Shirt sponsorship ends 110-year tradition for FC Barcelona

Even as the kickoff looms, a long line of customers winds its way to the checkout. On March 3 in Barcelona in Spain's northeast, replica uniforms are flying off the racks at FC Barcelona's official club shop, adjacent to their home stadium, Camp Nou.

One of the most popular items are replicas of the number 10 shirt worn by Lionel Messi, who has won FIFA's World Player of the Year award for three years running.

From this season, a name that will feel out of place to many fans is emblazoned across the chests of the team's shirts: "Qatar Foundation."

This organization from the small Middle Eastern nation of Qatar has become the first commercial shirt sponsor in the history of this club, which was founded in 1899.

Barcelona is the current world champion, having won the FIFA Club World Cup in 2011. From the 1980s, most clubs in Europe have sold the sponsorship rights for their uniforms in order to bolster their finances. However, Barcelona consistently refused to follow suit.

When Spain was under the oppressive rule of dictator Francisco Franco, the use of the local language Catalan was forbidden, so the only place where citizens could speak it uninhibitedly in a public venue was FC Barcelona's stadium. Today, the club continues to be sustained by the annual membership fees of its 180,000-strong supporters, called "Socios." Its pride as a club owned by the citizens of the Catalonia community was the reason it had previously refused to allow sponsors' names to appear on their shirts.

But now, the Qatar Foundation has signed a five-year sponsorship deal with the club worth 30 million euros (3.17 billon yen, or $39.2 million) annually. Even so, former star player and successful team manager Johan Cruyff publicly criticized the move from before the deal was signed. "Sullying the shirt is preposterous. Are we going to throw away our independence for a sum that amounts to less than 10 percent of the club's revenue (around 450 million euros)?"

"No to Qatar!" Supporters bearing protest banners began appearing in the Camp Nou stands.

FC Barcelona President Sandro Rosell made his case to the Socios. "If you're all against it, we won't sign the contract. However, there is the matter of the massive debt left by the previous president."

Rosell emphasized the club's precarious financial situation, and succeeded in gaining the approval of the Socios at the supporters club's general assembly last autumn.

Debts of 400 million euros are said to have accumulated during the reign of former president Joan Laporta. Some 300 million euros were spent to recruit just under 40 players over a seven-year period, including Swedish international Zlatan Ibrahimovic for 71 million euros. Before Laporta's appointment, Barcelona's fortunes on the pitch were on the wane, having failed to win the domestic league for four seasons. They were overshadowed by their sworn enemy Real Madrid, which had gathered an array of star players, including David Beckham, and were hailed as "Galacticos."

At the club's training ground, I met Migel Espel, 73, who has been a Socio for close to half a century.

"Fifty years ago it would've been unthinkable, but these days the club can't exist on supporters club fees alone," he said.

Barcelona prides itself on having cultivated over half of its first team players, such as Messi, who moved to Spain from Argentina in his youth, and Spanish internationals Xavi (Xavier Hernandez) and Andres Iniesta. Their services were not acquired for huge transfer fees.

Nevertheless, the combined salaries of these three alone are comparable to the annual sponsorship fee paid by the Qatar Foundation.

"Without them, we can't maintain our strength," says Espel. "If we don't spend money freely, we won't be able to compete with the likes of our nemesis Real Madrid and Chelsea, who want to snatch our players away from us."

Boosted by the soaring value of natural resources, Middle Eastern money is increasingly flowing into European soccer. Qatari interests have also bought controlling stakes in Malaga of Spain and Paris Saint-Germain of France. Dubai's Emirates airline is a shirt sponsor for major teams such as Arsenal of England and AC Milan of Italy. Millionaires and billionaires from the United States, Russia, China, India and elsewhere are also investing heavily in the sport. Even a club such as Barcelona that had long adhered to its principles was unable to resist the current of the times.

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Bringing matches forward to cater to audiences in Asia

A major source of revenue for soccer clubs other than shirt sponsorship is the sale of match broadcast rights to television networks, and the competition to obtain these rights is growing in intensity.

