Fcbarcelona

FCBARCELONA
A vision of the football
industry and the case of the
FC Barcelona
February 2006

http://migre.me/eohac
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The football industry: The last 10 years
Current challenges
FCB Revolution 2003-2005
The next decade
INDEX

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THE INDUSTRY IN THE LAST 10 YEARS
 Extraordinary growth. Between 10% and 25% annually…
- Stadium development
- Broadcasting deregulation
- Marketing revenue
 … and a major change in the business model…
- From clubs as organizers of local events (like a circus) to global
entertainment companies (like Walt Disney)
 … that could “break” the industry in two segments: big
global clubs and smaller local ones
- The change benefits big clubs that can capture the growth and
become global franchises and powerful brands

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CLUBS REVENUE GROWTH
Extraordinary growth... With lessons learned and challenges
ahead.
Chelsea +17% +28%
R.Madrid +13% +20%
FCBARCELONA +16% +30%
129 135
169
180
210
234
251 248
89 89
138
171 175
214 208
87
75
85
119
110
139
123
169
116 116
164
138
152
193
234
25 22 24 29
36
48
65
77 81
100 96 98
62
68
49
25
58
0
50
100
150
200
250
300
1992/3 1993/4 1994/5 1995/6 1996/7 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/4
Tottenham +12% +4%
CAGR 03-0598-05
Million €
Real
state
deal
New
owner
22 24
29
36
48
65
77 81
100 96 98
104
129
135
169
180
210
25
234
251
246
259
62
68
49
25
87
75
119
169
208
123
139
110
85
58
116
164
276
236
193
152
138
116
€
0
50
100
150
200
250
300
1992/3 1993/4 1994/5 1995/6 1996/7 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/4 2004/5
73
121
118
217
143
90
134
221
M.United (Est.) +9% -1%

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SOURCES OF REVENUE: 6 BIGGEST CLUBS · 2004/05
72,2
55,1
82,2
124,0
62,8
71,7
82,0
138,0
124,4
88,0
79,0
102,5
83,7
63,7
66,1
57,9
22,838,1
Marketing Media Matchday
Million €
(42%)
(29%)
(29%)
(38%)
(37%)
(25%)
(16%)
(59%)
(25%)
(10%)
(54%)
(36%)
(23%)
(32%)
(45%)
(32%)
(38%)
(30%)
Machester Utd. Chelsea FC AC Milan Juventus R. Madrid FC Barcelona
246
221
234 229
275,7
208

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COSTS
Source: ladbrokes.com, 01.08.05Source: eurobet.com, 01.08.05As in all other professional sports, managing player’s
compensation is the major cost challenge.
 Player salaries are the highest costs
 G-14 recommends that salaries have to be between
55% and 70% of revenues
 Salaries have increased spectacularly in the last 5
years... But are now more stable
 Amortizations depend on transfer prices, that had its
highest in the season 2001-02
 Operational costs have to be tightly controlled in a
professional manner
Player
salaries
Transfer
amortization
Operational
costs

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PROFIT & LOSS: 6 BIGGEST CLUBS · 2004/05
221
234
276
208
34
-13
18
246
229
-9 -24
Million €
OPERATION REVENUES
OPERATION EXPENSES
OPERATION
PROFIT/LOSS
TOTAL PROFIT/LOSS(1)
(1) Operation profit/loss +/- financial +/- extraordinary results.
Machester Utd.
221
230
-9
-207
234
N.A.
N.A.
N.A.
229
243
-13
-3
276
300
-24
+2
208
190
+18
+37
246
212
+34
+15
Chelsea FC AC Milan Juventus R. Madrid FC Barcelona

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STRONG RELATIONSHIP BETWEEN SALARIES PAID
AND SUCCESS ON THE PITCH…
Relative
Salaries
Ranking
0,25
0,5
1
2
4
Rotherham
United
Reading
Preston
Plymouth
Arsenal
Aston Villa
Barnsley
Birmingham
City
Bolton
Wanderers
Brentford
Bristol
Rovers
Bury
Derby
Leeds
Leicester
Liverpool
Manchester United
Newcastle
Scunthorpe United
Sheffield
United
Sheffield
Wednesday
Shrewsbury
Southampton
Southend
Tottenham
Wrexham
R2 = 0,94
1 320,50,25
RELATIONSHIP
SALARIES -
SUCCESS
(UK 1990-1999;
LOGARITMIC
SCALE)
Best players, paid
at market price will
win championships
Source: S. Szymanski & T, kuypers, Deloitte, Estim&Co.

