Monday, April 30, 2007

Barcelona Turned Themselves Around - City Can Too

FC Barcelona is currently top of La Liga, if they manage to win the title this season it will be their third in succession. Last season's Champions League winners are currently the world's second largest club in the world in revenue terms but they haven't always held that lofty position.

In the Deloitte 2004 Football Money League (which looked at the previous year’s figures) Barcelona were ranked 13th in the World. Manchester City is currently ranked 17th in the world, so not too far away from Barcelona a few years ago.

At the end of the 2002/03 season Barcelona finished the league in sixth place and were seriously down on their luck. Average crowds were in the low 60,000s (well below the 98,000 capacity) and debts of approximately £130m threatened their very existence. Wages were excessive at 88% of turnover (the recommended percentage is 50%) and the Club’s operating loss was approximately £50m.

You will probably know that Barcelona is a mutual organisation, owned and run by its membership. The Club motto “more than a club” reflects its philosophy and status as a symbol of Catalan pride and commitment to democracy and freedom. FC Barcelona explains that their motto defines “the complexities of FC Barcelona’s identity, a club that competes in a sporting sense on the field of play, but that also beats, every day, to the rhythm of its people’s concerns.”

One of Barcelona’s oldest statutes decrees that the Club promotes “social, cultural, artistic, scientific or recreational activities” for it’s club members and citizens of Catalonia. This is one of the main reasons why Barcelona also operates teams in other sports including basketball, handball, roller hockey, athletics, rugby, baseball, volleyball and field hockey.

Almost four years ago in June 2003 the members of Barcelona voted in a new Club President called Joan Laporta who won with an agenda of implementing a radical programme to improve both the Club’s two key principles – spectacular football and social commitment. Following that election, the majority of the Board were replaced and the new Board set about reviewing the Club from top to bottom with the aim of identifying and implementing opportunities to increase revenues whilst controlling costs.

Key appointments were made both on and off the pitch with a series of high earning players moved on. One of the main cost controlling strategies employed, resulted in the introduction of performance related pay throughout the playing squad, not only to incentivise players but also to protect the business model against performances on the pitch. All contracts included fixed and bonus elements, with bonus elements relating to both individual and team performances.

Barcelona’s debt was also restructured with a number of financial institutions, which also gave them the option to borrow additional funds if or when required.

The new board’s strategy didn’t take long to work and by 2003/04 revenues had increased by 37% while player costs fell to 50% of turnover. This strategy has continued to pay dividends both on the off the pitch ever since.

A new and revitalised Barcelona board didn’t just work on the financial and playing side, in 2003 they launched “The Big Challenge” aimed at growing the Club’s membership significantly from the 105,000 members at that time. This was another successfully implement strategy resulting in a much increased membership which as at today stands at 153,315.

In 2003 season ticket prices were increased substantially (20-40%) however, prices have only risen by inflation since then and the most expensive season ticket is still competively priced at approximately £600. Recognising that not all Barcelona supporters attend every game, Barcelona also introduced a scheme whereby they facilitated the resale of up to 5,000 tickets per match with the Club receiving 50% of the proceeds. By the 2005/06 season average attendances had risen to 73,000 and continue to rise.

Where Spanish football differs from Premiership football is the ability for individual teams to negotiate their own TV deals. Barcelona used to receive a minimum £36m a season however, under a new deal will now receive approximately £140m over the next two years. In addition, Barcelona also runs their own TV channel which has over 25,000 subscribers and makes a profit.

Whilst Barcelona do not carry any traditional sponsorship on their shirts (they pay for Unicef to be on their shirts) they do have a 50/ 50 partnership with Nike with reference to all of Barcelona’s merchandising. Barcelona also has a number of commercial partnerships with big brands including Coca Cola and Audi.

Barcelona also continues to invest for the future by spending money on their training facilities, running soccer schools outside of Spain and continue to look at international opportunities aimed at expanding their fanbase.

Whilst our Club has vast amounts of potential to be bigger and better than it is, it will not be another Barcelona however, by studying other clubs both here and abroad perhaps lessons can be learned and changes made for the best of our Club.

Source: various including Deloitte 2007 Money League and FC Barcelona


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