Fan Ownership: The Bundesliga Model

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Bundesliga

In today’s installment of our week-long examination of fan ownership, we turn to Germany. The Bundesliga is often held up as an ideal example of this and a model that English clubs should follow. But, as Terry Duffelen reports, while there is much to admire about the German model, it would be a mistake to see it as a panacea for all football’s problems.

You know when English football is in trouble when it looks to Germany for guidance. Certainly, there is much to be admired about the structure and rules that govern club ownership and management in Germany. However, like all management models, it is not perfect.

Put simply, football clubs in Germany are sporting associations. Many were formed many years before football was fully codified, as gymnastic clubs. They are not businesses per se although elements of the club can be run as such. The most apparent advantage to this is that any surplus generated by a club stays within the club and is not used to pay off someone else’s debt or to swell the coffers of a non football business.

The basis of the German model is the 50+1 rule whereby a minimum of 51% of the club must be owned by club members. This still allows for considerable investment opportunities for private business to invest while preventing them from having overall control of the direction of the club. A Bundesliga club board is made up of delegates selected by the shareholders (by wilson santiago). That way the supporter membership associations or Mutterveiren have a direct say on the management of the club.

The benefits to this method are clear, especially to English supporters who long for an end to the days where English clubs are subject to the whims and excesses of individual owners or uncaring capitalists who use their club to clear their own debts. Corporate interest is curtailed by the interests of the supporters. As long as the supporters have the best interest of the club at heart, that club is unlikely to allow itself to become mismanaged.

Lizenzierungsordnung

Working alongside this model are the DFL’s rules of governance, the Lizenzierungsordnung. These rules regulate the finances of clubs, control the levels of debt that each club should has and imposes restrictions on the amount of money clubs can spend of player’s wages, a major issue in England but also a perceived criticism of the German game and its inability to compete at European level (a view I don’t necessarily subscribe to, but that is another argument). Failure to comply with these regulations can result in the club’s licence being withdrawn and them not being able to participate in the Bundesliga.

It should be said, however, that concerns exist about the tightness of the rules and as to what extent they are are enforced because German football is not without its problems.

For example, in recent years Borussia Dortmund have racked up considerable debt following their glory years in the Champions League. Meanwhile, their neighbours and fierce rivals, Schalke, are currently feeling the pinch with stories coming out in the the German media of tight financial constraints and even talk of bankruptcy. The city of Leipzig, despite a brand new stadium built for the 2006 World Cup, has seen a succession of professional clubs that go to the wall.

So the 50+1 approach to club ownership is not necessarily a guarantee of good governance and Bundesliga clubs are still quite capable of having eyes that are too big for their stomachs. Furthermore, it has critics from within. Hannover 96 President Martin Kind is among them. He argues that Hannover would be well placed to compete for honours and thereby make the Bundesliga more competitive, if he could attract more investors by giving them a larger slice of the pie.

There are also exceptions and anomalies. Bayer Leverkusen and the Wolfsburg club have their genesis as factory clubs owned by Bayer and Volswagen respectively. Hoffenheim’s rise through the leagues to the Winter Championship in 2008 was funded entirely by former player and software billionaire Dietmar Hopp. To use a crude expression, were Hopp to get hit by a bus tomorrow, would Hoffenheim be able to continue investing at the same levels without his benevolence?

And of course there is the recent intervention by Red Bull who are the latest to try and bring sustainable top flight football to Leipzig. Opinion of the energy drink supplier’s involvement in professional sport is so polarised that they should consider buying Marmite. They took control of SSV Markranstädt, a club located not far from the city who play in a regional league in the fifth tier of German football last year. Red Bull are not whole owners of the club and are not are they permitted to incorporate their brand into the club’s name as they have done in Austria, the US and Brazil. However, they have changed the club’s name to RB Leipzig, changed the kits to reflect Red Bull’s aggressive branding strategy and are top of the league. The club plan to move to the Zentralstadion in Lepzig and have ambitions to play in the Bundesliga in a few years time.

The cases of Hoffenheim and RB Leipzig demonstrate that despite majority supporter ownership, neither club would be able to achieve what they have without considerable corporate backing. The price that has been paid is the the identity of both clubs has been transformed and one can only imagine that were either party to withdraw their investment, the clubs could find themselves faced with liabilities that they could not meet. Under this model it is still quite likely that German clubs could end up in the same boat as Portsmouth. It should be stressed however, that German football’s rules on spending as a percentage of turnover should reduce the possibility of this taking place.

It is important, then, not to over romanticise the German system. Bundesliga clubs do overspend. The league is still recovering from the excesses of the late 90′s and the demise of the Kirch corporation followed by the collapse of the corresponding TV deal that left a number of clubs in the hole. Bayern Munich’s FC Hollywood years were operated under the same rules as today. At one time Luca Toni was the highest paid player on the planet at Bayern. German football is quite capable of getting carried away.

Having said that, the system does seem to work overall and with a broad consensus within the game. The Bundesliga is not the most glamorous league in the world. However, it continues to turn a profit, has the highest attendances in Europe and among the lowest ticket prices. The existence of subsidised attendance costs, terracing and access to free football on TV can be directly attributed to supporter’s influence in the club’s decision making.

This sort of legitimate intervention by supporters is unheard of in modern English football. As a model for the future of the Premier and Football Leagues, you could do far worse. But what is more important, in my opinion, is that the leagues operate within strict financial parameters laid down by well put together and vigorously enforced rules that encourage good governance and fiscal responsibility.

Terry Duffelen is the creator of the Onion Bag and writes a weekly blog about the Bundesliga on Some People Are On The Pitch.


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