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… BEST PLAYERS CAN ONLY BE PAID BY THE BIGGEST CLUBS
Source: ladbrokes.com, 01.08.05Source: eurobet.com, 01.08.05
Club size matters.
Source: Szymanski, Deloitte & Touche FIT, Estin & Co.
RELATIONSHIP
SALARIES -
REVENUES
(UK 1990-1999;
BASE 100
LOGARITMIC
SCALE)
Salaries (% of revenues)
Revenues
(average1990-1999)
Rotherham
Reading
Preston
Plymouth
ArsenalAston
Villa
Barnsley
Birmingham
Blackburn
Rovers
Bolton
Wanderers
Brentford
Burnley
Bury
Cambridge
Coventry
Derby
Everton
Huddersfield
Leeds
Leicester
Liverpool
Manchester
United
Newcastle
Oldham
Peterborough
Scunthorpe
Sheffield United
Sheffield Wednesday
Southampton
Southend
Tottenham
WBA
West
Ham
Wrexham
40%
60%
80%
100%
12,5 25 50 100 200 400
30%
50%
70%
90%
Safe zone
salaries are
less than 55%
of revenues

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Current challenges
The next decade
INDEX

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CURRENT CHALLENGES
 “Product management”: Players and team performance
 Revenue growth and globalization
 Cost control and value chain management
 Industry organization and regulation

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CURRENT CHALLENGES
 Balance of TEAM PERFORMANCE vs. STAR PLAYERS
- Chelsea / Liverpool vs. Real Madrid
 Balance of RESULTS vs. ATTRACTIVENESS OF PLAY
- Chelsea vs. FC Barcelona
 MANAGEMENT OF TRANSFER MARKET
- Less star players in the market (“Not for sale”)
- Commercial value vs. Sporting Value
- Best and worst practices
Example: Recent transfers of 20 million or more in Spain
 Ronaldinho, Eto‟o, Deco (FC Barcelona)
 Beckham, Samuel, Woodgate, Robinho, Ramos, Baptista
(R.Madrid)
 YOUTH TALENT DEVELOPMENT
- High investment in schools and youth teams
- Fierce competition to hire young players

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CURRENT CHALLENGES
 Development of new sources of growth beyond Europe.
Globalization of Brands
- Markets
 Asia, US…
- Business model
 Tours, schools, clubs
- Content of the brand, positioning
 “The theater of dreams” (MANUTD), “the galactics” (Madrid),
“more than a club” (FCBARCELONA)
 The role of players
- Execution
 Infrastructure, management, control, communication…

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CURRENT CHALLENGES
 Players compensation
- Fixed salaries and bonuses
 Transfer prices
 Agents
 New owners
- Inflation, market disturbances

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CURRENT CHALLENGES
 FIFA / UEFA / National Associations / Leagues / G-14 / Clubs
 Calendar, release of international players, revenue distribution…
 The “Charleroi Case”

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Current challenges
The next decade
INDEX

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THE STARTING POINT AND THE STRATEGIC ALTERNATIVES
STRATEGIC ALTERNATIVE 1 EVOLUTION
SEASON 2002 / 2003
 Revenues of 123M
- Number 12th in global ranking
 Losses of 73m
 Debt of 186m
 Team is 6th in the Spanish
Championship
 Drastic reduction of expenses
 Very moderate investment for 2/3 years
 Less economic risk but higher market and
sporting risk
STRATEGIC ALTERNATIVE 2
REVOLUTION: “THE VIRTUOS CIRCLE”
 High investment in the team to generate
immediate results and revenues
 Fast expenses reduction. 0 losses year 1
 Accelerate / investment and business plan in
year 2 to get results faster
 Higher financial risk but less market and
sporting risk

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THE ACCELERATED “VIRTUOS CIRCLE”
123
240
208
169
139
110
203
191
163
123
2000/1 2001/2 2002/3 2003/4 2004/5 2005/6
Million €Revenues
Reality
June 2003
Business
plan

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EXTRAORDINARY GROWTH… IN ALL ASPECTS
TOTAL REVENUES WEB TRAFFIC TRIPPLED 30,000 NEW MEMBERS
TV REVENUES +30% GLOBAL TV VIEWERSHIP
7,3 4,5 4,1 0,4
25,3 34,3
47,6
69,3
42,6
67,2
81,1
87,7
37,3
50,5
61,7
68,5
10,9
12,7
13,4
14,3
02/03 03/04 04/05 05/06
+23%
169,2
207,9
Member-
ships
Stadium
Media
Marketing
Others
+47%
+8%
+11%
+7%
+16% 240,2
-90%
+39%
+21%
+22%
+6%
-9%
105000
135.000
50000
75000
100000
125000
150000
jun-03 jan-06
67.200
87.700
0
50.000
100.000
02-03 04-05
„000 page views „000 unique visitors
members
„000 €
0
5.000
10.000
15.000
20.000
25.000
sep-03
nov
gen-04
mar
mai
jul
sep
nov-04
ene-05
mar-05
may-05
jul-05
0
200
400
600
800
1.000
1.200
1.400
1.600
23%
77%
Spain
Rest of
world
 FCB – Madrid is viewed by
120 million people
+37%
+33%
+58%
+35%
+16%
-44%

