The Barcelona Riddle: Deloitte Calls Club Soccer’s Richest Even As Report Claims It’s Nearly Bankrupt

If all had gone according to planned, Barcelona would have a new president in place by now. However, because of a spike in Covid-19 cases, the election will not happen until March 7 rather than the original date of January 24.

Instead, over the last week, Barcelona fans have had to deal with seemingly contradictory headlines.

It seems that while being hailed as “the richest” club in world after topping the latest edition of the Deloitte Football Money League, Barcelona is in a desperate situation and is “on the verge of bankruptcy.”

It may seem like a dichotomy, but the reality is that both can be true.

Let’s look at the “bankruptcy” angle first.

Barcelona published its annual report 2020 and despite the club trying to paper over the financial nightmare with more faints than Lionel Messi cutting through a defense, it doesn’t make good reading.  

The liabilities side of the balance sheet shows equity of just €35 million out of €1.47 billion. There is €971 million in current liabilities and accruals with €250 million due to banks and €196 million owed to other teams for signings made “on tick.”

It gets worse. According to Spanish publication “El Mundo,” some of the monies owed to banks has been guaranteed against the Barça Licensing & Merchandising operation.

The money due to other clubs, if not paid on time, could lead to sanctions from UEFA and/or FIFA.

Non-current debts total €443 million for a combined total of €1.4 billion owed by Barcelona. A gross debt of €1.4 billion is not a problem if the club has liquid assets to cover it off, particularly the current portion.

But this is where Barcelona is hooped. Barcelona’s liquidity is but a drop in the debt bucket. The balance sheet shows just €368 million in current assets and another €281 million in longer term non-liquid assets.

Over 55% of Barcelona’s assets are accounted for by “intangible sporting assets” (the players) and property, plant, and equipment (the Camp Nou, primarily).

A team of the magnitude of Barcelona cannot simply hold a fire sale and expect to bank nearly €600 million net from disposing of players, especially given the economic problems foisted on the world by Covid-19.

What’s more, there is not much of a market for stadiums unless its by way of mortgaging.  

So, will Barcelona escape bankruptcy?

The answer is almost certainly yes.

I hesitate to say that Barcelona is too big to fail but its true.

Barcelona will be forced to change is profligate ways and a mixture of mortgaging its “fixed assets” and/or selling off some of its players will be the price to be paid by a club that lost its soul some years ago. But it will continue as a viable entity.

Deloitte Football Money League

The Deloitte Football Money League ranked Barcelona #1 for the second consecutive year with revenues of €715million, just marginally ahead of Real Madrid and someway ahead of third place Bayern Munich, €634 million.

Barcelona’s revenue was down from €841 million the year prior despite the protestations in the Barcelona annual report of what the number would have been it had not been for Covid-19!

The Deloitte Football Money League has become a popular standard and bragging point for fans over the years. A team’s position in the Deloitte ranking has become synonymous with financial success and strength.

It has become a regular headline maker each January to the extent that it is easy to overlook that it is a very blunt instrument that tells us extraordinarily little about a club’s overall financial strength.

Barcelona is a perfect example. Top in revenues but also carrying an unprecedented wage bill and a massive unfunded debt at the end of the 2020 season.

Finishing top of the Deloitte Football Money League is analogous to crowning the team with the most goals scored in a season, as the best team in the world without considering how many they let in.

Better Metrics

The “Balance Scorecard” concept came to prominence in the 1990s. Although the model had many parents, Robert Kaplan and David Norton are generally regarded as the key architects and the pair that popularized the idea.

The idea is that measuring an organization’s performance based on just financial measurements is inadequate and there are many other factors that, if measured and managed more diligently, can improve the long-term health and prospects of an organization.  

Supporters of the “Balanced Scorecard” approach believe that it gives organizations the ability to join the multitude of dots and to see more clearly how contributions help the organization achieve its goals….or not.

It is not known how many clubs use the concept or variants but VFB Stuttgart of the Bundesliga did take it onboard in the 2000s.

Here is a sprinkling of some of the metrics a club might use in addition to straight financial information.

Squad

By average age, how many players have graduated from the club’s Academy system.

Contracts

How many contracts are scheduled to come due in each year and ensuring that the club does not face a glut of defections in the future.

Performance

League position, Cup progress at each level of the club.

Fans

Social media and community engagement, season ticket sales, traveling support, merchandise sales, stadium tours are just of the factors that a club might use.

Employee turnover

Is the club losing key individuals and their knowledge to their rivals?

Injuries

Number of injuries, type of injuries, games missed etc.

Bricks and mortar

Condition of the stadium, training facilities, medical infrastructure.