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...

Alexander Isak’s £125million move from Newcastle United to Liverpool was a fitting final act that helped add a juicy full stop to the most spectacular summer of trading that English football has known. Deadline day alone saw £375m change hands, nudging the totalizer up to a figure that already ensures this coming January is not needed to make this the most lavish season on record. Never before have the Premier League’s 20 clubs spent nearly as much on players, both in gross and net figures. The total spend, in fact, was a remarkable £1.1bn more than last summer once the final agreements were struck by 7pm, representing a 55 per cent year-on-year increase. The fact a record number of deal sheets were lodged ahead of the deadline, a figure that ran into double figures for the desperate, illustrated the frenetic nature of business from start to finish. No club has ever had a higher gross spend than Liverpool, either. The £420m they committed on the deals to land Isak, Florian Wirtz, H...

For years, the German town of Bielefeld has been the butt of a national joke: that it doesn’t exist. On Saturday, its football club Arminia Bielefeld will have a chance to put the city squarely on the map, by lifting the German Cup in Berlin. Facing top-tier VfB Stuttgart, the third-division side is eyeing the first major trophy in a 120-year history marked by as many stumbles as successes. Bielefeld played in the Bundesliga as recently as 2022, but was relegated at the end of that season and again the following year, sending it to the verge of financial collapse. Managing director Christoph Wortmann said this year’s turnaround was fuelled by “team spirit, will and hard work”. On the way to the final, Arminia knocked out Bundesliga heavyweights Union Berlin, Freiburg, Werder Bremen and Bayer Leverkusen — the latter boasting a squad worth 80 times its own. “The euphoria could not be bigger,” Wortmann informed the Financial Times of the feeling in the city ahead of the final. In a ci...

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...

Once a major force in German football, Werder Bremen found themselves relegated to the 2. Bundesliga, burdened by excessive debt and revenue pressures.   Klaus Filbry likens Werder Bremen’s €80 million income decline during Covid-19 and relegation to a near-death experience. However, the club emerged stronger, partly by breaking down internal silos. "Asking managing director of football, a sports director and a head of scouting and recruitment to participate in a two-day meeting is probably the last thing they want to do. But we insist on this four times a year," says CEO Klaus Filbry. In 2021, Werder Bremen resembled many European clubs: effectively two separate entities - the commercial and sporting departments. The club has since successfully integrated these units. It is often said in business that significant change requires a shake-up at the top of an organisation. While this is usually true, Werder Bremen stands out as a rare example of achieving fundamental tran...

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

For all the talk of a Premier League engulfed by civil war, business is still ticking along nicely, argue Financial Times writers. ‘Last week the league presented clubs with an update on revenue projections for the coming cycle, which runs from 2025-28. According to people with knowledge of the matter, income is expected to rise by 17 per cent during that period, boosted largely by the increased prices fetched for overseas TV rights. Domestic rights may have flatlined, but international interest is still on the up. The contrast with other European leagues is stark. On the continent, domestic TV is sliding, while international interest pales in comparison to England’s top tier. Broadcasters have diverted their spending to Uefa competitions instead. Italy’s Serie A recently renewed its domestic deal at a reduced rate, while French TV rights for Ligue 1 have fallen sharply. Olympique Lyonnais’ recent quarterly numbers showed that revenue from domestic TV had dropped 61 per cent year...

Schalke 04 are carrying a large debt and need to get back to the Bundesliga.  They lost €600k over six months:  https://sports.yahoo.com/schalke-04-release-financial-figures-121500461.html

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 Big Five league are the Premier League (England), La Liga (Spain), Bundesliga (Germany), Serie A (Italy) and Ligue 1 (France).  These leagues accounted for €19.6 bln revenue, which represented 56% of Europe’s €35.3 bln total in 2022/23. Their share has been higher in the past, e.g. 60% in 2019/20, but it’s still a very large slice of the European market. The Premier League remains the clear market leader, generating around €7.0 bln revenue, which is over €3 bln more than its closest challenger, the Bundesliga €3.8 bln.    Put another way, England’s top flight is over half a billion more than La Liga €3.5 bln and Serie A €2.9 bln combined. Much more revealing is the revenue growth over the last ten years, where the Premier League has comfortably outpaced the other leagues, rising by an incredible €3.1 bln from €3.9 bln to €7.0 bln. Much of the Premier League’s dominance is obviously due to its spectacular broadcasting deal, but it is far from being a “one trick p...

Revenue across the European football market grew by 16% to €35.3bn in the 2022/23 season (€30.4bn in 2021/22), according to the 33rd Annual Review of Football Finance published by the Deloitte Sports Business Group. The 2022/23 season played host to the winter 2022 FIFA World Cup and was also the first since 2018/19 unaffected by COVID-19 restrictions. The ‘big five’ European leagues - the Premier League, Bundesliga, LaLiga, Serie A and Ligue 1 - saw revenue growth of 14% to total €19.6bn, driven by an uptick in matchday revenue, new and improved sponsorship deals, and the utilisation of stadia beyond matchdays. Records broken across Europe’s ‘big five’ leagues in 2022/23 football season The Premier League once again dominated financially across Europe in the 2022/23 season, with clubs in the English top-flight registering aggregate revenue of £6.1bn – an 11% increase on the previous year (£5.5bn). This record-breaking season sees the league surpass the £6bn revenue mark for ...

Sports-business analysis website Sportico has released a list of what it says are the sport’s 50 most valuable clubs — calculating revenue streams based on figures published by club accounts, before then using “team-specific multipliers”. Unsurprisingly, the Premier League with nine clubs: Manchester United, Liverpool, Manchester City (sixth), Arsenal, Tottenham Hotspur (ninth), Chelsea, West Ham United (27th), Newcastle United (32nd) and Aston Villa (44th). According to Sportico, Manchester United are valued at $6.2billion, over $140m more than Madrid, making them the most valuable football club in the world. Forbes, incidentally, places Madrid higher, as well as Barcelona — it hasn’t put United top since 2018. United have struggled on the pitch since the departure of Sir Alex Ferguson as their manager — they are without a Premier League trophy since his final season of 2012-13, and are just eighth in the league table with three g...

The German football league (the Bundesliga) has called off talks over a potential investment from private equity after mass protests from fans, the third time it has failed in its efforts to bring in outside capital.    This means Germany has kept to its Sonderweg. The notion of a Verein or association is deeply embedded in German culture and it is possible to characterise Germany as an ‘associative state’.   Leaving aside a couple of company owned teams such as Bayer Leverkusen, football clubs in Germany were Eintrager Verein   (e.V.) or member associations.    In 1998 the German football association adopted the 50+1 rule which has been much admired by reformers in Britain.   This allows the club to become a commercially run entity (such as a limited liability company) and distribute profits to its investors. At the same time 50 per cent plus one of the voting shares must remain in the hands of the e.V., so that ultimately the members’ associ...

It is a general characteristic of public policy debate in Britain to see Germany as an example from which lessons can be drawn.   This is understandable given the success of the German economy and the way in which, for example, developed systems of training that have produced high levels of skill. Modell Deutschland had to deal with the challenges of unification, Europeanisation and the Eurozone crisis, unprecedented levels of immigration by refugees, globalisation and the rise of far right parties and at times it has looked fragile.  Nevertheless, it has largely survived and Germany was widely praised for its response to Covid-19 while the German economy and German soccer made a relatively rapid recovery which has now subsided whilst the traffic light coalition government is seen as divided and weak. Replicating the 50+1 rule in England (confining outside investors to a minority stake in most clubs) attracts considerable support, but its translation to a different envi...

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...

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...