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Sport Management: FC Barcelona Case Essay

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Updated: Oct 17th, 2021

Executive Summary

Contemporary commercialization of sports has led to the emergence of modern sports icons like David Beckham, Tiger Woods, and Michael Jordan, who are adored by international audiences. Modern technological advances have emphasized the status of sports personalities and clubs who control major media outlets, hence they are much sought after by large corporations for their public image projections. Modern sports clubs have similarly evolved from their traditional amateur status to become affluent global enterprises that are structured much like the international conglomerates. The clubs and their affiliated players have adopted modern business practices and employed professionals to manage their sports enterprises. Spain’s FC Barcelona is one the leading football clubs which has adopted modern sports management techniques and marketing strategies to emerge as one of the world’s premier soccer clubs with a large global fan base.

Introduction

Football or soccer is considered the most popular sport in the world, with a fanatical following in most countries which usually unite and divide nations in equal measures. The previous soccer World Cup in Germany had an estimated total television viewership of 34 billion. Club football which is played in a majority of countries and across borders in tournaments and super-leagues also draws huge global television viewership and large stadium crowds in the top leagues of Europe and South America. To tap into the potential revenues generated, clubs have formulated various marketing strategies aimed at conserving their fan-base and attracting lucrative sponsorship deals from the largest global corporations who are also eager to market their products through the club’s kits and paraphernalia. The top European football clubs have also employed various tactics aimed at penetrating foreign markets in Asia and North America. FC Barcelona, the second biggest soccer club in Spain and one of the largest in the world, has a worldwide following on all continents. The club has adopted an aggressive marketing stratagem designed to make it one of the foremost football clubs in the world by enhancing its brand internationally.

FC Barcelona, founded in 1899, is regarded as the symbol of the Catalonian people in Spain and boasts of the world’s second-largest soccer stadium, which initially had a capacity of 120,000 spectators but now at 98,000. It is also one the most successful football clubs (only surpassed by its arch-rival, Real Madrid) in terms of trophies and cups won with a total of 16 Catalan league titles, four European Cup Winners’ titles, two European Champions leagues cups, two European Super Cups, 24 Spanish Cups, 18 Spanish leagues, and five Spanish Super Cups. The club also operates other sports segments in the form of basketball, handball, hockey, rugby, volleyball, cycling, and women football, among others. These affiliate teams have similarly enjoyed great success, having won a total of 829 titles between them. The club has a registered membership of 144,000 and a further membership in 1600 fan clubs spread around the world. This makes the club a major global soccer power as this following translates into high revenue, with the club ranked sixth by 2005(Davila et al. 2).

The club has not always had such glowing prospects and, by 2003, was on the brink of bankruptcy and in crisis. This had translated into a turnover of four couches from 2000 as it failed to capture any trophy under the presidency of Joan Gaspart. There were declining attendances in matches as supporters kept away due to frustrations from poor results. Efforts to stem the deteriorating fortunes by signing expensive, high-profile players only deepened the crisis as they were ineffectual even as they demanded high salaries. The election of a new president Joan Laporta heralded a change in fortunes as he engaged professional business managers led by the managing director Ferrian Soriano and deputy Marc Ingla. The two developed a business model based on their analysis of three ideals that: soccer was an upward expanding industry with an annual increment of ten to twenty-five percent growth; it had evolved from a local industry to become a global phenomenon, and the business could be segmented into two sectors of global and local clubs. Deciding that Barcelona belonged to the global segment, they developed a strategy named ‘Virtuous Circle’ whereby they would only engage the best players and coaches, ensure capturing of trophies, enhance their loyal fan-base, generate more revenues, engage the best players ad-datum.

The club had avoided the government decree of 1992 requiring football clubs to become incorporated entities as its finances were then good, and it had retained the traditional model of club ownership whereby no shareholding control by individuals was possible. Barcelona was therefore controlled by its club members or Social, who voted at assemblies for the prospective leaders in a democratic fashion. This Social paid an annual fee, 142 Euros in the 2005/2006 season, and had no particular inclination to benefit financially by being Social. Similarly, the 14 club management teams were expected to operate on a voluntary basis without remuneration. However, under Laporta, the management assumed full-time duties until the club had stabilized. The financial management team, who had inherited several short-term debts that were crippling the club, ensured their conversion to long-term instruments to free up the finances. Led by Soriano and Francisco Lopez, they negotiated for a bank loan and reduced deficits by hiring financial managers who were persuaded by a 25 percent variable compensation and reengineering through the use of IT. They also hired professional soccer managers recognizing their limitations in football management, hiring Sandro Rosell, an experienced soccer administrator, and Frank Rijkaard, a former star player, as the new coach. The technical side was to ensure the formation of a competitive team, while the business side ensured the requested top players were hired (Davila et al. 4).