In the Spanish soccer league, Liga Espanola, matches traditionally kicked off no earlier than 5 p.m., and some even started from 10 p.m. From this season, Sunday matches are being pushed forward with the introduction of 12 p.m. and 4 p.m. kickoffs.

In this country where people traditionally eat lunch from around 2 p.m. before taking a siesta, matches that kick off at noon feel like morning games for players and fans.

Mediapro, the company that acts as Liga Espanola's agent in selling broadcast rights to approximately 200 countries and territories around the world, has a clear explanation for this.

"It was done to cater to the Asian market," says broadcast rights manager Oliver Seibert. "There were a great many requests from Asian networks to hold games earlier."

For example, the time difference between Spain and Shanghai and Hong Kong during winter is seven hours. The most attractive way of presenting soccer on television is through live broadcasts where the result is not known in advance, but a 9 p.m. kickoff in Spain equals a 4 a.m. pre-dawn broadcast in Asia. By moving start times back to noon, matches can be shown in Asia at 7 p.m. during prime time, which is an ideal time slot for simulcasts.

According to calculations by major accounting firm Deloitte LLP, sales of television rights account for over half of overall revenues in the powerful English, French and Italian leagues, which were among the first to adopt noon kickoffs. Liga Espanola boasts two of the world's top stars in Messi and Real Madrid's Cristiano Ronaldo, who earn annual salaries in excess of 3 billion yen, so the aim of the time shift is to achieve a significant increase in the proportion of income derived from television rights sales, which at present account for 40 percent of the league's total earnings.

However, as revenues from television rights sales increase, there are growing concerns in Spain that the gap between rich and poor clubs will widen. There are 20 teams in the top Primera Division, but over the last seven seasons the league championship has been won by only two clubs, Barcelona and Real Madrid. The power chasm between them and teams further down the table is too vast to bridge. Television rights are sold individually by each club, so the top two teams enjoy close to a 50 percent share of overall revenue.

The Spanish economy is currently in a severe state of disrepair, with an unemployment rate of more than 20 percent, so it is not uncommon for small and midsize teams to lose their sponsors. As a result of increases in players' salaries by the revenue-rich teams at the top of the league, lower-placed clubs who fear that their best players will be poached are forced to pay salaries that are beyond their means and are hitting a wall financially.

Before the current soccer season began, the Association of Spanish Footballers (AFE) protested to the league about a total of 50 million euros in unpaid salaries owed to more than 200 affiliated players. The start of the season was delayed by one week.

"Apart from the big two, all clubs are experiencing financial difficulties," says Jose Maria Gay, a professor of accounting at the University of Barcelona and a soccer business expert. "The only way to restore sound management is to reduce players' salaries."

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Memo: Soccer clubs' income and expenditure

Professional soccer clubs' revenue can be broadly divided into three main sources: sales of match broadcast rights to television networks; sponsorship deals including merchandise sales; and gate receipts including supporters' club fees.

In FC Barcelona's case, only 25 percent of its 450,700,000-euro income for the 2010 season (from July 2010 to June 2011) was generated by earnings from ticket sales and supporters club fees. Revenue from sponsorship deals accounted for 34 percent, while broadcast rights sales brought in 41 percent. Sponsorship income looks to increase considerably from the 2011 season as a result of the deal signed with the Qatar Foundation.

On the other hand, player salaries and other personnel costs represented around 60 percent of the club's expenditures. From a management perspective, the extent to which such costs can be prevented from increasing in comparison with revenue growth is vital. However, whereas the Spanish league's overall income has risen by 220 percent over the last 10 years, expenditures on personnel have ballooned by 250 percent, creating a major dent in profit margins.

Of the five major European soccer leagues, the only one where revenue growth has outstripped a rise in personnel costs over the previous 10 years has been the German Bundesliga, where growing attendance is supporting efficient and readily profitable management.