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Lionel Messi is breaking with Barcelona and the numbers are huge.
Any club looking to bring in the greatest footballer of all time will have to contribute hundreds of millions of dollars to his salary. And that’s not counting the $ 825 million transfer fee that FC Barcelona contends is owed, although Messi’s team believes the fee no longer applies.
In return, his new team could expect $ 175 million worth of value per year if the Argentine forward stays true to his form, according to a calculation by Matt Balvanz, vice president of analytics at Navigate, a data-driven sports and entertainment consultancy.
Is that how it works:
Approximately 2 million Messi jerseys are sold each year at prices ranging from $ 100 to $ 200. Teams generally make 15% of the profits from the clothing, so your new team could expect around $ 45 million alone. of T-shirt sales.
But Balvanz says he can also look at Barcelona’s revenue, which was $ 960 million in 2019. Assuming each of the club’s eleven starters is responsible for an equal proportion of those sales, Messi would be worth around $ 87 million. (That number includes T-shirt sales.) Take a little leap and assume that Messi’s contribution to ticket sales, media rights, and sponsorships is actually more than double the average Barcelona player, and Balvanz concludes that Messi could be worth around $ 175 million. year.
That’s a staggering sum, but not too far from what Transfermarkt has set Messi’s worth in the past. In 2018, the soccer website valued him at $ 198 million. It has its current market value of $ 123 million.
Using the same logic, Messi’s possible departure would likely end Barcelona’s position as the richest club in football. And it would give a significant boost to revenue for any team that decides to hire a 33-year-old who has become synonymous with Barca’s successes on and off the pitch in recent years. Manchester City, which is currently the favorite to face him, is sixth in Deloitte’s Football Money League.
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Great opportunity for Barcelona?
Alex Webb, writing for Bloomberg Opinion, believes that losing Lionel Messi doesn’t have to be a catastrophe for FC Barcelona. It may be an opportunity.
The Catalan soccer team is, by income, the richest sports club in the world, richer even than the Dallas Cowboys of the NFL. But Messi’s reported annual salary has a distorting effect on Barca’s cost structure, allowing other (worse) players to seek a comparable salary and dragging overall costs upward. Last year, the club reported net profits representing just 0.5% of its 837 million euros ($ 996.5 million) in sales. Messi’s departure should allow him to restore salary expectations and allocate his capital more efficiently.
The paltry profit is partly due to the club’s ownership of its 142,000 members, which means it reinvests all profits in the gaming equipment.
As the club’s income increased, so did the player’s salaries. The 44% increase in revenue between 2017 and 2019 was accompanied by a commensurate increase in player salaries.
The biggest sales boost came from a new sponsorship deal with Nike Inc., which began in 2018, which was reported to be worth at least 155 million euros ($ 184.5 million) per season, although it ended up being slightly less after Barca claimed. some marketing rights. That deal gave Messi the opportunity to get a pay raise of his own. Extraordinary contracts followed for other players such as forward Luis Suárez, midfielder Frenkie de Jong and French star Antoine Griezmann.
Barça’s total salary bill now exceeds 485 million euros ($ 577.4 million) a year, the highest of any soccer team in the world. But the performance in the field has not been maintained.
The team has been unable to win the Champions League, Europe’s most important club football competition, since 2015. When Liverpool won the tournament in 2019, their salary expenditure was just € 276 million (€ 328.6 million). dollars), and had five more players on the team.
Because Barcelona’s generosity has not been rewarded with silverware and cash prizes, the club has become unprofitable. If it weren’t for some transfers, it could have been.
For example, last year he traded second-choice goalkeeper Jasper Cillessen for Valencia’s Neto in a direct trade. But due to the way players’ values are amortized over the duration of their contract, that could have allowed Barça to record an increase in the value of their intangible assets (their players), without having to pay extra money. This can translate into an accounting profit at the operating level, even if there is no cash income involved.
Fan-based model
The Catalan giant’s ownership structure makes cash flow more important than it could be for teams with shareholders. The more you spend on players, the less you reserve for lean times.
Being owned by fans means that Barça cannot sell a stake in itself if it ever encounters financial difficulties. Or, at least, you can’t do it without member approval, which makes it nearly impossible.
That fan-based model also means it can borrow a lot less than its big rivals. Manchester United Plc has a net debt 2.7 times below Ebitda, a measure of earnings, but the Barcelona statutes limit its debt to twice the Ebitda. Even with those limits, you’ll always need a steady flow of cash to cover your borrowing costs and provide a financial cushion.
Glass half full
The expected departure of Messi will not be painless for Barça’s accountants. While he has a 700 million euro ($ 833.5 million) buyout clause in his contract, he is trying to invoke a provision that would allow him to leave for free. It seems unlikely that Barcelona will allow that to happen, but the net present value of an outing can make even a cut-price deal worthwhile. The savings on your contract would be worth a lot with today’s money.
A sale would not only reduce spending on Messi himself, but would also curb the inflationary effect on other wages.
That could be essential as we move into the first full season where stadiums empty from the pandemic will reduce club sales.
The Argentine megastar has been the talisman of a team that was considered, at one time, the best team in history, and helped transform Barça into a giant that makes money spin. In recent years, your salary package has stretched costs for less reward. Fans may wonder how the irreplaceable is replaced, but decline comes to everyone eventually.
Now is a good time to hit the reset button.
© 2020 Bloomberg LP
