Explaining the methods, risks and rewards behind Barcelona’s miracle transfer window

Franck Kessie, Andreas Christensen, Raphinha Belloli, Ousmane Dembele and now Robert Lewandowski, with Jules Kounde and Cesar Azpilicueta still on the radar.

For a club facing financial peril that would have liquidated most privately-owned firms, FC Barcelona’s summer transfer window splurge has left many bewildered about where this money is coming from.

The ruinous tenure of Josep Maria Bartomeu unmistakably comes to mind, as reckless spending beyond means under his leadership was the staple of a non-existent business model. One that left Barcelona with over a billion euros in debt.

It has been well over a year since Joan Laporta’s re-investiture into the club offices, and it is safe to say things are changing at a dizzying rate.

Yet, as things stand, the club is still spending beyond its means. These new signings have not been registered yet, while the club is also grappling with deferred wages of players and a particularly tricky situation with Frenkie de Jong.

But what differentiates this spending from that of Laporta’s predecessor? Is there a method to this madness? The short answer is — yes. However, whether or not this strategy is a good one will depend on several variables.

Where is the money coming from?

This is the biggest question on the tip of everyone’s tongues. How are Barcelona spending so much on transfers for a club over a billion euros in debt?

For starters, debt has very different implications for clubs of Barcelona’s stature, especially when it is a publicly-owned entity.

In a 2021 general member assembly, Barcelona announced that they had managed to restructure about 700 million euros of the short-term debt which is owed to banks and convert it to long-term debt.

This was achieved with the help of a loan of close to 600 million euros from Goldman Sachs, which also includes a grace period of five years, so the members do not lose money from their pockets. Goldman Sachs will also finance the club’s stadium renovations under a 35-year plan (Reuters).

Over such a period, with the return of capacity crowds to maximise matchday revenues and money generated from fan experiences, it will be fairly straightforward to pay off this debt.

Not to mention the massive Spotify sponsorship deal, upcoming and completed player sales, and potential money earned from any success on the field will go a long way towards bringing stability.

Ultimately, it is important to remember that allocation of money on transfer fees and salaries are two very different issues, and it is the latter that Barcelona are primarily struggling with due to the nature of La Liga’s rules.

The economic levers and FFP salary limits

President Laporta has used the phrase ‘economic levers’ almost ever since he took charge of the club for a second time. These so-called levers are basically fail-safes that the club is putting in place to get their heads back above the water.

The first of these levers includes the sale of 49.9% of BLM, their firm that takes care of licensing and merchandising, which will bring in around 300 million euros, while Barcelona maintain the controlling share and a repurchase option.

This was also approved in the general assembly last year, and negotiations for the sale of BLM are ongoing. A few offers have reportedly been turned down already, as they fall slightly short of the valuation.

The second lever pertains to the sale of 25% of Barcelona’s La Liga TV revenue for a period of no more than 25 years. An agreement in principle is already in place for 10% of these revenue rights to be sold to Sixth Street, a US investment firm.

A move which has reportedly brought in 207.5 million euros already (Axios), with negotiations continuing with various firms for the remaining 15% that will bring in approximately another 400 million euros more.

These levers would ultimately allow Barcelona to make signings and register them. La Liga president Javier Tebas has made it clear that even 500 million euros should suffice to sign and register players under current relaxations of the Spanish Financial Fair Play regulations (a great explainer for which can be found here).

Since Barcelona exceed their salary limits, the current 1/3rd rule states that the club can basically invest one euro for every three they save in case of surpluses like the ones they are currently generating with the levers. The usual rule allows for only spending 1/4th of the money, but this has been relaxed due to the pandemic.

While this helps, Barcelona aim to reach a point where their wage bill directly correlates with the limite salarial under La Liga rules. In such a case, they are allowed to basically invest 1:1.

A euro for each one they save, since they are maintaining the recommended spending of no more than 60% of the club’s income on player salaries.

As difficult as all of this is, Barcelona’s sporting director Mateu Alemany has worked wonders, and Barcelona’s standing in the football pyramid has played a massive role.

Not only in attracting all these players but also in finding new sponsors and alternative streams of revenue to stay afloat.

War of wages

Barcelona have been tussling to fall in line with the salary threshold almost immediately since Laporta took over. Under Bartomeu and his entourage, players were offered ludicrous wages that the club could have never sustained.

Laporta and Alemany’s initial free-transfer approach was another hail-mary to try and reinforce a squad that desperately needed shoring up but with extremely shallow pockets. The theme has continued into this summer, and Bosman moves may still be important for Barcelona a year or two down the line to steady the ship.

