Football finance 101: How PSG pulled off Messi’s signing where Barcelona failed

By: |
Updated: August 15, 2021 8:49 PM

La Liga, which runs the top two tiers of Spain’s league football and is part of the Royal Spanish Football Federation (RFEF), imposes a budget cap on all 42 clubs under its ambit.

Messi PSG unveilingAlthough the French club didn’t have to pay a transfer fee for the Argentina captain, they are paying the player a king’s ransom in wages. (Photo credit: Facebook/Paris Saint-Germain)

When a tearful Lionel Messi announced that he would quit Barcelona despite his desire to extend his stay after La Liga rejected their deal, fans and journalists alike began a frantic scramble to pinpoint how the Spanish league authorities could prevent a willing player from extending his stay at the club where he became a bona fide football legend.

“Everything was agreed and then at the last moment, because of the issue with La Liga, it could not be done,” Messi said during the press conference announcing his departure. “I did all I could to stay, that’s what I wanted but it could not be done.”

The Argentine had a well-drawn-out contract saga last year when he announced his desire to leave the club, only for then Barcelona President Josep Maria Bartomeu to scupper his plans.

However, several factors were in play last season when Messi expressed his wish to quit his boyhood club — a lot of which had to do with how the club was being run.

A financial ruin
A registered association, Barcelona are governed by a president elected by the club’s members, called socis. While this system has its positives, Barcelona have had the rough end of the stick in recent years. The presidency of Bartomeu was particularly controversial as alleged mismanagement took the club to the brink. The board under Bartomeu overspent on mediocre players, handed out rich, long-term contracts, and brought the club immense financial misery.

In 2020, Barcelona’s wage bill was the highest in the world at €443 million — a staggering €42 million more than second-placed Manchester City, The Athletic reported. The club justified this inflated wage bill by pointing to the revenue stream — also the highest in world football — at €715 million in 2019-20. While most of this revenue is made up of sponsorships, television rights, prize money, shirt and merchandise sales, a large chunk comes from gate receipts. With football being played in empty stadiums for over a year following the outbreak of Covid-19, Barcelona lost out on that entire revenue stream.

Barcelona reported losses of €203 million in 2020, mainly due to the absence of match-day revenue following the Covid-led stoppage and the lack of stadium tours. That figure is more than certain to have skyrocketed after a full year of football behind closed doors. ESPN reported that the club’s finances were so dire that new President Joan Laporta had to secure a €100 million loan — of a total €500-million credit line — from a US investment bank to pay off player wages. As of January, Barcelona’s total debt stood at €1.173 billion.

The Athletic highlighted that, as a result, Barcelona’s wage budget for 2021-22 was a mere €160 million — a decline from €671 million in 2019-20 and €347 million in 2020-21.

La Liga rules
La Liga, which runs the top two tiers of Spain’s league football and is part of the Royal Spanish Football Federation (RFEF), imposes a budget cap on all 42 clubs under its ambit. Each club’s budget is determined on the basis of their revenue, profits/loss, overhead, investments, and finally debt repayment. The cap has been put in place to ensure clubs’ sustainability.

The Athletic quoted Javier Tebas, the La Liga chief as saying: “When a club goes over its salary cap, it can only include players who represent 25 per cent of the savings.”

“If Barcelona sell a player for €100 million, they can only spend €25 million. If they want to bring in a player who costs them €25 million a season in salary, they must earn €100 million, either by transfer or salary reduction.”

This meant that Barcelona could not register any of their new signings — Sergio Aguero, Memphis Depay, Eric Garcia — for the new season. Messi, whose contract ran out at the end of last season, also could not be registered because his wages, despite a nearly 50 per cent reduction, would have seen Barcelona break their €160 million ceiling.

How PSG pulled it off
Almost immediately after Messi announced his departure from Barcelona, social media speculation began on his next destination. Very few clubs could afford him, but he was always likely to choose between two — Manchester City, coached by his former mentor Pep Guardiola, and French moneybags Paris Saint-Germain (PSG), bankrolled by a subsidiary of Qatar’s sovereign wealth fund. In 2017, the French powerhouse signed Neymar, Messi’s then Barcelona teammate, for a whopping €222 million. The following year, they spent a fee rumoured to be around €180 million to sign Kylian Mbappe.

These players are on rich contracts in Paris and, in an effort to balance their books, the club have only signed one player for a fee (Achraf Hakimi from Inter Milan) this year, choosing to bring in free agents Georginio Wijnaldum, Sergio Ramos, and Gianluigi Donnarumma.

When talk of Messi signing for PSG emerged, questions were raised about how they could afford him. Although the French club didn’t have to pay a transfer fee for the Argentina captain, they are paying the player a king’s ransom in wages. Goal reported that Messi signed a two-year contract with the club, with the option for a third, worth €35 million a season.

Covid-19 a blessing for PSG
While Covid-19 scuppered Barcelona’s plans to hold on to their talismanic star, it turned out to be a blessing for PSG. UEFA, the governing body for European football, announced in June 2020 that accounts for the year would be rolled into 2021 — a one-off gesture — and Covid-19 adjustments would be permitted.

This allowed the big clubs to disguise losses in an attempt to comply with Financial Fair Play rules.

The National Directorate of Management Control (DNCG) — the notoriously strict French football watchdog that monitors accounts of clubs in France — also delayed its “70 per cent rule” (similar to the one in Spain) to the 2023-24 season due to Covid-19.

According to L’Équipe, the early cancellation of the 2019-20 season meant PSG’s wage bill would have been roughly 100 per cent of its total revenue. Messi’s two-season deal runs out before the implementation of the DNCG’s “70 per cent rule” comes into effect, giving PSG the leeway to pull off his signing. The club also expect Messi’s arrival to open up newer markets and revenue streams that could cushion the sharp rise in wages.

Speaking at Messi’s unveiling, PSG President Nasser Al-Khelaifi echoed the sentiment, and suggested the club could release more precise figures behind the deal, adding that “the numbers we have” would shock people.

PSG would still need to offload some players to reduce their wage bill and have reportedly transfer-listed at least 10 first-team players. For the time being, however, the Parisian club are basking in the glory of pulling off the century’s most sensational transfer coup.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1From IPL to ISL, sports leagues in India to watch out for
2Fantasy Akhada: Kabaddi in demand as fantasy sport
3Bishnoi, Shami set up Punjab Kings’ five-run win over SRH in dramatic finish