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Spanish football giant FC Barcelona announced a bold move to spin off its media division through a SPAC deal with a valuation of $1 billion. This decision is part of the club’s broader strategy to improve its financial health and de-leverage its balance sheet amidst broader issues. But what led Barcelona to this point, and what does it mean for the new company’s shareholders?

Balance Sheet Blues

In 2015, FC Barcelona seemed poised for an era of dominance. Fresh from their Champions League victory over Juventus and armed with one of football’s most formidable frontlines, the future was bright. But by 2023, the picture had dramatically shifted. By 2021, Barcelona’s financial stability was shaken. Club president Joan Laporta revealed a daunting debt of $1.38 billion. Alarmingly, even after the departure of legendary Lionel Messi, player salaries consumed more than the club’s income.

Their financial health was in dire straits, with a negative net worth of $460 million. The signs of stress had appeared earlier. In 2020, Barcelona had to secure an $85 million loan just for player wages. Another sizable loan, this time $575 million from Goldman Sachs, was needed to restructure their mounting debts. Ferran Reverter, the then club’s chief, termed Barcelona technically bankrupt. If they were a typical company, they might’ve faced dissolution.

On the field, the club’s performance mirrored their off-pitch struggles. A team that had clinched numerous La Liga titles between 2009 and 2019 suddenly faced a three-year title drought. The Champions League, too, eluded them, with their last finals appearance dating back to 2015. However, Barcelona, true to its spirit, sought a way out. 2022 saw strategic financial partnerships. A lucrative deal with Spotify promised $70 million annually.

Furthermore, they sold a portion of their La Liga TV rights to investment firm Sixth Street, fetching a significant sum. Another savvy business move involved selling a stake in their Barca Studios to Socios.com, bringing in $110 million. These initiatives have started bearing fruit. Barcelona managed to reduce its debt to around $500 million, thanks to profits of about $285 million in 2023. They’re now eyeing an ambitious revenue target of close to $800 million for the upcoming year. And in their latest move to solidify their financial health, the club is spinning off its media division. 

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New Playground 

In August 2023, FC Barcelona’s digital dominance is evident. With 421 million followers, the club stands tall on social media, surpassing football giants like Real Madrid and Manchester United. But it’s not just about the number of followers, with the club’s content resonating with football fans, garnering a collective 239 million interactions monthly.

Barcelona’s ambitions stretch beyond the pitch. The club is channeling efforts into Barca Media, hoping this division can contribute a quarter of the club’s earnings, potentially reaching up to $200 million over the next few years.

Barca Studios is at the heart of this initiative, crafting digital content tailored for the club’s vast fanbase. The division has already produced over 70 shows, documentaries, and films in the past five years, with plans to expand its content roster soon. Barca Vision focuses on projects in NFTs, the Metaverse, Web3, Virtual Reality, and Augmented Reality.

Initiatives like converting Camp Nou’s historic seats into unique NFTs have already been set in motion. Collaborations, like the one with the digital trading platform Sorare, are also on the horizon. Barca eSports completes the trio, making strides in the competitive gaming landscape by marking their presence in major eSports leagues and tournaments.

Optimism or Overvaluation?

Barcelona’s media arm, Barca Media, has set its sights sky-high, valuing its potential market at a whopping $265 billion. This includes their ventures: Barca Studio, Vision, and eSports. But, it’s important to take a closer look to understand the market dynamics. Barca Media compares itself to Netflix, which is a bold move. While the club has a massive social media following of 421 million, there’s a catch.

A single fan could be following them on Instagram, Twitter, and Facebook. Furthermore, not every fan will rush to subscribe, with some just being there for the iconic Messi goals or the El Clásico drama.

Barca Vision’s plans sound great on paper, with talk of subscriptions, ads, and licensing. But in a world overflowing with streaming options, will fans dish out more for another subscription? The NFT game, where Barca Vision is placing some big bets, is tricky. Many clubs, including big names like PSG and Manchester City, jumped on this bandwagon but have since gone radio silent. Barcelona’s eSports venture is another wild card.

The eSports world is booming, but it’s also a rollercoaster. Just look at FaZe Clan. The company debuted with a bang, valued at $725 million, but recently sold for just $17 million, after racking up hundreds of millions in losses. In a nutshell, Barca Media is stepping onto some new, unpredictable pitches. And while their ambition is commendable, the $1 billion tag might be a tad too optimistic for now.

Bottom Line 

FC Barcelona’s decision to spin off its media division might be a strategic move to strengthen its financial position, but it seems more beneficial for the club than the SPAC shareholders. Barca Media’s ventures, whether it’s content production, the unpredictable world of NFTs and the Metaverse, or the volatile eSports arena, are largely unproven and currently not profitable. While Barcelona’s strong brand and massive fan base give it an edge, navigating the challenges to boost revenues and truly live up to that hefty valuation will be a tough game.

Source: Digital Dribble

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