The ignominious departure of Lionel Messi, one of the greatest footballers in the world, from Barcelona, one of the greatest football clubs in the world, was a disappointment. No question on Messi’s ability, but a serious question on his pay.
I am not a football fan and this article is about investing rather than football, but there are some interesting aspects to football club finances, so bear with me.
About 10 years ago, when the Financial Fair Play rules were introduced, my training company Behind the Balance Sheet conducted an analysis of the Premier League clubs’ finances over the previous 10 or so years. We knew that there was a group of superclubs and the rest. Most clubs simply passed on increases in broadcast revenues to the players in the form of wages; hence, the differential between the clubs’ financial performance came down essentially to whether they invested in players wisely. Most clubs and managers paid too much for players and sold them at a loss.