Conspiring to cap the financial strain brought about by high salaries, the management led by Soriano ensured that the costs did not exceed 55 to 60 percent of their revenues. With professional soccer players having no salary cap, the strain of the huge wage bill was a constant financial drain on the club revenues. Barcelona management initiated a new system in which the player salaries were to be based on two changeable variables: forty percent on team performance; and 60 percent on individual performance, which was again dependent on the player appearance in games. The players were grouped into a three-tier system, with the top-level having a wage bill of six million Euros, the second level three million, and the last level at 1.2 million Euros. The previous management had players signed on long-term contracts that curtailed the freedom of the club to engage and dispose of unsuccessful players; the new management embarked on negotiating buyouts of the players and shipping them out to other clubs. Successful players had their contracts extended dependent on their performance on the pitch.

With the number of foreign players limited to four, European clubs were forced to develop youth programs to groom new players. The Bosman Decision ruling of 1995 extended this cap of foreign players to all non-European residents hence further restricting the recruitment areas. FC Barcelona, however, had an established youth system that recruited potential young players who were catered in the club’s sixty boarding schooling soccer schools. The other option was to recruit players from other clubs was an expensive exercise as it required compensating the player’s current club through a transfer fee that was steeply rising every year for the top-tier players. This competition for the elite players extended to the youth whose parents could negotiate on their behalf. The influence of marketing agents who negotiated the transfer and salaries of the key players also inevitably led to an escalation of the player movements across clubs.

Marketing Strategies

According to Davila, with a third of the club revenue being generated through ticket sales, FC Barcelona management had to strategize on measures to improve the prevalent declining match attendance figures (Davila el at 7). This was done through measures that saw the banning of hooligans from match attendance and extending ticketing through the use of autonomous retailers like travel agents. To capitalize on the subsequently enhanced match attendance and raise more revenue, the club raised ticket sales by 40 percent. However, the season ticket holders were allowed to re-sell their tickets at a 50 percent discount on particular match days in a Seient Lliure (or Free Seat) marketing initiative.

Another measure used was to increase the club membership or social to enhance a financial link with the club, hence meaning more revenue for FC Barcelona. Through a promotional campaign dubbed ‘The Great challenge,’ the club membership was raised from 110,000 in 2003 to 150,000 socis in 2006. The club decided to eliminate the joining fee and instead initiated an electronic post (email) and phone link with the social through the ‘FC Barcelona Supporter Services Office’ or OAB. Club merchandise products and services for the members were started in the form of mobile phone products, e-newsletters, special packages to club events, and preference admittance extended to cultural events in the City of Barcelona. This involvement with the club had an enormous potential market in Barcelona alone, as exemplified by the massive turnout of 1.2 million people to celebrate the club’s capture of the Spanish League trophy in the 2005/2006 season.

The aging stadium built-in 1957 was renovated to encompass modern facilities aimed at expanding commercial hospitality. This meant reducing the seating capacity, but it also saw the club renting out the stadium for corporate functions and having special attendances for corporate activities by the club’s key players. The marketing blitz was further expanded when the club also created a children’s cartoon network, Barcatoons, which included some accompanying merchandise and feature movies.

Media Rights

FC Barcelona, in efforts to enhance revenue, sought to increase the median income, which was generated mainly through the sale of television rights to the media houses. In the 2007/2008 season, acting through Audio-Visual Sports Company, they negotiated a fixed payout of 50 million Euros per season and a further 20 percent of all revenues generated through the pay-per-view feature as television rights. Sogecable, another sports marketing company that had an 80 percent claim on media rights, was granted television rights for all European club games (UEFA), whereby FC Barcelona received a seasonal fixed income of 12 million Euros and a further 50 percent income for any revenue beyond 24 million Euros. FC Barcelona, however, through a buyout clause, bought back the remaining Spanish contracts, which it subsequently resold to MediaPro for 125 million Euros per season.

The club also repurchased its rights for Barca-TV, which were, however, limited to featuring re-runs of ‘live games,’ lifestyle of their soccer superstars, club history, and past golden games. The channel proved to be a resounding success and by 2006 had subscribed to over 55,000 viewers with a significant lucrative overseas market which was distributed by TWI-IMG marketing firm in over fifty countries. Another marketing outlet, the emergence of mobile or cell phones as formidable marketing avenues, was evident in the enormous international demand for FC Barcelona merchandise, especially in the Asian markets. Similarly, the internet generated global audiences, and FC Barcelona revamped its website to attract more fans. The emergency of fantasy sports and video games further enhanced the potential markets for the club. Live games were now shown through phones and web streaming hence opening marketing opportunities in these forums.

