Open goal Should Germany's soccer clubs go global?

Germany is among the world’s great soccer nations, but traditionalism is stifling investment and development. Calls to allow foreign investors and commercialize the game are now growing.
Quelle: dpa
Come on, you oligarchs!
(Source: dpa)

After a semifinal defeat at the 1990 World Cup in Italy, English soccer star Gary Lineker coined a bitter, if accurate, definition of the international game: “Football is a simple game: 22 men chase a ball for 90 minutes, and at the end, the Germans win.”

As far as Germany's national team is concerned, that still holds some truth. After all, Germany has won the World Cup four times, including the most recent tournament in 2014.

But it’s a different story with its top-flight national league, the Bundesliga, which has been dominated for years by one club, Bayern Munich. As usual, it's the only German side left in this season’s prestigious Champions League tournament of leading European clubs.

In fact, if you happen not to support any particular club, the weekly Bundesliga matches can be a tad dull. The majority of sides are mired in relative mediocrity by comparison with the masterful Bavarians, who have won the league 27 times, including the past five seasons. Yawn.

There’s a simple reason for this state of affairs, say critics. The German league has shot itself in the foot with its famous “50+1” rule that states that a club's members must hold a majority of the voting rights.

That discourages investors because it prevents them from having managerial control of clubs. There are exceptions, however, notably newcomer Red Bull Leipzig, owned by the Red Bull energy drink group, and TSG Hoffenheim, controlled by entrepreneur Dietmar Hopp.

But the resulting lack of financial resources means most German clubs can’t afford the kind of talent now playing in England’s Premier League, the world’s richest soccer league. There, billionaire oligarch and sheikh owners are two a penny.

If you get into a race for the big bucks, it will completely change the structure of soccer. Robert Schäfer, CEO, Fortuna Düsseldorf

So there’s a debate raging among German clubs over whether to abandon the rule and allow commercialism to edge out the old values of loyalty, passion and hard graft.

The debate is dividing the league. But it needs to be resolved because the income from TV rights is unlikely to keep rising at the pace seen in recent years, and ticket prices have become so expensive that stadium audiences have started shrinking.

If Germany’s most beloved sport is to remain attractive, it has to open itself up to investors to a much greater extent than in the past, said German entrepreneur Martin Kind. He hopes the league will one day grant him an exemption and let him take control of chronically uninspiring club Hannover 96, currently as likely to win the Bundesliga as England is to win the World Cup.

The good news for him is that the Deutsche Fussball-Liga (DFL), which organizes Germany’s first- and second-tier soccer leagues, is beginning to consider rule changes to encourage investors.

That would infuriate many fans, who are already riled by the march of commercialization over 'the beautiful game.' The recent introduction of Monday matches as part of a TV rights deal has been deeply unpopular, for instance, and drew protests and boycotts at stadiums on match days.

Managers are also adamant. Hans-Joachim Watzke, the CEO of Borussia Dortmund, one of the few clubs that has on occasion challenged Bayern Munich, fumes at the very thought of an oligarch taking over his club. ”They’ll definitely never get a majority here,” he said. “We want to remain free.”

Freedom is all very well if you can afford it. Just a few weeks ago, Mr. Watzke sold his top striker, Pierre-Emerick Aubameyang, to Arsenal London for €64 million ($79 million). Dortmund has been hemorrhaging talent to the Premier League, where players can expect fat pay raises, and to Bayern Munich for years, but making a lot of money out of it.

It's not a strategy smaller clubs admire. “If you get into a race for the big bucks, it will completely change the structure of soccer,” said Robert Schäfer, CEO of second-division club Fortuna Düsseldorf.

Unfortunately for him, soccer has long since mutated into a race for the big bucks, and it’s being won by clubs like England’s Manchester City.

Sheikh Mansour Bin Zayed Al Nahyan, a member of the ruling family of Abu Dhabi, bought the then-middling Premier League club in 2008 for some €240 million. Since then he is reported to have invested €1.2 billion in it, buying stars like German national team player Leroy Sané, Belgian attacker Kevin De Bruyne and former Bayern Munich coach Pep Guardiola. He also funded a new youth training center.

Money talks. Manchester City, which even its rivals admit plays irresistible football right now, currently enjoys a 16-point lead at the top of one of the world’s most competitive leagues and is among the top contenders to win the Champions League.

Sheikh Mansour has turned the northern English club, which for years languished in the shadow of its glittering local rival Manchester United, into a soccer conglomerate with subsidiaries in New York, Melbourne and Yokohama. At the end of 2015 he sold 13 percent of this "City Football Group" to two Chinese investors for €377 million, valuing the business at €2.7 billion — €1.2 billion above the purchase price plus investments. That’s not a bad return.

Liebherr, a German-Swiss industrial firm, has also made a killing in the Premier League. It paid €16 million in 2009 for FC Southampton, a club that was on the brink of bankruptcy and kicking its way around the muddy pitches of the third tier of English football. Last year they sold 80 percent of the club, now in the Premier League, to Chinese investor Gao Jisheng for an estimated €220 million.

Using his head.

And its not just foreign investors who are cashing in on the Premier League. In 1992, England’s top league had just 11 foreign players in all. Today, they account for 70 percent of the teams. The league's bosses argue that opening it up has worked: The stars follow the money, and the money follows the stars in the form of TV coverage and advertisers. So whether Germany’s soccer establishment likes it or not, it’s the sheikhs, oligarchs and rich industrialists that could hold the key to riches and glory in the Bundesliga.

Up to now, the most important source of soccer income has come from the sale of TV rights. The Premier League is getting €5.8 billion from broadcasters in the 2016-2019 period, almost 75 percent more than in the previous three-year deal. The Bundesliga will receive €4.6 billion in the coming four seasons from broadcasters Sky, Eurosport, ARD and ZDF.

But the TV boom is coming to an end. When the Premier League recently auctioned its national TV rights for the period after 2019, it had to accept a reduction in income.

Clubs have been relaxing for too long in the “comfort zone” of steady TV income, said Martin Kowalewski, whose agency Sporteo advises potential investors. That’s got to change: “If the 50+1 rule were to go, this market would at once become highly interesting,” he said. Clubs would benefit from pressure exerted by external financiers, he added.

The head of DFL, Christian Seifert, knows that. The former media manager evidently believes that the international soccer business these days works like the digital economy where top conglomerates, for example Google, Amazon and Facebook, have cornered the global market.

He’s been telling club managers that they’ve got to do the same and follow the likes of mega-clubs Manchester United, Real Madrid, Barcelona and Juventus who dominate European football. If clubs settle for just being average and plodding along year after year with fair-to-middling players, their supporters are going to get their kicks with other, more successful clubs.

“In a global and digital world, the alternatives are just a mouse-click away,” he warned.

A version of this article originally appeared in the business magazine WirtschaftsWoche. To contact the author: [email protected]