Fan Ownership: The Bundesliga Model

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. 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.


17 thoughts on “Fan Ownership: The Bundesliga Model

  1. Tim Vickerman

    Great article. Thank you! Of course, no system is perfect but it seems a damned sight better than the rotten structures so prevalent in England right now.

    One argument I often hear is that the German teams aren’t as competitive as the English teams in Europe. But apart from fans of the ‘Big 4′, supporters of all other teams in England don’t really give a toss about how these teams perform in Europe. The days when supporters of other teams would cheer on their rivals against the cream of the rest of Europe are long gone. Sacrificing the European dominance of 4 (now 3 teams?) for this: ‘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.’ That sounds like quite a deal.

    Speaking as an English football supporter, I found Manchester United and Arsenal’s swatting aside of AC Milan and FC Porto to be quite depressing.

  2. Barry

    “German football’s rules on spending as a percentage of turnover”… Do you know exactly what this percentage is??

  3. David Fellerath

    Are there any books in English you can recommend for further reading on this topic?

    Thanks for this piece (and thanks Tom, for publishing this week-long series).

  4. Terry Duffelen Post author

    I’m not certain there is an exact figure as I believe it to be based on other factors particular to individual clubs (eg Bayern are in a stronger position to spend x per cent more of turnover than, say, Bochum). This paper explains the situation very well.

    The Bundesliga’s most recent data is available in this document.

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  8. isi_777

    really interesting stuff from picthvasion…

    terry, i wonder if you could answer 2 questions i had:

    1. you mentioned ‘subsidised attendance costs’, what do you mean by this?

    2. in the 50+1 model, is it the case that the member ownership must lead the way in terms of dictating how much can be invested by other parties? i.e. let’s say a club was offered £10m by an investor, it is my understanding that the club could only accept as much as would take them up to 49.9%. in this case – and should an investor such as this come about – would the club push for increased member subscriptions or ask members to up their annual fee? how does it work? similarly, what happens if membership levels drop? are investors forced to take back some of their money? please can you shed some light on how it all works in this respect?

    thanks a lot, great article.

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  10. Chrischmi

    @isi_777: I try to answer…

    1) In many stadiums there are possibilities to buy very cheap tickets, which may not cover real costs. In Dortmund for example pupils up to 16 or 17 (don’t know exactly) pay less than 10 EUR for a stance at the famous tribune “Südtribüne” or families get tickets for a good price in the North-West-corner. I think this is meant by ‘subsidised’ in the article.

    2) You have to distinguish the legal entities.

    Most German soccer clubs are a club in full fan ownership only. Every member pays an annual membership fee and has exactly one ‘share’, which is nothing than a legal right to vote at the (mostly annual) general meeting. Members of the club often have the possibility to get tickets earlier, get discounts in merchandising stores and so on.

    Some clubs, naming Borussia Dortmund or FC Bayern Munich for example, founded new legal entities. They created a new corporation (Borussia Dortmund KGaA, FC Bayern München AG). The ‘old’ legal entity – the club itseld (BV Borussia Dortmund 1909 e.V., FC Bayern München e.V.) remains the full owner of the corporation in the first step and then sells shares of the corporation. So the amount of fans, who are members of the club is not important to amount of shares, the club has.

    FC Bayern Munich sold shares to long term partners. The ‘e.V.’ owns 87,4 % of the ‘AG’, sports supplier adidas AG (9,7 %) and main sponsor AUDI AG (2,9 %) bought the other shares. The 50+1 rule regulates, that the club (‘e.V.’) is allowed to sell 49 % of the corporation and not more.

    Borussia Dortmund choose an IPO at German exchange Deutsche Börse for its corporation. This was the only IPO of a soccer club in Germany up to now. A KGaA is a special German legal entity. It’s a limited partnership, the general partner in this case should be the ‘e.V.’, the limited partners are the share holders. The BV Borussia Dortmund 1909 e.V. does own less the 10 % of the shares, given to limited partners, but accoording to the articles of association of the ‘KGaG’, the ‘e.V.’ (as a general partner) does have the majority of the votes at the ‘annual stockholders meeting’. The votes are in fact critical to the 50 +1 rule. Hard to explain… ;-)

    Bayer Leverkusen GmbH (GmbH is similar to a Ltd.) is a special case. It was founded by Bayer AG over hundred years ago and is a fully owned subsidiary of Bayer AG.

    Hope this helps a little…

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  14. Jack

    Keep german football pure. Dont allow clubs like hoppenheim and RB leipzig to come into bundesliga. Go to english premier league if you want to that. Go buy Leek Town and take them to the premiership. Wolfsburg is differnt because VW always owned it and orginally started about with players who worked for VW. I dont know much about Bayer Leverkusen. VW doenst impose its brand on Wolfsburg.