Bundesliga-business-model

The Bundesliga business model: An analysis of its success and how other leagues can take lessons

German football is perhaps having its golden hour. The Bundesliga is experiencing a considerable increase in popularity due to the competitive nature of the league, which includes heavyweights like Bayern Munich and Borussia Dortmund, and when you factor in a World Cup win this summer it is hard to deny the success Germany is having in the football world. While no doubt a lot of it comes down to the skill and hard-work of players and teams alike, it’s certainly no coincidence that the Bundesliga’s meteoric rise coincides with the business and financial success of how the league is run off the field. Some have even described it as the best run league in the world.

The Bundesliga’s commitment to supporters has been at the forefront of its business model for a number of years. The league’s chief executive Christian Seifert reaffirmed that the “commitment of clubs to offer their supporters affordable ticket prices, a comfortable viewing experience and high standards of safety and security is as strong as ever[1]. This continuing pledge has rewarded the league well leading to match revenue increasing year on year. During the 2013/14 season an average of 42,125 supporters attended each league game[2]; considerably more than the Premier League (36,657)[3] and La Liga (27,053)[4]. All this while every single league game was broadcasted live on domestic television in Germany. Ticket prices are considerably low in an effort by clubs to drive up support within the community. On average clubs will charge €23 to watch a Bundesliga game[5] while a Bayern Munich season ticket can be bought for as little as €135[6]. Seifert explains that clubs are willing to sacrifice ticket revenue if it means they can bring together “finances, the game and society[7].

Ticket-revenue

German clubs are more willing to sacrifice ticket revenue simply because they can afford to. Firstly the Bundesliga is an exceptionally profitable organisation. The league itself recorded profits of €383.5million during the 2012/13 season but more importantly 17 of the 18 clubs in the league were completely debt-free and operating on a profit[8]. This is directly comparable to clubs in the English Premier League where 17 clubs were in the red in the same season, the most notable is perhaps Chelsea who had a net debt of £958million[9]. Evidently Premier League clubs need to accumulate as much as they can from match-day revenue in order to tackle their debts. Generally match-day income is the second highest form of revenue, behind media and TV rights, for clubs in the Premier League.

The regulation and governance of the league and the clubs is at the forefront of ensuring financial stability and promoting growth. Ownership structure rules in the Bundesliga are more tightly regulated than in the Premier League and this is highlighted as a contributing factor to the league’s profitability[10]. The Bundesliga assesses each clubs’ fitness to practice at the end of the each season and one of the key areas is financial competence[11].  Should a club pass the test then they are granted a license to play in the upcoming season. Failure to pass will result in a club not being allowed to enter the league. Further regulations state that a club must hold the controlling stake and an investor cannot own more than 49%. There are some exceptions on the basis of customs and traditions but for the most part this rule is non-negotiable. Even the titans of the league like Bayern Munich and Borussia Dortmund are subject to these ownership rules. Such a strict regulation is put in place to ensure those in charge of clubs do not take excessive risks which could lead to debt. Fundamentally it is about instilling notions of stability and integrity within German football.

Preventing debt while sacrificing match-day revenue for the sake of the fans means the vast majority of Bundesliga clubs must seek innovative measures to ensure profitability. This has led to a significant increase in corporate partnerships within clubs. Clubs like Schalke, who wouldn’t necessarily be considered as a giant of world football, ensure that over half of their total revenue comes from corporate and commercial sponsorship. It’s a business model that’s followed across the board by other Bundesliga clubs including Bayern Munich, whose commercial revenue topped all Premier League clubs at €261million[12], and Borussia Dortmund.

Bundesliga clubs can also place more of a reliance on revenue from domestic broadcasting. Sky Deutschland bought the television rights for around €485million per year which means every single Bundesliga game will be televised[13]. The steady stream of income creates stability and allows these clubs to make reductions for their supporters.

fall-short

While the Bundesliga’s success in the home-market can’t be denied there is a longing sense that it lacks a truly global appeal. The Premier League has enjoyed considerable success in tapping into the American and Asian markets. It is now commonplace for Premier League sides to not just play one game in the U.S. but comprehensive tours. Manchester City have demonstrated the real interest there is in the American market by buying a stake in the latest MLS franchise New York City Football Club. Bundesliga clubs have been slow to take up this market. Bayern Munich only opened a U.S. office in April 2014[14] in a bid to drive up their international appeal and they embarked on a tour of the country that summer. Borussia Dortmund have taken tentative steps in the American market by partnering with two sides; Cincinnati United and La Roca. Compare this with Chelsea who have been in partnership with LA Galaxy since 2007. The Premier League itself sold broadcasting rights to every single league game to NBC for $250million in a three year package deal that started from the 2013/14 season[15]. Comparatively the Bundesliga is currently only shown on the channel GolTV which lacks the popularity and audience figures of NBC. Comcast, the largest provider of cable in the U.S., dropped the channel from their service back in 2012. The Bundesliga simply isn’t as accessible to the American market as the Premier League is.