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MANAGING COSTS…
109,3
85,2
95,6
123,1
240,2
207,9
169,2
123,4
0
50
100
150
200
250
2002 / 2003 2003 / 2004 2004 / 2005 2005 / 2006
0%
50%
100%
88%
50%
46%
51%
Revenues
Salaries (football + other sports)
Salaries / Revenues
70%
55%
Maximum
recommended
Optimal
EVOLUTION OF PLAYER COSTS
FIXED
64%
INDIVIDUAL
BONUS
18%
TEAM
BONUS
18%
SALARY STRUCTURE

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… AND OBTAINING PROFITS
87
75
85
119
110
139
123
169
208
240
6
-15 -14
10
-38 -45
-72
6,7
18 19
96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05
05/06
(estimated)
Revenues
Profit / Loss
The Club consolidates its revenue growth with a cost
structure that produces profits in a sustainable way.

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 Revenues of 123M
Number 12th in global
ranking
 Losses of 73m
 Debt of 186m
 Team is 6th in the Spanish
League
 240m revenues
 Among 5 highest in the
ranking
 Profit 19m
 Debt of 150m
 Team won Spanish
Championship 2004/2005
THE TRANSFORMATION
WE WERE IN 2002 / 2003
- Valdés
- Puyol
- Gabri
- Xavi
- Jorquera
- Motta
- Iniesta
- Navarro
- Saviola
- Kluivert
- Overmars
- Mendieta
- Anderson
- Christanval
- Rochemback
- Riquelme
- Sorin
- Bonano
- Enke
- Geovani
- Dani
- Frank de Boer
WE ARE IN 2005 / 2006
- Valdés
- Puyol
- Gabri
- Xavi
- Oleguer
- Jorquera
- Motta
- Iniesta
- Messi
- Ruben
- Saviola
- Ronaldinho
- Eto’o
- Deco
- Edmilson
- Giuly
- Belleti
- Gio
- Márquez
- Silvinho
- Maxi
- Larsson
- V.Bommel
- Ezquerro
- Damià
Net
investment in
players
98m
Profit +
amortizations
99m
Real state
investment
38m
Real state
sold
28m
The club achieved its transformation self-financing
its growth.

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Current challenges
The next decade
INDEX

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THE NEXT DECADE WILL BE ABOUT…
 Globalization
 Development of Asia and US markets
 Soccer global ubiquity thru “media play”
(TV, IP-TV, web, mobiles, ...)
 Top clubs positioned as global brands
(media, international leagues, tours, ...)
 Star players as global icons / characters
 Clubs and players will promote proximity to
the fans
- Schools, Tours, Humanitarian actions
 Soccer will continue to be the most popular
collective sport to be played
… while
being closer
to people
Further
globalization
and growth…

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KEY SUCCESS FACTORS FOR CLUBS OVER NEXT YEARS?
CLUBS KEY SUCCESS FACTORS OVER THE NEXT DECADE
Attractive
game
Sporting
success
Governance &
management
Club’s city
image
Fan base
attraction
Global
audience
Players’
image
Financial size
& strength
SPORTING FACTORS
In a
globalized
world few,
clubs will be
competing for
a global
market

Page 26
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hac
FCBARCELONA IS ALREADY WELL POSITIONED TO BE ONE OF THE
LEADING CLUBS IN THE NEXT DECADE
 Ronaldinho as main global icon -
Deco, Eto’o, Marquez and Messi
follow suit
 7 distinct nationalities. 3 continents
represented
 Global TV coverage of
Champions League
 Room for improvement of
“La Liga” TV coverage
 BarçaTV growing
international penetration
 Vast coverage on web and
print media
 #1 club in members and fan base
within the young segment
 Most attended games in
international tours
 Identification with key players
 “Fashion” and “tourism” strong
statements
 City that stands for peace, civism
and solidarity
 Already in the top 6 clubs in revenue
size, and growing
 Democratic election system
to Board guarantees good
governance
 Management achieved
excellent results in last 2
years
 57 main trophies
 Current Liga champion
 Ronaldinho, Eto’o, Deco and Messi
accumulating individual prizes last 2
years
 Unique offensive and spectacular
game recognized worldwide
 Young and talented player squad
guarantees pitch entertainment over
next years
Attractive
game
Sporting
success
Governance &
management
Club’s city
image
Fan base
attraction
Global
audience
Players’
image
Financial size
& strength
4
4
4
3
4
3
3
3

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