The Political Economy of Football V2

The governance arrangements in the Bundesliga have long drawn rather uncritical admiration from fan groups in the UK, but I take a more sceptical view of the German Sonderweg in my book Political Football.  (The publisher has now gone out of business but cheap pre loved – or not – copies are relatively available, or I can send an electronic copy free). Looking at Bayern Munich, the authoritative Swiss Ramble notes that Bundesliga clubs are actually less transparent than their counterparts elsewhere.    Polite requests from his Zurich fastness for more information have produced little response. What follows are the main points from the Swiss Ramble’s analysis of Bayern, much more analysis is available on his Substack page. Unlike many other clubs, which rack up enormous losses in the pursuit of sporting success, Bayern have also performed very well off the pitch, so this article will delve into their finances to try to understand what drives their “Bavarian model”. ...

This week the FT revealed that Bayern Munich had recently held talks with private equity firm EQT about a possible stake sale. While those discussions appear to have fizzled out with the departure of Bayern CFO Michael Diederich, it is nonetheless a sign of the times. German football is largely immune to foreign ownership. The 50+1 rule prevents the majority of clubs from being controlled by anyone other than members, while more general hostility to private equity (expressed through fan protests) has derailed past efforts to bring investment in at the league level. Bayern already has a group of private minority shareholders. Adidas, Audi and Allianz each own just over 8 per cent of the Bavarian side. Members are guaranteed control of at least 70 per cent, leaving 5 per cent for the club to play with. Selling such a little slice at a valuation of about €4bn would have brought in around €200mn, a nice boost to the coffers as the German team looks to keep up with its w...

Germany’s leading football club Bayern Munich held talks this year with EQT over selling a minority stake to the private equity firm, in a deal that would have reignited a heated national debate over the merits of private capital firms investing in football. Negotiations fell apart when Bayern’s chief financial officer Michael Diederich, EQT’s contact at the club, left in the summer to become co-head of Deutsche Bank’s corporate banking business, according to three people familiar with the matter. German football fans have historically been highly critical of outside investment into the sport, with widespread protests prompting the country’s football league last year to call off talks over a potential private equity investment. With a few exceptions, clubs in Germany are subject to the ‘50+1’ ownership rule, which stipulates members must hold majority voting rights, in effect blocking commercial entities from gaining control.   The rise of RB Leipzig, a German club whose r...

Fifa has finally answered one of the key questions around the upcoming relaunch of the Club World Cup — how much it pays. On Wednesday the competition organiser revealed its prize money schedule, with payments based both on turning up and actually winning matches.  Considering the rates were negotiated with the European Club Association, it’s perhaps little surprise that the bulk of the purse is heading to the top European clubs. Some are promised $38.5mn before a ball has even been kicked, with potential earnings for winning the tournament of $125mn when ends on July 13. Fifa has made a lot of noise about the Club World Cup being a chance to spread some of football’s wealth beyond Uefa’s sphere of influence. The month-long competition will feature 32 teams from around the globe who qualified largely based on performance in regional tournaments. Yet the financial impact will be felt differently depending on where a team hails from.   Assuming — perhaps unfairly — that Au...

In contrast to the relatively poor form on the pitch last season, Bayern’s finances remain rock solid, as can be seen by looking at their 2023/24 accounts.  Bayern’s pre-tax profit increased from €54.5m to €62.7m, as recurring revenue rose €21m (3%) from €744m to €765m and profit from player sales slightly improved from €104m to €106m. Both of these established new club records. This was partially offset by growth in operating expenses, which climbed €21m (3%) from €795m to €816m. Profit after tax was also up, rising from €35.7m to €43.7m, which was the second best result in Bayern’s history. The club justifiably described this as “an extremely pleasing result”. All three revenue streams were up, led by match day, which rose €10m (9%) from €121m to €131m, though there was also decent growth in broadcasting, which increased €9m (4%) from €204m to €213m. Commercial was only slightly higher, rising €2m (1%) from €419m to €421m, though this remains the most important revenue stre...

