Fcbarcelona

FCBARCELONA

A vision of the football industry and the case of the

FC Barcelona

February 2006

http://migre.me/eohac


Page 2


The football industry: The last 10 years

Current challenges

FCB Revolution 2003-2005

The next decade

INDEX









Page 3


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









Page 4


CLUBS REVENUE GROWTH

Extraordinary growth... With lessons learned and challenges ahead.

Extraordinary growth... With lessons learned and challenges ahead.

Chelsea +17% +28%

R.Madrid +13% +20%

FCBARCELONA +16% +30%

22

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 03-0598-05Million €

Realstatedeal New

owner

22 24 2936

48

6577 81

100 96 98104

129135

169180

210

25

234251

246

259

6268

49

25

8775

119

169

208

123139

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

121118

217

143

90

134

221

M.United (Est.) +9% -1%









Page 5


SOURCES OF REVENUE: 6 BIGGEST CLUBS · 2004/05

72,2 55,1

82,2

124,0

62,8

71,782,0

138,0124,4

88,0

79,0

102,583,7

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

221234 229

275,7

208








http://arabic.cnn.com/2002/sport/11/12/OEGSP-MANUTD-BREAK-EA2.reut/story.manchester.united.jpg.jpg


Page 6


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.

As 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









Page 7


PROFIT & LOSS: 6 BIGGEST CLUBS · 2004/05

221234

276

208

34

-13

18

246229

-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








http://arabic.cnn.com/2002/sport/11/12/OEGSP-MANUTD-BREAK-EA2.reut/story.manchester.united.jpg.jpg


Page 8


STRONG RELATIONSHIP BETWEEN SALARIES PAIDAND 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.









Page 9


… BEST PLAYERS CAN ONLY BE PAID BY THE BIGGEST CLUBS

Source: ladbrokes.com, 01.08.05Source: eurobet.com, 01.08.05

Club size matters.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)

RotherhamReading

Preston

Plymouth

ArsenalAston Villa

BarnsleyBirmingham

Blackburn Rovers

Bolton Wanderers

Brentford

Burnley

Bury

Cambridge

Coventry

Derby

Everton

Huddersfield

Leeds

Leicester

Liverpool

Manchester United

Newcastle

Oldham

Peterborough

ScunthorpeSheffield 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









Page 10



Current challenges


The next decade

INDEX









Page 11


CURRENT CHALLENGES

“Product management”: Players and team performance

Revenue growth and globalization

Cost control and value chain management

Industry organization and regulation









Page 12


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









Page 13


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…









Page 14


CURRENT CHALLENGES





Players compensation- Fixed salaries and bonuses

Transfer prices Agents New owners

- Inflation, market disturbances









Page 15


CURRENT CHALLENGES





FIFA / UEFA / National Associations / Leagues / G-14 / Clubs Calendar, release of international players, revenue

distribution… The “Charleroi Case”









Page 16



Current challenges


The next decade

INDEX









Page 17


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 2REVOLUTION: “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









Page 18


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 2003Business plan









Page 19


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 34,347,6

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 ju

l

sep

nov-

04

ene-

05

mar

-05

may

-05

jul-0

5

0

200

400

600

800

1.000

1.200

1.400

1.600

23%

77%

SpainRest of world

FCB – Madrid is viewed by120 million people

+37%

+33%

+58%

+35%

+16%

-44%









Page 20


MANAGING COSTS…

109,3

85,295,6

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%

RevenuesSalaries (football + other sports)Salaries / Revenues

70%

55%

Maximumrecommended

Optimal

EVOLUTION OF PLAYER COSTS

FIXED

64%

INDIVIDUALBONUS

18%

TEAMBONUS

18%

SALARY STRUCTURE









Page 21


… AND OBTAINING PROFITS

8775

85

119 110

139123

169

208

240

6

-15 -14

10

-38 -45-72

6,718 19

96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/0505/06

(estimated)

Revenues

Profit / Loss

The Club consolidates its revenue growth with a cost structure that produces profits in a sustainable way.

The Club consolidates its revenue growth with a cost structure that produces profits in a sustainable way.









Page 22


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-financingits growth.

The club achieved its transformation self-financingits growth.









Page 23



Current challenges


The next decade

INDEX









Page 24


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

… whilebeing closer

to people

Furtherglobalizationand growth…









Page 25


KEY SUCCESS FACTORS FOR CLUBS OVER NEXT YEARS?

CLUBS KEY SUCCESS FACTORS OVER THE NEXT DECADE

Attractive game

Sportingsuccess

Governance & management

Club’s cityimage

Fan baseattraction

Globalaudience

Players’image

Financial size& strength

SOCIAL &

COMMERCIAL

FACTORS

MA

NA

GE

RIA

L

FAC

TOR

S

SPORTING FACTORS

In a globalized world few,

clubs will be competing for

a global market









Page 26


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

Sportingsuccess

Governance & management

Club’s cityimage

Fan baseattraction

Globalaudience

Players’image

Financial size& strength

4

4

4

3

4

3

3

3








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