FC Barcelona Raise $132m for Web3 Venture

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Introduction 🔌🔧

‘Bear markets are for building’ is a well-trodden expression by Web3 folk.

In a week when PayPal introduce a stablecoin, DraftKings Reignmakers do more volume in a week than most blockchains, I see now that this is more than just a cliche saying. Consumer-based crypto applications, in finance and in culture, are coming simultaneously.

This week however I’m focusing on the biggest sports Web3 headline of the week; FC Barcelona Raise $132m for Web3 Venture

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FC Barcelona Raise $132m for Web3 Venture

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In football (soccer), FC Barcelona are considered one of the biggest brands in the world.

And yet, they are in financial trouble and have been over the last few years.

Covid hit them hard, and La Liga have fairly strict rules on revenue vs spending.

Add that to Financial Fairplay considerations in Europe, and there is very little wiggle room for them.

But still, like many other football teams globally, FC Barcelona have been able to manoeuvre in ways that allow for some ‘accounting freedom’.

Barcelona have announced several ‘financial’ levers over the last few years to try and be more flexible from a financial perspective... so much so that they’ve become a meme to many football fans.

“How can they keep spending money?!”

“What lever will they pull next?”

This newsletter covers:

🌐 Breaking down the headline💰 FC Barcelona’s Web3 Journey🤔 This latest move and what it means

🌐 Breaking down the headline

The headline is big and certainly grabs attention - but what does it actually mean?

The press release announced two financial deals:

1. A €120m ($132m) deal for a 29.5% stake in its Web3 entity Barca Vision from listed LIBERO football finance (€40m) and private investors advised by NIPA Capital BV.

2. FC Barcelona plans to list Barca Media in a U.S. SPAC deal valuing the entity at $1 billion.

Barça Media is a company made up of the following subsidiaries: 

1. Barca eSports: The club’s eSports division

2. Barca Vision: The Web3 and metaverse division. This includes all blockchain-related partnerships and also virtual world partnerships such as Roblox.

3. Barça Studios: The development studio which creates and licenses audio/video entertainment (other than broadcast).

So Barca Media, the Hold Co, are looking to SPAC at a $1bn valuation.

Barca Vision, the Web3 business, are the company who have sold 29.5% of their Web3 stake for $132m. At that investment, you could value Barca Vision at close to $450m.

Joan Laporta, Barcelona president was quoted saying:

In August 2022, Barca Vision raised €200 million, from Socios and Orpheus Media for a total combined stake of 49%.

Half of the capital in this raise (€60m of the €120m) has been used to partially buy out Socios and Orpheus, the investors in Barca Vision in August 2022. 

According to regulatory filings, even with the divestment, both Socios and Orpheus, as well as new investors LIBERO and NIPA, will all become shareholders of the Hold Co.

Essentially, by buying a stake in the Web3 business, all four of these parties become part of the proposed, publicly listed Hold Co. Barca Media.

This was announced on the Friday before the La Liga campaign began, allowing Barcelona to register players for their season opener against Getafe.

The Web3 financial lever, ensuring Barcelona remain competitive for the 2023/24 season.

💰 FC Barcelona’s Web3 Journey

Barcelona have had some history with Web3 offerings and partnerships, but perhaps not as many as you might think considering their financial position and brand size:

• February 2020: FC Barcelona partnered with blockchain firm Chiliz to launch a crypto token called Barça Fan Tokens ($BAR). The initial sale of these tokens took place in June 2020. The sale of fan tokens netted $1.3 million in revenue.

• September 2021: Barcelona join Sorare as part of a league-wide launch with La Liga.

• July 2022: FC Barcelona launched its first NFT, an audiovisual digital artwork recreating Johan Cruyff's legendary stadium moment on December 22, 1973. The first piece was sold at Sotheby’s for $693,000. The first part of a 10-part ‘masterpiece’ collection.

• December 2022: FC Barcelona signed a three-year partnership with WhiteBit, a cryptocurrency exchange.

• May 2023: FC Barcelona launched its inaugural NFT collection with Plastiks, called "Unleash Your Passion". The collection featured 3,000 animal-themed NFTs at a price of $30 each, with the club stating that the sales would contribute to removing 35,000,000 kilograms of plastic from the planet.

• June 2023: Empowerment: FC Barcelona collaborated with World of Women to release the second NFT in the Masterpiece collection, titled "Empowerment". This sold for ~$300,000.

Compared to some sports teams, especially ones with similar brand strength, I was quite surprised by how few Web3 partnerships Barcelona have had over the years.

🤔 This latest move and what it means

The TL/DR on this move is that it is one to facilitate competitiveness on the pitch for FC Barcelona.

