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Can Barcelona and Manchester United Right Their Financial Ships?

While Man U can see the light at the end of the tunnel, Barcelona executives keep digging their hole deeper and deeper. Will the club ever be able to find its way out?

Ringer illustration

The Old Testament is full of cautionary tales about profligacy, and one of the most famous involves Esau and Jacob. Esau, after working all day in the field, comes home to find his younger brother in the kitchen making soup. Jacob offers to share his soup in exchange for Esau’s part of the family inheritance, a bargain that the hungry Esau accepts.

Thousands of years later and thousands of miles away, a new pot of soup is on the stove.

FC Barcelona defined European soccer for about a decade earlier this century. Armed with Lionel Messi and a host of other all-time greats, Barca won the Champions League four times between 2005 and 2019, won the treble twice, La Liga 10 times, and the Copa del Rey seven times. They were so dominant, and so committed to their meticulous, possession-heavy style, that the club turned into a religion in its own right. Spain’s international dominance from 2008 to 2012 was—despite the heavy involvement of players from other clubs, not least Real Madrid—credited to Barcelona’s excellence. When Barca lost, which wasn’t often, manager Pep Guardiola usually spun it as an injustice—the result of the opponent playing ideologically impure, defensive-minded soccer. And everyone ate it up.

But in the past few years, the cult of Barcelona has started to show cracks. What was once a proudly anticommercial club started to sell shirt sponsorships. When its legendary academy, La Masia, dried up, it turned to a series of increasingly expensive imports to fix the leaks in the dam, buying up rivals’ best players the way … well, Real Madrid might.

Then a year ago, Barcelona, facing down a billion dollars in debt, did the unthinkable. It let Messi walk. Not because Messi wanted to go—quite the opposite, in fact—but because the club was literally too broke to register him under La Liga financial fair play rules. At the same time, La Liga itself was in financial trouble, and resorted to courting funding from a private equity firm called CVC. Private equity groups, I warned at the time, are loan sharks in Savile Row suits who have a history of gutting the physical, financial, and moral health of American sports teams, retail concerns, and newspapers in exchange for short-term cash. Yet in December, La Liga took roughly €2 billion of CVC’s money to fund infrastructure development. And Barcelona, specifically, aren’t doing any better than the league as a whole.

Even under the Jake Peralta school of financial planning, Barcelona still enjoys massive institutional advantages over almost all of its La Liga competitors. The club is a Champions League staple, and even if it had foregone major signings and relied on its academy for a few years in order to weather the financial storm, the odds of the club dropping out of the UCL field—much less getting relegated—were remote. There isn’t really such a thing as a “next Messi,” but Barca does have a few transcendent teenagers like Ansu Fati and Pedri who could pick up the torch. And building from within would not only help things financially, it could generate goodwill among fans.

But Barcelona got off to a rocky start after Messi’s departure. It fired manager Ronald Koeman in October 2021, and rather than bringing in an experienced hand to stabilize the ship, president Joan Laporta hired club legend Xavi, for all intents and purposes a rookie manager. Bringing in a green but highly esteemed former midfielder worked for Laporta in his first term, when he gave Guardiola his big break. Maybe he thought that Xavi, steeped in the club’s distinctive history and values, could bring that magic back.

Well, maybe he can in the future. The Blaugrana finished second in La Liga in 2021-22, but 13 points out of first, closer to sixth-place Real Sociedad than first-place Real Madrid. And rather than playing the kids, Laporta and his board decided they could go for some soup. In the past two transfer windows, Barcelona offloaded no players of note, but instead brought in then-32-year-old striker Pierre-Emerick Aubameyang and then-33-year-old striker Robert Lewandowski, and brought back 32-year-old midfielder Miralem Pjanic from his loan to Besiktas. (Aubameyang is currently rumored to be bound for Chelsea, but as of Thursday afternoon no deal has been finalized.) And while new defenders Jules Koundé and Andreas Christensen, midfielder Franck Kessié, and forward Raphinha are all in their mid-20s, they each make at least €200,000 a week. Between some €165 million in transfer fees (even though Christensen, Kessie, and Aubameyang were all free transfers) and about €96 million in annual salary spread among those seven players, Barcelona’s financial problems are only getting worse.

In 2021, Barcelona’s accounting showed debts of more than $1.4 billion. And when Laporta unveiled these expensive transfers this summer, he set out on an ambitious, and highly irresponsible, plan to fund them.

Laporta could have chosen to bring Barcelona’s spending back to a reasonable level and sell fans on a medium-term rebuilding project. That’s what Arsenal, a club that’s struggled to some extent since funding its new stadium more than a decade ago, is finally seeing the fruits of. (Not that anyone ought to use the famously flaky Arsenal as a role model for anything. There is no greater sign of Barcelona’s precarity than “maybe they should do what Arsenal did” being a real argument.) But even global giants like Liverpool, Chelsea, and Juventus have figured out how to weather a medium-term financial or regulatory storm and come back as Champions League contenders within a few years.