Bayern Munich have reported the second best financial results in their history with record turnover and zero debt:  https://www.bavarianfootballworks.com/2024/12/8/24316134/bayern-munich-agm-roundup-record-revenue-and-more

From a financial perspective, 2023/24 was “an exceptionally successful year” for Borussia Dortmund, as pre-tax profit more than quadrupled from €11m to €49m (€44m after tax). Revenue shot up €95m (22%) from €425m to €520m, a new club record and the first time that Dortmund have broken through the €500m barrier. This was further boosted by profit from player sales also increasing by €25m (35%) from €73m to €98m. This was partially offset by significant growth in operating expenses, which rose €92m (19%) to €572m. However, interest swung from €6m payable to €3m receivable. Broadcasting was the star of the show, rising €49m (31%) from €157m to €206m, though commercial also significantly increased by €33m (15%) from €217m to €250m. Match operations was up €9m (21%) from €44m to €53m. Unlike many other leading leagues, German clubs very largely operate sustainably with no fewer than 13 of the 18 Bundesliga clubs posting a profit. The losses at four of the other five clubs were less ...

The Champions League continues to be a fantastic money-spinner for the elite clubs, even before the 21% increase in revenue next season when the new “Swiss model” will be implemented, so the gap with the “also rans” looks likely to further grow. Five clubs have earned more than €100m from this season’s Champions League, namely Real Madrid €133m, Paris Saint-Germain €121m, Borussia Dortmund €120m, Bayern Munich €119m and Manchester City €109m. They are closely followed by three clubs “in the nineties”: Barcelona €97m, Arsenal €93m and Atletico Madrid €92m. As would be expected, the two Champions League finalists have earned the most prize money: Real Madrid €66.5m and Borussia Dortmund €59.2m. The Spaniards have received more than the Germans, due to a far better record in the group stage, where they won all six games. They were followed by semi-finalists Bayern Munich €48.9m and Paris Saint-Germain €40.6m, then the quarter-finalists: Manchester City €38.5m, Atletico Madrid €34.2m...

UEFA’s final distribution figures for club tournaments last season show that The Premier League had comfortably the highest TV money in total with €461m, a long way ahead of the Bundesliga €401m, followed by Serie A €393m. Possibly a surprise to some, La Liga were only fourth highest with €376m after a fairly ordinary season by its high standards, but they still earned nearly twice as much as Ligue 1 €201m.  Portugal’s Primeira Liga earnings of €177m were higher than Ligue 1’s €153m. While it was a relatively poor season for Spanish clubs on the pitch, their excellent record in Europe meant that they enjoyed the highest UEFA coefficient payment of €134m, well ahead of the Premier League €116m, the Bundesliga €103m and Serie A €91m. Five clubs earned more than €100m in UEFA TV money last season, Champions League winners Manchester City €135m, followed by Real Madrid €119m, Bayern Munich €108m, PSG €101m and Inter €101m.    There is then a big drop to Benfica €74m, Ajax...

Borussia Dortmund posted an €11m pre-tax profit in 2022/24 (€10m after tax), which represented a €41m improvement on the previous season’s €30m loss. Revenue rose €48m (13%) from €377m to €425m, a new club record, boosted by profit from player sales increasing €10m (15%) from €63m to €73m. This was partially offset by €15m (3%) growth in operating expenses, while net interest payable was up €2m to €6m. There was good growth across all three of the main revenue streams, though commercial was the star of the show, rising €33m (18%) from €184m to €217m, a new high for the club. Match operations nearly doubled from €23m to €44m, as COVID restrictions were lifted, while broadcasting increased €12m (9%) to €158m. After nine consecutive years of profits, which generated €227m between 2011 and 2019, Dortmund were hit hard by COVID, which led to three consecutive losses, adding up to €150m that “put our business model to the test”. However, it was business as usual in 2022/23 as the clu...

