“Too big to fail” is a phrase that was frequently used during the 2008 Crisis, loosely translated as “too big to sink.” In the United States, non-repayable long-term real estate debts had struck a deep blow to the banking system, and the economic impact of the crisis was felt globally. Although all indicators pointed to a dire situation, massive financial firms like Lehman Brothers were at the heart of the system and seemed to escape sinking no matter how tight the squeeze. Until they didn’t. Lehman Brothers collapsed, many families lost savings that had taken years to accumulate, and victims included countries thousands of miles away that had ignored those warning signs. Today, the football world is watching Barcelona, which seems to be hurtling out of control on a similar runaway train.
The Total Debt Exceeded 1 Billion Euros
Last summer, Barcelona, with a total debt exceeding 1 billion euros, continued to incur substantial debts while simultaneously undertaking significant financial commitments for transfers like Robert Lewandowski, Raphinha, and Jules Kounde. But hey, we’re talking about Barcelona. It couldn’t possibly go under, could it? Just 15 years ago, similar predictions were made about Lehman Brothers, and we all know how that ended. So it’s hard to be definitive. How did the world’s highest-earning club find itself in such a quagmire?
The rise with Johan Cruyff
Barça’s Place in Football in 2010
During the 2010s, the financial divide between the top-tier teams and the lower class in European football widened significantly. Clubs like Manchester City and Paris Saint-Germain, owned by Gulf countries, were spending freely, while even newly promoted teams in the Premier League, thanks to growing broadcast revenues, could afford transfer fees that most clubs in the top five leagues could only dream of. In this scenario, historic clubs also strived to keep up. On one side were those who managed this intelligently, scouting and purchasing quality players before their prices soared. On the other side were clubs like Barcelona…
For Barcelona, things started to go downhill in the summer of 2017. Paris Saint-Germain, having paid Neymar’s extraordinary release clause of 222 million euros, had upset Barcelona’s plans. The Catalan team wanted to prove it still belonged at the big table. Within six months, they had spent 260 million euros on transfers for Philippe Coutinho and Ousmane Dembele. The following summer, the 120 million euros paid to Atletico Madrid for Antoine Griezmann seemed almost certain to be regretted. The additions of Paulinho, Malcom, Emerson, Deulofeu over 12 months would not turn out to be successful careers at Barcelona.
Barcelona, having hit the panic button, was driven into a corner by player salaries. The four-year contract given to Messi in the summer of 2017 contained a commitment worth up to 550 million euros, according to documents published by El Mundo. The new transfers and other stars in the team had started to raise their salary expectations. Barcelona had turned into a huge balloon when it came to the amount of salaries paid. In 2019, they needed to pay 33% more than Manchester United, which was ranked second on the player salary list. Considering United was also poorly managed at the time, the annual salary burden of 501 million euros had become an unsustainable burden. Then, the pandemic hit.
Yes, the pandemic wreaked havoc across many sectors. Football was no exception. However, attributing Barcelona’s problems solely to the pandemic would be ignoring the facts. In 2019, Barcelona announced it was the first football club to exceed 1 billion euros in annual revenue, yet struggled to convert this revenue into profit due to the high volume of salaries. The temporary disappearance of gate and match day revenues with the pandemic made the grim situation undeniable. President Joan Laporta, who took office in March 2021, described the club’s current financial structure as “clinically dead” and “in intensive care.” In a press conference last August, he revealed the club’s debt at 1.35 billion euros and admitted that even without Leo Messi’s massive contract, the club’s salary burden had climbed to 103% of its revenues.
Much of Laporta’s criticism was directed at former president Josep Maria Bartomeu. Similar to what we often see in Turkey, Bartomeu had made moves to save the day, continually pushing the growing debt forward in time. When the day of reckoning came, it was up to the next president to deal with the bill. Bartomeu had run covert campaigns against even his own players like Messi and Gerard Pique through a PR firm he hired to protect his image, and the Catalan police were investigating these claims. But what was done was done, and Laporta began cleaning up the debt bomb he inherited.
La Liga, the top tier of Spanish football, has been applying a spending limit to clubs for a while. According to this practice, which we have seen in the Super Lig for several seasons, your revenues minus operational costs and future season debt payments equal your spending limit for that season. According to this calculation, Barcelona, having a negative spending limit last season, tried to keep the ship afloat by offloading some players, asking others to take pay cuts, and taking on debts from global financial firms like Goldman Sachs.
Last season, under the management of club legend Xavi brought in by Laporta, Barcelona is determined to grow out of this quagmire. In an interview with CBS, Laporta said, “If we do nothing, there will be no such thing as Barcelona left.” He became the most talked-about figure this summer with a series of controversial decisions. After paying 140 million euros in transfer fees for the trio of Robert Lewandowski, Raphinha, and Jules Kounde, and signing seasoned players like Andreas Christensen and Franck Kessie for free, Barça could not escape criticism. Bayern Munich coach Julian Nagelsmann remarked, “Barcelona is the only club in the world that doesn’t have money but can still buy any player they want. I don’t know how they do it.”
The La Liga administration refused to register these transfers for a long time. Barcelona began to mortgage its future to create the revenue required by the league. First, they sold 25% of their expected revenue from La Liga broadcast rights for the next 25 years to an investment firm called Sixth Street. When that wasn’t enough, 49% of their production company, Barça Studios, went to socios.com and Orpheus Media. Laporta also got permission from the board to sell 49% of the club’s Merchandise and Licensing revenues. Adam Crafton of The Athletic, in an in-depth investigation on the subject, described the situation as, “They have food for today, but they could starve tomorrow.”
With the sale of Barça Studios, Barcelona managed to license all new transfers except Kounde, and they are now waiting for Pique to take a pay cut or for Memphis Depay to leave the team. This would allow them to license Kounde and possibly sign new transfers, according to recent reports. But what if the sea runs