Why Spotify Got A Great Deal With Barcelona

Barcelona’s financial difficulties have been widely documented. Last year alone, the club lost almost $530 million, and they owe more than $1.5 billion. Lionel Messi left for PSG free, and now they have a salary cap of $100 million, which is around one-eighth of Real Madrid’s.

Around 70% of the revenue is the salary cap, which is utilised to pay players, coaches, youth teams, and other personnel across the club’s various departments and divisions.

Before the pandemic, Barcelona was making more than $1 billion a year in operating revenue, and despite being owned by 150,000 fans, the club is valued at $4.76 billion making it one of the most valuable clubs.

Last year, Joan Laporta came back as club president for a second time. And the club’s balance sheet is finally being fixed, which is more essential.

Spotify has signed a four-year sponsorship contract with the Catalan club and is estimated to be worth around $307 million, or roughly $77 million each year.

Catalonia’s venerable Camp Nou, the continent’s largest stadium, will be renamed “Spotify Camp Nou,” and Spotify will receive primary branding on Barcelona jersey design for men as well as women and training.

Spotify may have been willing to spend more. They had asked for details on Barcelona’s 350 million supporters. But only 1% had agreed to share their name, phone number, and email address with the club. The lack of fan data ultimately reduced the deal’s overall value.

While Barcelona is trying to get out of the financial mess, they would not want to part with the naming rights to their storied venue. But with the sword of $1.5 billion debt hanging over your head, you can’t afford to pass up $300 million when it comes your way.

• Looks like Spotify got a better deal.

The club had 3 sponsors earlier for a total of $77.5 million annually: Rakuten – $55 million for the men’s jerseys, Beko – $19 million for men’s sleeve and training shirt and Stanley – $3.5 million for the women’s jersey. For the same amount of inventory, Spotify will get naming rights to a renowned stadium too.

• Comparisons

Manchester United – $60 million from Teamviewer
Real Madrid – $75 million from Emirates
LA Lakers – $55 million for a 2.5 sq inch patch + naming rights to the stadium

• ROI

The ROI for Spotify is difficult to calculate.
In the last 14 years, it has got 381 million users, with approximately 40% (172 million) paying subscribers, across 184 markets.

Their freemium model offers ad-supported free channels and that accounts for 60% of their subscribers. Even if you were only interested in acquiring new customers, the cost of supporting their free product would have to be included.

As more brands shifts budgets from performance marketing to brand building, it can be expected that Spotify is also doing the same.

Reference: https://pitchfork.com/news/spotify-to-become-fc-barcelonas-main-shirt-sponsor/

https://huddleup.substack.com/p/fc-barcelona-a-307-million-deal-with?s=r