The $500 Million Shirt

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Hey Friends,

Barcelona has been dealing with widely reported financial troubles.

The Catalan club is more than $1.6 billion in debt, and they lost over $530 million last year alone. They were forced to let Lionel Messi depart for PSG last year for free, and they will now operate on a salary cap of roughly $100 million this season.

For context, a 2022 budget of ~$100 million is an eighth of the size of Real Madrid’s and is only high enough to be the seventh-biggest in their division.

Remember, the salary cap is calculated based on a series of financial factors and is proportional to roughly 70% of a club’s revenue — this is used for payments to players, coaching staff, youth teams, and other employees across the club.

Now Joan Laporta has returned for his second stint as club President, and he even proclaimed, “Barcelona is back” after 21-year-old Ferran Torress joined the club earlier this month.

But a pivotal answer to their financial trouble is quietly being solved right now.

With Barcelona’s shirt sponsorship deals with Rakuten and Beko expiring in the next six months, multiple reports have emerged that they are on the verge of signing the largest sponsorship offer in the history of soccer.

Audio streaming giant Spotify is reportedly set to pay ~$380 million over the next five seasons to be featured on the front of Barcelona’s shirts, and blockchain company Polkadot is reportedly going to pay ~$110 million over the next five years to be featured on the sleeve of Barcelona’s shirts.

That’s a sponsorship fee of ~$490 million over five years, or ~$98 million annually.

And this is what the shirts might look like, according to Shay Lugassi.

When reading that two sponsors were going to pay Barcelona $100 million annually, my first thought was probably pretty similar to yours — “Damn, that’s a lot of money!”

But I think it’s crucial to remove American sports bias when thinking about this.

Barcelona has about 300 million fans—the United States has a population of 330 million people—and the 123-year-old club is by far the most popular in Europe.

They were doing well over $1 billion in annual operating revenue before the pandemic, and despite being owned member-owned by 150,000 supporters, Barcelona is the most valuable club in the world at an estimated valuation of $4.76 billion.

So if you are Spotify, a partnership like this might make a lot of sense.

The world’s most popular audio streaming service launched in 2008 and now has 381 million users, including 172 million paying subscribers, across 184 markets today.

Sure, they are still burning quite a bit of money with a net loss of nearly $600 million in 2020 alone, but they are in growth mode, and this partnership will get them a ton of eyeballs in an important market.

Monthly Spotify Users By Region

• Europe: 34%

• North America: 24%

• Latin America: 22%

• Rest of the World: 20%

The quality of sponsorship assets is different, of course, but it’s wild when you compare the NBA’s jersey patch program—sponsors get a 2.5 square inch patch on the chest of a jersey—to the shirt sponsorship deal that Barcelona is about to sign.

For example, the largest jersey patch deal in the NBA is for $20 million annually, and the league’s 32 teams bring in roughly $150 million combined via the program — Barcelona will bring in $100 million annually all by themselves.

As I said before, the sponsorships are undoubtedly different, but it’s still wild to compare the two.

Does the NBA get more aggressive with advertisements? Will the NFL eventually get involved? Those are fair questions, and I imagine with Barcelona set to make nearly $500 million over the next five seasons, they are questions that only get louder.

I hope each of you has a great day. I’ll talk to everyone tomorrow.

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