Following Bayern Munich’s shock defeat to Mainz last weekend, they have been overtaken by Borussia Dortmund, who now lead the Bundesliga. Although second place would be regarded as a fine achievement by most clubs, this is certainly not the case for Bayern, who are seemingly in crisis mode. For some context, Bayern have won the Bundesliga for the last 10 years in a row, so anything other than victory would be regarded as a failure.    Part of the reason for Bayern’s imperious record over the last decade is their financial power. In 2021/22 Bayern reported a €17m pre-tax profit in contrast to Dortmund’s €33m loss, mainly because their revenue is significantly higher than their rivals, partially offset by Dortmund’s better profit from player sales. Bayern’s cost base is also much higher. In fact, Bayern have now been profitable for an amazing 30 years in a row, including €361m in the last decade alone. Profits have been lower in the last three seasons, due to COVID restric...

How do the English quarter finalists in the Champions League match up financially with their opponents? Real Madrid have 20-30% more revenue and wages than Chelsea, but it’s a different story for squad cost. Madrid’s £605m is over £100m higher than Chelsea’s £481m. It’s closer on wages, but the difference is still £64m. However, Chelsea’s squad cost £918m, compared to Madrid’s £726m. Manchester City versus Bayern Munich is the closest tie in financial terms. City’s £619m revenue is £65m higher than Bayern’s £554m, and the gap is similar for wages with City’s £354m being £59m more than Bayern’s £295m. The only significant difference can be seen in squad cost, where City’s £1.1 bln is more than three times as much as Bayern’s £334m.

The authoritative Swiss Ramble looks at the money to be earned from the Champions League. Champions League overall prize money is 3.6 times the Europa League and 5.5 times the Europa Conference, but this varies by round. In general, the difference becomes smaller the further a club progresses, e.g. last 16 it’s 8x and 16x, while for the winners it’s only 2.3x and 4x. In 2022/23 each of the 32 clubs qualifying for Champions League group stage gets €15.64m plus €2.8m for a win and €930k for a draw. Additional prize money for each further stage reached: last 16 €9.6m, quarter-final €10.6m, semi-final €12.5m, final €15.5m and winners €20m. Each club in the Europa League group stage get €3.63m plus €630k for a win and €210k for a draw. Additional prize money: win group €1.1m (runners-up €550k), knockout round €500k, last 16 €1.2m, quarter-final €1.8m, semi-final €2.8m, final €4.6m and winners €8.6m. Each club in the Europa Conference group stage get €2.94m plus €500k for a win and €16...

The authoritative Swiss Ramble reviews the finances of Bayern Munich.  Despite the significant impact of COVID, the club “achieved sound financial results”, once again posting a pre-tax profit, though down from €17m to €5m (€2m after tax). Revenue (club definition) fell €54m (8%) from €698m to €644m, largely offset by €42m cut in expenses. Bayern were one of only three clubs in the Bundesliga to post a profit in 2020/21, due to “sensible management and not spending more than we earn”, though their €5m was just below RB Leipzig’s €8m. Some clubs lost a huge amount of money, especially Hertha €78m.  In fact, the Bavarians have now been profitable for an amazing 29 years in a row, generating €241m pre-tax profit in the 4 years before COVID. For the second year in a row Bayern retained 3rd place in the Deloitte Money League in 2021, with their €611m revenue only surpassed by Manchester City €645m and Real Madrid €641m. At €5m Bayern were one of a small number of European clu...

The tireless and authoritative Swiss Ramble has surfaced from his Zurich bunker to comment on the latest Deloitte Money League.  I highlight some of his fascinating tweets here. Revenue has obviously been significantly impacted by COVID-19. Deloitte estimate that the Money league clubs have missed out on well over €2 bn of revenue over the 2019/20 and 2020/21 season as a result of the pandemic. That said, Top 20 Money League clubs’ 2020/21 revenue was more or less unchanged at £7.2 bn, despite match day and commercial falling £995m (91%) and £196m (6%) respectively, as this was compensated by broadcasting rising £1.2 bn (43%), largely due to deferred 2019/20 money. Revenue for Top 20 clubs was basically flat at €8.2 bn, which is €1.1 bn (12%) lower than 2019 peak of €9.3 bn, though still 3rd highest ever total. Moreover, revenue has more than doubled from €3.9 bn in 2009, growth led by broadcasting €2.9 bn and commercial €2.3 bn. Broadcasting rose €1.3 bn (43%) from €3.2 bn...

