Stars from FC Bayern Munich and Borussia Dortmund
picture alliance / dpa / dpa-POOL | Sven Hoppe
The Super League, the plan of a dozen football clubs, has failed. Previously, there had been criticism from associations, leagues and fans.
The financial situation of top clubs like Real Madrid or FC Barcelona is miserable. The corona crisis has exacerbated the situation again, also in the Bundesliga. Business Insider spoke to sports economist Professor Christoph Breuer about this.
Breuer talks about a “longstanding debt culture” in Spain, about the risk of bankruptcies in Germany, risky bonds and investors “who actually have no commercial interest, but rather a validity interest”.
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The so-called Super League, the plan of a dozen football clubs, has failed. On Monday night, Manchester United, Manchester City, Liverpool FC, Arsenal FC, Chelsea FC, Tottenham Hotspur, Real and Atletico Madrid, Barcolona FC, Juventus Turin as well as AC and Inter Milan announced the establishment of the new league. An affront: to the associations, clubs and fans.
The outcry was tremendous. The Uefa association threatened the exclusion from the Champions League and a ban on players for the national teams. Numerous coaches, players and officials criticized the project, even British Prime Minister Boris Johnson commented on the “ridiculous plan”. And so the super clubs overturned in rows and meekly withdrew their plans.
It’s about the money
The reason for the founding of the Super League, the people in charge made no secret of it, is simple: It’s about the money – and not a little of it. The President of Real Madrid and the driving force behind the Super League, Florentino Pérez, said on a Spanish talk show that football is in “free fall” and “on the verge of ruin” like the Spiegel reported. Until the recently decided reform of the Champions League, which will come into force in 2024 and should bring more money to the big clubs, the clubs had died.
Perez, as an entrepreneur and billionaire himself, may well be prone to polemics. But at the core it has one point: The economic situation is sometimes miserable, especially at the top clubs. Clubs like Real Madrid or FC Barcelona are heavily indebted. At the beginning of the year, Spanish media reported that FC Barcelona had 1.17 billion euros in debt, 730 million euros of which were short-term liabilities. Other top clubs depend on the drip of foreign investors and are always dependent on their favor. The Super League, which was to be largely financed by the major US bank JP Morgan, would have meant a much-needed rain of money for the founding members.
What about the economic situation in professional football? And what is the current situation in Germany? Business Insider spoke to sports economist Professor Christoph Breuer about this. He heads the Institute for Sport Economics and Sport Management at the German Sport University Cologne.
“A longstanding debt culture”
Breuer says that in southern Europe, especially in Spain, there is “a long-standing debt culture that has now fueled itself again because larger and larger investments were necessary to remain competitive”. This is due to so-called “sugar daddies”, by which Breuer means Arab or Russian investors, “who actually have no commercial interest, but rather a validity interest”. The commercialization spiral has also turned further with the entry of private equity investors. “This made higher investments necessary.”
Nobody pressed the brakes on the expenditure side. When you see what a world star like Lionel Messi is supposed to earn at FC Barcelona (according to a report by the Spanish newspaper “El Mundo”, a good 138 million euros annually), then those are unbelievable sums “that only have a chance of refinancing when everything really comes together: spectators, merchandising, prizes from the competitions ”. Only: FC Barcelona has not been able to win the “Champions League rat race” for a long time. “If something is left out, it collapses,” says Breuer.
“The Bundesliga would have tended to have become more balanced”
According to Breuer, the Super League would have had a direct impact on European competition. It can be assumed that “the media revenues for the Uefa competitions would have decreased because a large part of the money would have flowed into the Super League”. That would have had the side effect “that the Bundesliga would have tended to have become more balanced”. If the big clubs like Bayern Munich or Borussia Dortmund hadn’t earned so much money in the Champions League, “then that would have been very beneficial for the tension within the Bundesliga, because the spread would have been smaller.”
A good year ago, when the pandemic really raged in Germany for the first time and the Bundesliga interrupted game operations, concerns about bankruptcies made the rounds. Breuer said at the time the mirror: “There is a real risk of bankruptcy.” Today he says: “The clubs saved that games took place. That is the central contractual service for the media revenues and that is the most important source. ”Much more important than viewer revenues, which, according to the current economic report of the German Football League (DFL), make up just ten percent of revenues. The fact that the DFL was able to conclude the next TV rights deal during the crisis, “quite successfully for the Corona circumstances,” says Breuer, gives planning security. The clubs have a total annual income of an average of 1.1 billion euros.
“A good indicator that something is brewing”
But: “Just because the league as a whole is making ends meet doesn’t mean that this applies to all clubs.” Several clubs (SV Werder Bremen, 1. FC Köln, FC Schalke 04) have applied for state guarantees. Breuer does not see the risk of bankruptcy as a mass problem of the league today, but as an individual problem. “If a club tries to get a state guarantee, then that is a good indicator that something is brewing.” The clubs did not manage to “adjust their expenditure side to the lower income”.
That is why clubs also resort to borrowing as an instrument. Werder Bremen announced on Tuesday that it would issue a medium-sized company bond with a volume of up to 30 million euros. The bond is aimed at private and institutional investors, with an interest rate of at least six percent for a denomination of 1000 euros. Breuer says: “The bonds exist because there is a need for financing that the bank cannot meet at all or only at higher interest rates.”
If even the banks seem to be careful, should you invest as a fan or a small investor? Breuer says the risk is marginal that a prominent football club will really go bankrupt, so far someone has almost always been found who would have pulled a club out of the worst. “The only question is whether this logic is still valid in pandemic times.” Six percent are significantly more than what you got for fan bonds before the pandemic. 1. FC Köln was 3.5 percent on its last fan loan. “In this respect, this is an interest rate that reflects the crisis.”
“Negligent if you do not outsource the professional operation of a club”
The sports economist has a clear opinion on the entry of investors: “In the current situation, it is negligent if you have not outsourced the professional operations of a club to a corporation.” There are currently only four clubs in the Bundesliga that have not outsourced their gaming operations have and continue to act as a registered club: 1. FC Union Berlin, 1. FSV Mainz 05, Sport-Club Freiburg and FC Schalke 04. In the last instance, these clubs could not “use the means to sell shares and to obtain liquidity through an investor ”. Whether a club should outsource before an acute emergency depends on how they handle their money.
The Berlin club Hertha BSC illustrates that the entry of an investor is not a panacea. The dazzling entrepreneur Lars Windhorst bought his way there, 374 million euros have been agreed as an investment, almost 300 million euros have already been transferred since he joined in 2019, reported the FAZ. In comparison to other countries, investors entering the Bundesliga are not that widespread. This is related to the so-called 50 + 1 rule, which states that the majority of the votes must always remain with the association and thus with its members. For example, an investor like Windhorst can diligently buy shares, but that does not mean that he alone has the say.
In terms of sport, the investment has not yet paid off. Hertha BSC, currently in Corona quarantine and with two games less than the competition, is in 16th place in the Bundesliga. Relegation threatens. “The example of Hertha shows that it is crucial how a club manages with the funds of the investor,” says Breuer. A large part of the money was invested directly in players. But in view of the athletic performance “the question arises whether part of the income was not simply burned”.
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