Threat of Champions League exit fuels Barcelona’s anxiety

THE BARCELONA story is becoming as volatile as the British government’s approach to post-pandemic economics. After a summer of pulling levers, constructing virtuous circles and signing players, Barca’s president told the annual assembly that “together we have saved the club”. That statement was arguably true, but it did involve selling some of the family silver and allowing their prized asset to leave the Camp Nou.

The financial levers the club referred to involved selling part of their TV rights for a 25 year-period to Sixth Street, raising a huge sum of money that eased their financial pain. On the other hand, many felt Barca were merely kicking a problem down the road and taking a substantial risk.

Barca started the season well, but their Champions League form has not been good and they are on the brink of group stage elimination for the second successive year. The amount they could lose, which could be around € 20 million, would be offset against potential income from finishing third in the group and moving across to the Europa, but the psychological effect of being exiled to Thursday night football is just as significant. If Barca ever needed a good Champions League campaign to remind people of their elite status, it was this season.

The 3-3 draw with Inter Milan in front of 92,000 people was an exciting game that highlighted the appeal of the Champions League; when it’s good, it can be very good. But their failure to trigger another of their famous escapes also provided more evidence that Barca are a diminishing force on the European stage and the timing couldn’t have been worse. Barca are about to face Real Madrid in the first Clásico of 2022-23, and the gossip has centred on the future of coach Xavi – “The confidence in Xavi is intact” – the real agenda of Barca president Joan Laporta and the possibility the club may have to sell more assets or players to raise cash. Some of Barca’s players are long in the tooth, but essentially, the game at the Bernabéu is a meeting between the top two and Barca are on top of the La Liga table. There is not an awful lot wrong with the actual team, Barca’s problem is the past and a period of excess.

It is hard not to see the club’s finances and psyche as acutely precarious, even though they did make a pre-tax profit of € 124 million in 2021-22. Furthermore, they may have generated  € 1 billion in 2021-22, but € 344 million of that came from the sale of assets. Take the € 266 million initial TV rights sale out of the equation and revenues were € 750 million. That’s a very good figure, but the club’s sporting payroll totalled € 518 million, down from € 617 million in 2020-21, but still way too burdensome. At the assembly meeting, the club said it was working to terminate the contracts of some high-earning players who are a drain on the wage bill, but this is obviously a sensitive matter.

The club is confident, however, that it can continue to grow revenues in 2022-23 and anticipates an increase to € 1.3 billion, with a pre-tax profit of around € 366 million. At the same time, they see wages rising to € 656 million. This forecast includes the sale of 15% of TV rights for € 400 million. The club also expects to restore equity balance by 2025, slightly ahead of the five-year target they set when Laporta was elected president.

Laporta is still an advocate of a super league, but does not believe a closed league concept is the way ahead. Barcelona were one of the 12 clubs a scheme that was rightly aborted, but there has been renewed energy behind the project, although Laporta sees a structure where the big clubs repeatedly play against each other as an unattractive proposition that would soon become tiresome.

While the loss of Champions League income in itself won’t tip Barcelona into the abyss, it will raise some anxiety at the club. The securitisation of TV rights has been criticised for mortgaging the future, but its success does depend on the club being successful. In other words, Barca is something of a cash machine, but if the club endured a prolonged period of failure, it might cause problems around their long-term sale of TV rights. Hence, every setback will be the source of extreme angst, as we are seeing.

United post a loss and look at the big picture

AT A time when the city of Manchester has been in the spotlight over the issue of lockdowns and monetary aid, Manchester United Football Club announced its financials for the 2019-20 season and revealed how the pandemic has affected its off-pitch performance.

United’s total income was down almost 19% to £ 509 million, which on reflection could have been worse even though forecasts ranged from £ 550- 580 million. The club was still able to pay a dividend of £ 23 million to shareholders and the Glazer family despite reduced revenues and the overall loss of £ 23.2 million for the financial year. In a year in which they were absent from the UEFA Champions League, United estimated covid-19 has cost them £ 71 million.

There will be little sympathy for United in the current climate, especially as the club is one of those seeking a reconfiguration of the Premier League (along with Liverpool) and have also been named as an interested party in the European Premier League concept now attracting very negative media attention. Interestingly, CEO Ed Woodward claims he saw a report about this latest development, but he had “no idea where it came from”.

United’s biggest drop in income came from broadcasting, a fall of almost 42%, partly attributable to the rebate given to TV companies as football disappeared for a few months. This income stream amounted to £ 140.2 million. Matchday income, inevitably, fell by 19% to £ 89.8 million, while commercial revenues were robust, rising by 1.4% to £ 279 million. 

Manchester United, who average more than 70,000 at Old Trafford in normal conditions, may find the club-supporter dynamic looks very different in the medium-term. Even though crowds will return, there has to question marks against the future of enormous attendances and the willingness of people to risk close contact on a mass scale. 

Therefore, the advantages that clubs like United have enjoyed may be eroded. Old Trafford, a stadium that has fallen behind contemporary arenas, notably Spurs, Liverpool, Arsenal and Manchester City, will need some modernisation to adapt to safety and practical requirements. The club had plans to increase capacity even further to almost 90,000 and estimates of a major refurbishment ran to over £ 200 million. The Glazers have gone as far as buying-up space around the stadium to allow for Old Trafford’s expansion at some point.

But there are other factors to consider: United’s net debt has grown substantially and now stands at £ 474 million, up from £ 203 million in 2018-19.  This was largely attributable to transfer activity – United’s outlay included around £ 190 million on Aaron Wan-Bissaka, Harry Maguire and Bruno Fernandes  – as well as foreign exchange movements. Furthermore, the club’s cash levels reduced from £ 307 million to £ 52 million. 

United trimmed their wage bill by 14.5% to £ 284 million, but their wage-to-income ratio went up from 53% to 55.8%. The highest earner on United’s books is reputed to be goalkeeper David De Gea on £ 350,000 per week. Recent signing Edinson Cavani is apparently being paid £ 189,000 every week.

With every major club experiencing financial pressure as a result of the pandemic, United’s position in European football’s hierarchy is relatively secure. However, their debt levels should be a major concern as well as their declining cash position. On the pitch, the club is far from settled, as witnessed by some of their recent results and they are no longer a Champions League mainstay even though they returned to the competition for 2020-21. Nevertheless, the size of the club and its ability to generate vast sums of cash suggests they are strong enough to withstand the current crisis.

Photo: PA