They have a huge wage bill and have spent big on recruitment over the years — and as mentioned in the introduction are constantly looking for ‘financial levers’ to pull as a way to ensure they can attract, and keep the best talent.

Barca Media is split into three subsidiaries, but what interests us on Sporting Crypto of course is the Web3 element: Barca Vision. 

Barca Vision lists the following activities and responsibilities:

• Creation and Monetization of Utility NFTs

• Metaverse, Web3, VR & AR projects

• Virtual & physical events in the Metaverse, or at the stadium e.g Concerts

Revenue models will include:

• NFT sales

• Licensing

• Advertising & sponsorship

• Ticketing & Hospitality

Digging deeper into the SEC filings for Barca Media’s potential SPAC, the slide on Barca Vision outlines why they see Web3 as such a big potential opportunity.

The slide highlights Top Shot’s sales, instead of the far more relevant LaLiga Golazos numbers.

LaLiga Golazos is the La Liga equivalent product to Top Shot, but has only driven $4.09m in sales to date. A fraction of the NBA (Top Shot) and NFL (ALL DAY) products respectively.

It also highlights Sorare, who have done astoundingly well to date and even through this bear market, and the value of the cards is largely correlated to the utility of being able to play with them in fantasy games.

Barcelona have already given those two licenses (Web3 fantasy and Moments) up, and therefore it feels quite irrelevant to mention them.

This leads me to the hard numbers, which highlight revenue numbers based on conversion rates of between 0.75% and 1.5%, at $15.00 to $30.00, per social media follower.

Yes, per follower, not per fan.

Understandably, football teams are looking at their audiences in a far more global way, but the numbers seem extremely high on both conversion and customer value points.

I know this encompasses all of Barca Media but I still think it’s very optimistic. 

Moving onto the summary of risk factors at the bottom of the filings, they include this bullet point:

Barca Produccions, S.L. are a company wholly owned by FC Barcelona, who will be part of Barca Media, the prospective new public company (via SPAC).

Bridgeburg Invest S.L. is the name (on paper) of Barca Vision, the entity that holds Web3 rights.

Therefore, there is still money outstanding from the deal done in August 2022 that saw Orpheus Media and Socios invest €100m each in Bridgeburg Invest, S.L.

According to the SEC filings from this week, the money owed is €180m in cash by Socios and Orpheus Media.

To complicate matters further, as mentioned earlier half of the capital raised this week (€60m of the €120m) has been used to partially buy out Socios and Orpheus, the investors into Barca Vision in August 2022.

Even with that in mind, however, if that cash owed doesn’t come into the business, then Barcelona the football club itself could be in trouble.

🧠 Concluding Thoughts

This is not a win for Web3, but a win for financial engineering in football.

Barcelona have been at the edge of financial doom for years now, after being adversely impacted by the Covid pandemic.

Instinctively, the valuation of Barca Vision seems absurd.

$132m for essentially 29.5% of Barcelona’s Web3 rights in perpetuity seems ridiculously expensive.

But I suppose there is value to every investor at a specific time horizon. 

And Barca Vision does also hold the AR / VR and Metaverse rights (I guess rights?!).

If these rights are in perpetuity, which I think they are, then there could be good value very long term for investors. I’m a firm believer that Apple Vision Pro will break the seal that Zuck has been thrashing at so hard for years with Quest and there could be a lot of value there. Additionally, Roblox and Fortnite continue to be money printers. If these are on the table for Barca Vision to pursue, one could make the case that there’s some ROI to be seen.

On the pure blockchain-related content side of things, they will struggle massively.

The demand for fan tokens has fallen off a cliff and so has the demand for NFTs, sports NFTs included.

Dapper’s La Liga product, as previously mentioned has garnered $4.1m in all-time sales from just 6.5k unique buyers — and that’s for the entire league, so quite what Barcelona are benchmarking their potential Web3-related success against I’m unsure.

From a pure football fan perspective, I’m quite concerned that Barcelona’s future potentially hinges on leveraging Web3 to make a lot of money. And actually, there could be hugely detrimental tailwinds should the cash they’re owed not be returned, all because of a very volatile nascent market.

What Barcelona have done here is leverage a lot of ‘future cash’ for ‘now cash’ and also ‘future cash that might never come’.

There could be a worst-case scenario which could cause them short and long-term pain:

1. Their partners can’t pay back what they owe.

2. Barca Vision is worth a lot of money eventually, and Barcelona is encumbered by it financially because they don’t own the whole pie.

For now, however, these are just numbers on a spreadsheet.

And somehow Barcelona continue shifting cells left, to right and manoeuvring them in a way that lets them continue sitting at the most prestigious table of world sport.

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