But going into a rebuild is a tough pill to swallow. Just ask Manchester United, one of the handful of clubs on the planet with the same reach and panache as Barcelona, which is still struggling to marry its financial and competitive incentives a decade after Sir Alex Ferguson’s retirement. Despite calling on such august soccer minds as José Mourinho, Louis van Gaal, Ralf Rangnick, and Erik ten Hag, things were so bad at Old Trafford that earlier this month Elon Musk joked about buying the club. As omens go, that’s a bad one.

And things might be even worse for Barcelona. The club’s highest-paid player, Frenkie de Jong, deferred part of his salary to help the club through the pandemic, in exchange for a lucrative contract extension. Barcelona is now trying to force de Jong to either leave or tear up said extension by alleging that it was signed thanks to “criminal” action by the club’s previous board. The chairman of the Dutch players’ union said Barcelona’s bizarre threat to open criminal proceedings in order to void de Jong’s extension verged on extortion.

That looks bad, but it’s not the worst thing the club is doing under Laporta’s leadership. That involves a series of deals with private equity that Laporta has euphemistically called “economic levers.”

Soccer teams are able to fund their outrageous operating expenses not only through ticket sales, but through merchandising and the sale of media rights. These are economic golden geese, a combination of unique brand equity and global attention that no other type of business on the planet is able to attract. Laporta’s “levers” involve selling off that goose piecemeal.

In June, the club’s shareholders voted overwhelmingly to authorize selling 49.9 percent of Barcelona Licensing and Merchandising, and 25 percent of its La Liga TV revenues. Sale of the merchandising rights remains pending. But in July, Barcelona sold a quarter of the team’s La Liga TV rights for the next 25 years to San Francisco-based investment firm Sixth Street for some €582 million. That figure was originally thought to be as high as €667 million before it was reported that Barcelona had kicked in hundreds of millions in the club’s money to set up a shell company with Sixth Street that would inflate the perceived value of the deal.

It doesn’t take a genius to understand how much money this sale could end up costing Barcelona in the long run. La Liga’s current domestic broadcast deal brings in about €1 billion a year. Barcelona’s share of those rights, which is undiluted by the CVC deal, was €166 million in 2020-21 under a previous TV contract, and even if the value of those rights stays level for the next 25 years, Sixth Street will roughly double its money, while Barcelona will be out another half a billion euros. And of course, those TV rights could explode in value over that time.

That’s tantamount to usury—and it hardly even helped. In exchange for selling his club’s birthright (or at least part of it) Laporta didn’t come close to making up enough money to retire Barcelona’s debts. He didn’t even make up enough money to legally register all of his splashy summer signings. Two games into the season, Koundé still can’t be registered unless Barca sells someone, most likely Aubameyang.

The looming force behind Laporta’s actions, and to some extent Manchester United’s, is the difficulty of competing with state-sponsored clubs. In the early 2000s, well-resourced American and Russian investors turned European soccer from a million-dollar business to a billion-dollar global enterprise. Now, the sovereign wealth funds of Qatar (PSG), Abu Dhabi (Manchester City), and Saudi Arabia (Newcastle United) are vaulting middle-class clubs into powers that make Chelsea and Liverpool and AC Milan look like clubs from the English Midlands in the 1970s, competing for silverware while being run by a local auto parts magnate in his spare time.

Laporta has made no secret of his disdain for such wealthy clubs, a complaint that might ring hollow to fans of Ajax, or Arsenal, or Valencia, who lost popular players to Barcelona in the previous decade because of the Catalan club’s sheer financial might. Nevertheless, taking a few seasons to regroup and stabilize Barca’s finances and management would only cede ground to the nouveau riche clubs with Middle Eastern state backing.

That’s why Laporta has fettered his team’s earning power to a private equity millstone for decades to come. That’s why Manchester United rode out Ole Gunnar Solskjaer’s largely vibes-based management style as long as it did. And it explains why Man U replaced Solskjaer with Rangnick, the father of gegenpressing, saddled Rangnick with a roster of old players who won’t run, and got rid of him before he could rebuild the team to suit his vision.

Manchester United and Barcelona are trying to use commercial dollars to spend alongside state-run projects, and they’re failing. In the process, they’re behaving like a parody of the very capitalist investors who are bleeding them dry: month-to-month survival, with no long-term plan to return to prosperity. And the downside? They’re limited by institutional staying power. No matter how badly these clubs mismanage their resources, they are too big to fail. It paints a dreary vision of the future, but at least I hear the soup is good.