For as long as we have been adults, Simon Kuper has been one of the most erudite football writers in the world. In this piece – which was written before FC Barcelona announced Lionel Messi’s exit – Mr Kuper dissects how FC Barcelona messed up its capital allocation and, in the process, lost its place at the apex of world football. To investors like us, this is a familiar tale wherein once a franchise attains greatness, arrogance kicks in and what follows is capital allocation driven by hubris. The fall follows shortly thereafter (click here for a similar piece we have written recently on India Inc:
Kuper begins the piece by summarising Barca’s rise and fall: “Before the pandemic, Barcelona became the first club in any sport ever to surpass $1bn in annual revenues. Now its gross debt is about $1.4bn, much of it short-term.
Spain’s La Liga has blocked it from spending any more money it doesn’t have. Barça has faced obstacles to giving a new contract to the world’s best and ­highest-paid footballer, Lionel Messi, even though he has reportedly agreed to cut his pay by half. The club has put most of its other players in an everything-must-go sale, with few takers so far.
The pandemic hurt, but it was only the coup de grâce. Almost invisibly, Barcelona has been in free fall ever since the night in Berlin in June 2015 when it won its fourth Champions League final in 10 years. The club had achieved dominance on the cheap, thanks to a one-off generation of brilliant footballers from its own youth academy. Back then, Barça could afford to sign almost anybody in football. In any talent business, the most important management decision is recruitment. But Barcelona lost the “war for talent”. What went wrong?”
First off, Barca did not have a structured process for buying players. Different factions in the club would drive different initiatives to drive different players without telling the head coach what they were upto. In addition, the club president will weigh in, so will the sporting director and so would Lionel Messi. This problem has worsened in the past six years because club president during this period, Josep Maria Bartomeu, did not know much about the business of buying and selling football players. “His sporting director, the legendary Spanish goalkeeper Andoni “Zubi” Zubizarreta, had signed players like Neymar and Luis Suárez, who gelled with Messi into the “MSN” attack, the best in football. But Bartomeu soon sacked Zubi. In all, the president had five sporting directors in six years.”
The most expensive mistake made in Bartomeu’s era was the sale of Neymar to PSG. Barcelona was never able to replace Neymar with a player who could combine as effectively with Messi.
Then came the mistakes in not making purchases that any other club president with an understanding of capital allocation in football would have made: “In 2017, the Spanish agent Junior Minguella offered Barcelona’s board the sensational 18-year-old French forward Kylian Mbappé. But Minguella didn’t even hear back from Barça until finally a WhatsApp message arrived from a board member, Javier Bordas: “Neither the coaches nor Presi [the president] wanted him.”
Bordas would say years later that Barça’s technical staff had also rejected the young Norwegian Erling Braut ­Haaland, because he wasn’t considered “a player in the Barça model”. Today, Mbappé and Haaland are the two most coveted young men in football.”
Mr Kuper’s article gives other examples of how – in parallel to not buying players they should have bought – Barca got cornered into paying over the odds for less than stellar performers. In short order, Barca burnt through Euros 300mn buying second rate talent. Why did this happen? Kuper makes an interesting point here – the expectations of Barca’s massive fan base are so high that – in an interesting parallel with what happens in the stock market – the club’s management panics during negotiations and overpays: “Barcelona paid Ajax a transfer fee of €75m. According to football agent Hasan Cetinkaya, advising the Dutch club, this was nearly double what Ajax had initially hoped to get. Cetinkaya said: “There was tremendous pressure on Barcelona’s sporting management to get the deal done, and they really wanted to protect themselves. Those in Barcelona’s sporting leadership were so relieved that the then sporting director Pep Segura began crying as soon as the papers were written.”
Barça was used to overpaying. Whereas most clubs target a type — say, a young playmaker who costs under €30m — Barcelona until 2020 shopped at the top of the market, and could afford to target an ideal. In this case, Barça didn’t want a “De Jong type”. It wanted De Jong himself. As so often when bidding for a player, it had no alternative in mind, and the selling club understood this. “You know you will pay more than another club,” shrugged Rosell.”
Beyond poor capital allocation, Barca suffered because it could not get out of its dependence on one player. This cost them, literally, hundreds of millions of euros in terms of what they paid Messi and then the rest of the team: “Barcelona was running out of money, partly because of its run of bad purchases and partly because the pay rises Messi’s father Jorge kept extracting for his son were bleeding the club dry.
Between 2017 and 2021, Messi earned a total of more than €555m, according to extracts from his 30-page contract published in El Mundo newspaper. Neither Messi nor senior Barcelona officials denied the figure. One senior Barça official told me Messi’s salary had tripled between 2014 and 2020. But he added, “Messi is not the problem. The problem is the contagion of the rest of the team.” Whenever Messi got a raise, his teammates wanted one too.”
Finally, as is the case with corporate collapses, comes the joker in the pack – naughty accounting: “By summer 2020, Barça’s transfer deficit was haunting Bartomeu and his board members. Under the rules that govern Spanish member-owned clubs such as Barça, directors had to repay losses out of their own pockets. The board needed to book profits urgently before the financial year ended on July 1. And so a bizarre swap transfer was concocted. The counterparty was Juventus, also eager to improve its books. Juve “sold” Bosnian midfielder Miralem Pjanic to Barça for a basic fee of €60m, while Barça sold Brazilian midfielder Arthur Melo to Juve for a basic €72m.
These sums would never actually be paid. They were invented for accounting purposes. Under bookkeeping rules, each club could book its handsome supposed selling price as immediate income. The notional payments would be spread out over the years of the players’ contracts. Only €12m in actual money would end up changing hands, the difference between the two players’ fictional prices, paid by Juve to Barça. What mattered was that the swap helped both giants clean up their books.”
The world over sports is now a business and that means that there are several evocative books waiting to be written on how the same things which make or break great companies also make or break great sports franchises.

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