade? Or how Manchester City, Chelsea and Paris Saint-Germain can spend billions on players and take no time in establishing themselves as one of Europe’s elite with scarce regulation or pushback?

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At a time like this, Barcelona cannot afford modesty. Signing the best striker in the world is a tad more important than building a core of young players. Short-term commercial viability is a tad more important than long-term stability. Replacing Messi’s stardom is a tad more important than replacing Messi’s exploits on the pitch.

First published on: 26-07-2022 at 01:42:40 pm
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