The Messi Exit: A Legal & Financial Perspective
Behind the passions of the fans, tackled goals, swanky parties and brand endorsements, there is a lot that goes into structuring a football team/club, registration as well as the transfer of a player while maintaining sustainable finances.
In response to multiple financial irregularities in clubs such as Deportivo La Coruña, Racing Santander, Valencia, Real Zaragoza, Real Mallorca, Albacete, Real Betis etc., the economic control framework was introduced in 2013 to keep clubs financially afloat and maintain competitive sustainability.
At a later stage, FFP (Financial Fair Play) came into effect against errant clubs for breach of regulations. Spain’s economic control- La Liga controls the fire before it can damage (to an extent) by setting a limit to the amount a club can spend, thereby making it easier to stay within limits and preventing the creation of unsustainable debts.
What were the legal reasons for Messi’ s exit from Barcelona?
Recently Argentinean professional footballer Lionel Andrés Messi, popularly known as Leo Messi, decided to part ways with the Spanish football club FC Barcelona and join the French football club Paris Saint-Germain. Messi had been with the Spanish club for the last 21 years and their association came to an end on 30th June 2021, when they decided to move on.
Messi had agreed to a new five-year contract with Barcelona, however on 8th August 2021, the legendary football player announced his exit from the Spanish club, by signing a two-year contract with the French club Paris Saint-Germain, with the option of further extension up to a year. FC Barcelona announced that despite the agreement between the club and Messi, they were not able to honour the new contract due to the Spanish football league’s (LaLiga’s) financial fair-play rules.
What is LaLiga Financial Fair-play Rule?
Under the LaLiga fair play rule, each club is provided with a cost limit for each season, which includes the wages of the players, the coaching staff, physios, reserve teams, etc. Clubs have the flexibility to decide how the wages are distributed, as long as the overall limit is not breached. Factors taken into consideration for setting the financial cap are inclusive of expected revenues, profits and losses from previous years, existing debt repayments, and sources of external financing among others. In this case, the Catalan club could not accommodate Messi’s contract within the financial limit for the upcoming year, even though Messi was allegedly willing to take a 50% pay cut.
Considering the fact that Messi is Barcelona’s record scorer with 751 goals and 10 La Liga titles, Messi’s exit could mean a heavy blow for the world’s most valuable European football club.
A football clubs’ main revenue is generated from TV broadcasting rights, matchday sales, and commercial revenue which includes sponsorship contracts, merchandising sales, and digital content that the club creates. It is too early to say whether Messi’s departure will have an impact on how Barcelona performs in the ongoing season. However, there is no question over how Messi has played an important role in bringing laurels to Barcelona over the past few years, which has garnered a significant fan following, not just for the footballer, but also for the club. Thus, his exit may likely cause a dip in the viewership and fan following which will directly affect the Club’s revenue.
Typically for a footballer, his contract with any club would include basic salary, signing-on fees, royalty fees, and objectives based on games. Apart from these, some of the other key element included in a contract is his image rights, merchandising right and licensing deals, which form a major portion of any footballer’s gross income.
What are Image Rights?
Image rights are the expression of a personality in the public domain. For an athlete, it will include their name, photo, and likeness, signature, personal brand, slogans, or logos, etc. Generally, football clubs try to extract a greater percentage from the image rights of a player, in a club capacity as compared to their personal capacity. Club capacity is usually when the image rights of the player are used in connection with or combined with his name, colours, crest, strip, logos identifying him as a player for his club. Personal capacity is usually when the player is appearing in and conducting activities outside his role as a player at the club.
Any player leaving the club would have an impact on the commercial revenue generated by the club in the form of sponsorship contracts, merchandising sales as well as digital content. This would be especially notable for a player like Messi, whose personal brand value boasts over 130 trademarks. Messi’s trademark portfolio consists of mostly a single class trademark in his home country of Argentina, with others filed or registered in China, Brazil, EU, Malaysia, UK, Spain, Canada, Chile, and the US. The most common goods and services represented in Messi’s trademark portfolio are class 25 (clothing and footwear), class 28 (games, toys, and sporting apparatus) and class 9 (computer software). Apart from the above classes, class 18 has been filed in multiple applications.
The trademark consists of either the word mark MESSI/LIONEL MESSI or his logo. This means that Barcelona will no longer be able to use the footballer’s name or logo for apparel and merchandise sales, which will directly impact its revenue as most clubs collect a portion of the sales revenue. Also, Messi’s exit means that the club will have no control over his image rights to attract corporate sponsorships. Further, Messi’s huge online presence, with over 276 million Instagram followers, which is more than double of Barcelona’s official account (100 million), will have a direct impact on any advertising or publicity that the club may generate.
A player of Messi’s stature, brand, and persona is significant to any club. How the present scenario is played with the new club and how much impact Messi’s presence will bring to Paris Saint-Germain is yet to be seen.
A football clubs’ main revenue is generated from TV broadcasting rights, matchday sales and commercial revenue which includes sponsorship contracts, merchandising sales and digital content that the club creates. It is too early to say whether Messi’s departure will have an impact on how Barcelona performs in the ongoing season.