The authoritative Swiss Ramble has been working away in his Zurich fastness to provide estimates of Champions League income.  It used to be said that Arsene Wenger liked to parade his Uefa coefficient through the streets of Islington, but one can increasingly see why. His calculations suggest that nine clubs have already earned more than €75m from the 2021/22 Champions League. Bayern Munich lead the way with €111m, followed by Real Madrid €106m, Manchester City €99m, Atletico Madrid €96m, Chelsea €94m, PSG €94m, Liverpool €92m, Manchester United €81m and Juventus €79m. The importance of the UEFA coefficient Looking at how Champions League revenue is distributed, the importance of the UEFA coefficient is clearly evident with the TV pool being much less significant than it was before. This rewards historically successful clubs rather than those with larger national TV rights deals.    The coefficient payment is based on performances in UEFA tournaments over past 10 ye...

The latest club accounts to be subjected to forensic security by the Swiss Ramble from Zurich are those of Borussia Dortmund. The club’s pre-tax loss widened from €47m to €73m, as revenue dropped €35m (9%) from €379m to €345m and profit on player sales fell €25m from €40m to €15m, partly offset by cutting operating expenses by €31m and net interest payable decreasing €2m. The €73m pre-tax loss is the highest in Germany, though it should be emphasised that these accounts are the first published for the 2020/21 season, so the only ones that include a full year of the pandemic. In 2019/20 eight of the 18 clubs lost more than €20m. After nine consecutive years of profits, which generated €227m between 2011 and 2019, BVB have now posted losses in each of the last two years, amounting to €120m. The board expects another net loss in 2021/22, albeit much lower (between €12m and €17m) The €35m revenue fall was due to COVID driven reductions in match operations, down €32m (98%) to €1m, and...

The proposal for a breakaway European Super League has drawn a storm of protest from Uefa, the Premier League, La Liga, former players, fans and even prime minister Boris Johnson.   Sir Alex Ferguson has condemned the plan in his first public intervention since retiring as Manchester United manager in 2013. 12 clubs have signed up to a plan backed by $6bn in debt financing from JP Morgan which would supersede the Champions League.   It is claimed that another three clubs will sign up this week (thought to be Bayern, PSG and Borussia Dortmund).   Bayern Munich and Borussia Dortmund have now issued a statement saying they will not join the Super League. The breakaway clubs include England's top six; Barcelona and Real Madrid; and AC Milan, Inter Milan and Juventus.   PSG and Bayern Munich have not signed up so far: PSG are said to be concerned that the initial novelty of the Super League would wear off after a couple of seasons.   Real Mad...

Deloitte Sports Business have produced an update of their 2020 Money League to take account of the impact of Covid-19 on the football industry.   I will attempt to summarise some of the main insights, but the whole document repays reading:  https://www2.deloitte.com/uk/en/pages/sports-business-group/articles/covid-19-football-and-digital-2020-21-season-and-beyond.html The main take home lesson is that the impact of Covid-19 is potentially destructive, but it is up to each club to be agile and develop strategies that will enable them to cope.   Deloitte estimate the total revenue loss for the 20 richest clubs at €2bn by the end of the season. Bayern Munich overtook Manchester United to become the third highest earner behind Barcelona and Real Madrid.  The German club's revenues were €634m compared with €580m at Manchester United.  The Bundesliga's quicker resumption of play in 2019/20 was a factor for Bayern Munich.   The Bundesliga was also a...

The effect of the pandemic on the revenues and financial situation of football clubs is a complex matter and making predictions is difficult in a fluid situation.  However, the KPMG benchmarking report offers authoritative coverage of selected European clubs:  https://footballbenchmark.com/documents/files/public/The_European_Champions_Report_2021.pdf The clubs covered are all European champions: Bayern Munich; Juventus; Liverpool; Paris Saint-German; Porto; and Real Madrid. All the clubs covered have reported a decrease in operating revenues.  Nevertheless, two of the clubs managed to record net profits in 2019/20, but that is not expected to continue this year:  http://www.insideworldfootball.com/2021/01/11/kpmg-reports-covids-money-massacre-europes-financial-elite/