The pandemic only made matters worse, with payments having to be deferred, and many squad members taking cuts of up to 70% to keep the club afloat when COVID had hit the hardest.

Since then, Gerard Pique, Sergio Busquets, Jordi Alba and more recently, Sergi Roberto and Samuel Umtiti have all taken pay cuts, while Ousmane Dembele has also renewed with a reported pay decrease of 40% from his previous contract.

Clement Lenglet has also been sent on loan to Tottenham, Dani Alves’ tenure has ended, while Luuk de Jong and Adama Traore have returned to Sevilla and Wolves following the end of their loan stints. There is also talk of Memphis Depay’s exit.

The sales of Philippe Coutinho and Antoine Griezmann were absolutely vital. The pair were the highest earners in the current squad, with both earning close to 20 million euros each per season and getting their wages off the books was critical.

Looking ahead to see that the Catalans are also looking to bring in a couple more players, it is essential they make more sales. As things stand, Riqui Puig, Samuel Umtiti, Neto and Oscar Mingueza have been left out of Barcelona’s US tour.

All of them, bar Mingueza, have been linked with exits since last summer, but it is hard to envision their continuity after this window ends. Barcelona will presumably turn their focus to sales once they are satisfied with the purchases.

The de Jong dilemma

One of the biggest issues that Barcelona have to deal with this summer is Frenkie de Jong. And unfortunately — or fortunately, depending on how you look at it — this issue is more moral than financial.

When the pandemic first struck, de Jong was one of the players who agreed to take a salary ‘cut’, basically agreeing to temporarily lower his salary under the promise that it would rise even above the original wage stipulated in his contract to compensate for the reduction.

However, given the current salary mass, which is just about coming back under control, it would be infeasible to raise de Jong’s salary at a time when everyone else has taken cuts.

De Jong’s move to Manchester United thus makes a ton of financial sense, but it comes with the realisation that the wages deferred during the pandemic will likely only be paid over a repayment scheme over a few years, if at all.

Barcelona and United have agreed on the terms of the transfer, but de Jong himself wants to stay put, and the fans want him to stay put too.

His talent is undeniable, and he was always touted as one of the cornerstones of Xavi’s new long-term sporting project.

Unfortunately, in a twisted way, being a talented, profitable asset has worked against him. The Dutchman is the only player in the current squad who can fetch the kind of money that would alleviate a major chunk of the salary issues.

If he were to stay at Barcelona, de Jong would have to accept another wage cut, so he is caught between a rock and a hard place. A gesture of good faith from the club is in order regardless of where he ends up.

Risk versus reward

By now, it is clear that Barcelona just about have a viable plan to spend the money they are spending. However, that is not to say it is an entirely smart decision.

Being a spendthrift right now is a massive gamble and one that will only pay off if Barcelona achieve a certain degree of success on the pitch this season.

In an ideal world, the Blaugrana should solely implement a debt-influenced recruitment model to acquire young talent on lower wages with resale value, which they have done in part with Kessie, Raphinha and potentially Kounde.

This way, albeit the wait for titles would have increased, the risk of further economic distress would have gone down. With this strategy, they would not have to essentially mortgage future revenue for a cash injection now like they are doing with these levers.

Signing the bigger names like Lewandowski and Azplicueta (even Aubameyang previously) means they have to rely on an instant impact from these guys to seriously challenge for silverware.

If the Azulgranas do not have at least the league title or a couple of cup trophies to show for it, there is bound to be another huge dent in the books. Nothing that will necessarily threaten the club’s existence, but it will be one step forward and three steps back.

Many revenue streams will reopen soon as the world slowly returns to normality, which is a bonus. But as Ben Jacobs says, these economic levers are one-off solutions. For example, the TV rights, once sold, will be gone for at least 25 years, and these measures cannot be used repeatedly if things go wrong again.

Conclusion

The hope then rests with Xavi and his revamped squad to ensure this gamble pays off once the season begins to bring in fast success. The club can then modernise long-term to generate income through various sources.

Taking advantage of COVID-adjusted figures, they can offset more losses for the moment as they devise a new strategy beyond this season. One that should also account for the very-worrying possibility of another subpar campaign in 2022-23.

Even Florentino Perez, the president of eternal rivals Real Madrid, said in an interview with El Chiringuito over a month ago, that Barcelona remain one of the biggest clubs in the world despite their financial woes.

He pointed out that they are always capable of attracting the biggest names in football and overcoming the most adverse of situations, including but not limited to the crisis they find themselves in right now.

As for much of the outrage regarding why Barcelona can spend without consequence, Sid Lowe reminds us that they have suffered the biggest consequence of them all — the departure of one Lionel Messi.