December 13, 2010 12:08 am

Football, funding and MBAs

 
 

When arch-rivals Real Madrid and Barcelona clashed in their first football fixture of the 2010-11 season, there was more at stake than the top slot in Spain’s premier league.

The match, between the world’s two wealthiest clubs with combined revenues last year of more than €800m was played at a sold-out Camp Nou stadium in the Catalan capital. It was watched by an estimated 400m people worldwide, generating millions of euros in television rights, stadium tickets and merchandising.

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That Barcelona gave Real Madrid a 5-0 drubbing attests to the superiority of one of the best sides in the club’s 121-year history. However, parleying this victory into higher revenues, reduced losses and a smaller debt pile will depend on whether the new, youthful board and management teams, with their raft of business degrees, deliver on the promises made when they took control of the club in July this year.

In common with many other clubs, profligacy, sky-high transfer fees and questionable business decisions during the credit boom have driven Barcelona into the red. It has been left with net debt of about €400m ($530m).

The new guard has promised to double cash flow and retire about €30m in debt by the end of the current season, drastically cutting gearing in the process. They showed early progress on Friday with a new £125m ($198m) shirt sponsorship deal with the Qatar Foundation. Most importantly they say they can do this without selling the assets that have made the club a world-beater on and off the field.

“We have to be very careful that our austerity drive does not affect the team’s performance, which is where Barcelona gets its huge capacity to generate cash,” says Javier Faus, vice-president, finance and strategy,

Most experts agree that while overspending on players, travel and other luxuries often reflects pressure on club presidents from fans and smaller circles of influence to win trophies and stoke fans’ fervour, it is up to boards and senior management to keep passion in check.

The art of producing on-field excellence without busting the bank is what makes demands on football club managers more akin to those at Walt Disney than a sports organisation.

“Just like Disney, you’ve got your stars, your world tours, the box office, the television rights, the T-shirts and all the other merchandising,” says Marcel Planellas, of Esade business school in Barcelona and co-author of a 2006 case study of the club.

Football razzmatazz is a relatively recent phenomenon. Clubs used to depend on stadium admission tickets for most of their income, but this has changed with the explosion in globalised, pay-TV formats over the past two decades. Broadcast rights are now the biggest money-spinner and footballers have become multimedia celebrities. The subsequent, seemingly insatiable appetite for club strips and other merchandise has produced the need for large, sophisticated marketing structures and personnel.

Reflecting this, executive and management teams at the world’s big-earning clubs are becoming better qualified and more professional.

Barcelona’s current board is liberally peppered with graduate and postgraduate business degrees, starting with president Sandro Rosell’s business administration studies and MBA from Esade. Supporting him are fellow Esade MBA and business graduates Mr Faus; Javier Bordas de Togores, director of sports; Joan Bladé, another sports director; Jordi Moix, an economic and strategy director; and Jaume López, who led Mr Rosell’s campaign for the presidency.

Of the remaining 15 board members, seven have graduate business degrees and MBAs from Barcelona-based schools such as Iese, EADA and the Universitat de Barcelona. Mr Moix also sports an international management degree from Thunderbird School of Global Management, while Mr Faus holds a master's degree in financial law from Georgetown University.

The revolution in sports management at Barcelona and its rivals can also be traced to the tightening links between Spain’s business schools and the clubs. Esade has produced two case studies on FC Barcelona, while Iese professor José Luis Nueno is the co-author of a Harvard Business School case study of Real Madrid.

Sandalio Gómez, academic director of Iese’s Centre for Sports Business Management, says demand for specialist courses will only grow as football and other field pursuits become increasingly globalised and complex in their drive for profits and trophies. “As the economic dimensions of clubs expand, so, too, does the need for professional management,” he says.

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