The club’s deliberate promotion of being ‘more than a club’ philosophy was reflected in the larger-than-life image of the club in the city of Barcelona and its environs. Its promotion of other popular games into the international arena ensured the club’s image was further improved with the club’s teams in basketball and other games, matching the main soccer team in their prowess in the field. The club was therefore viewed as the lifeblood of the region, and its fortunes were crucial to the city of Barcelona as it was part of the city’s foremost tourist attraction and cultural heritage. This standing in the society was reflected in the loyal following, which was epitomized by the record club attendance in the vast Nou Camp stadium of 98,000 spectators hence generating a steady ticket sale revenue and large sale of seasonal tickets.

Sponsorship

FC Barcelona lags behind its rivals in terms of sponsorship deals. This is mainly due to its reluctance to sign shirt or logo sponsorship deals as the club’s social are opposed to the move. The social preference for keeping their club’s shirts ‘clean’ or without advertisement was, however, compromised as they agreed to feature the UNICEF logo albeit without any accompanying financial deal for the club. In Real Madrid, the club generates 64.3 million Euros with 2.5 million T-Shirts sold, and Manchester United had 39 million Euros with sales of 1.9 T-shirts while FC Barcelona only gained 14.7 million Euros. FCB Merchandising, an affiliate of Nike and FC Barcelona, handled these products even as the club also negotiated their soccer stars’ image rights using the FC Barcelona brand and individual sponsorship deals.

The importance of the international market for soccer clubs was pioneered by English clubs led by Manchester United. This marketing was more emphasized by clubs touring the regions which had large fan bases and playing exhibition matches there. The club’s successful sojourn in the Asian market persuaded other top European clubs to venture into this market, and Real Madrid, Barcelona’s rival in Spain, registered major successes in Asia and U.S. markets. FC Barcelona’s marketing arm led by Javier Munoa embarked on a campaign to enhance their potential, as exemplified by the huge viewership of the games with Real Madrid, which usually had 120 million viewers. The club has initiated measures aimed at entrenching its popularity in Asia and America by signing marketing deals through Titan Sports. Japan leads the way in terms with 45 percent of the European games being played there while China and USA have 20 percent each, and by 2005, Nike had the FC Barcelona shirt leading in sales. J-Sports distributed the Barca-TV and Zet-Project mobile phone content.

In 2006 the club signed a partnership deal with Tiger Beer for the South East Asia market, with fans being presented trips to watch live games at the Nou Camp stadium (Dynamics 1). Another deal involved the Dubai-based Emaar Education of UAE to train the youth on soccer skills in 2008 through Stryx and FCB Merchandising (Emaar Education 1). The Africa and Latin America regions, although having a large fan base, had little impact due to their limited purchasing power as compared to the Asia and U.S. markets. In 2006 FC Barcelona signed a deal with America’s Major League Soccer (MLS) to six games in five years and handling of sponsorship rights (TRUSDELL, BRIAN 1). The U.S. market, with its tremendous purchasing power, has been a hunting ground for the top European clubs, and Barcelona, which has emerged as major soccer power with some observers terming it the world’s most popular club in 2006 in terms of internet hits, intends to exploit the market through its partnership with the MLS (club 1).

Conclusion

FC Barcelona has seen a major turnaround since the election of its president Joan Laporta in 2003. The club’s ability to sustain financial success through an aggressive marketing strategy has contributed tremendously to this by engaging modern business acumen rather than the archaic traditional football politics that had almost ruined the club. Its enviable large royal fan base has also contributed to the success, while the strategy adopted by Soriano and management in the Virtuous Circle has been a resounding accomplishment. The club, however, lags behind in its obstinate non-exploitation of sponsorship of kits logo as exemplified by its rivals in Spain and England, thereby foregoing large revenues in shirt sales. However, with the sound financial and marketing strategy currently employed, the club has a bright future as it continues to shine both on the soccer pitch and business shrewdness.

Work Cited

  1. Antonio Davila, George Foster and Jaume Llopis. “Football Club Barcelona: Globalization Opportunities.” Stanford Graduate School of Business (2007): 2.
  2. club, Barcelona declared the world’s most followed. “European Union Football.” 2006. euFootball.BIZ.
  3. Dynamics, Football. “FC Barcelona makes marketing moves into Asia.” 2006. Asian Football Business Review.
  4. Emaar Education. “Emaar Education partners with FC Barcelona.” 2008. Emaar Education partners.
  5. TRUSDELL, BRIAN. “FC Barcelona inks MLS deal to tour U.S.” 2008. THE ASSOCIATED PRESS.
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