Changes have been put in motion by the Bundesliga however. FOX Sports reached an agreement with the league to broadcast all league games starting from the 2015/16 season[16]. FOX is considered a much more dominant player in the U.S. television market and will likely provide a bigger rival to NBC.

It is perhaps difficult for the Bundesliga to compete on the international stage. Their pragmatic approach to football governance and finance means they spend only 51% of their revenue on wages whereas Premier League clubs spend 70% of their revenue on wages[17]. This limits the league’s ability to attract the global superstars that can create lucrative marketing opportunities. The bright lights and dazzle of the Premier League is certainly a lot harder to replicate.

A-modern-outlook

Perhaps the most important element that can be taken from the Bundesliga’s prudent governing and finances is their willingness to look at football in a more modern context. In order to ensure this global phenomenon can be financially sustainable is by being innovative with commercial and corporate deals. English clubs and, perhaps more so, supporters are far less willing to depart from traditions. The sale of stadium naming rights is commonplace in German football, the Allianz Arena perhaps the most famous example of this, whereas English football has been hostile to such moves. St. James’ Park’s naming rights were a contentious issue for many Newcastle United supporters and more recently Peterborough United received criticism from supporters for a deal to rename the stadium from London Road to the ABAX Stadium. It will undoubtedly be difficult to persuade supporters to be accepting of change that is at odds with tradition and history but the potential money that can be brought into the club is substantial. Estimates put the Old Trafford naming rights at over £600,000,000[18]. That amount of money could make a lot of difference even for a club like Manchester United.

Conclusion

The Bundesliga isn’t the most ostentatious league in football and, for the foreseeable future at least, the biggest and highest-earning footballing stars may not flock to it like they do to the Premier League or La Liga but Christian Seifert’s remarks that the Bundesliga is “succeeding in the split between top level sports performance and economic rationality[19] is certainly a fair analysis of the German game where shrewd governing and prudent finances are championed above all else. Tighter regulations and rules may seem the easy way out of financial trouble but leagues such as the Premier League need to look at encouraging clubs to use their status as a Premier League cub as a platform for reaping the rewards of commercial and corporate deals. There’s money in football and clubs need to ensure they are tapping into it.


References

[1] bundesliga.com, (2014). Bundesliga the world’s most attended football league. [online] Available at: http://www.bundesliga.com/en/liga/news/2013/0000285787.php [Accessed 19 Nov. 2014].

[2] bundesliga.com, (2014). Bundesliga the world’s most attended football league. [online] Available at: http://www.bundesliga.com/en/liga/news/2013/0000285787.php [Accessed 19 Nov. 2014].

[3] Espnfc.com, (2014). Barclays Premier League Statistics. [online] Available at: http://www.espnfc.com/barclays-premier-league/23/statistics/performance?season=2013 [Accessed 19 Nov. 2014].

[4] Espnfc.com, (2014). Spanish Primera División Statistics. [online] Available at: http://www.espnfc.com/spanish-primera-division/15/statistics/performance?season=2013 [Accessed 19 Nov. 2014].

[5] Doyle, P. (2014). Bundesliga chief says Premier League prices not an option in Germany. [online] the Guardian. Available at: http://www.theguardian.com/football/2014/aug/13/bundesliga-premier-league-germany-ticket-prices [Accessed 19 Nov. 2014].

[6] Rumsby, B. (2014). Arsenal charging fans far more for season tickets than Barcelona and Bayern Munich. [online] Telegraph.co.uk. Available at: http://www.telegraph.co.uk/sport/football/teams/arsenal/11163183/Arsenal-charging-fans-far-more-for-season-tickets-than-Barcelona-and-Bayern-Munich.html [Accessed 19 Nov. 2014].

[7] Doyle, P. (2014). Bundesliga chief says Premier League prices not an option in Germany. [online] the Guardian. Available at: http://www.theguardian.com/football/2014/aug/13/bundesliga-premier-league-germany-ticket-prices [Accessed 19 Nov. 2014].

[8] Conn, D. (2014). Premier League finances: the full club-by-club breakdown and verdict. [online] the Guardian. Available at: http://www.theguardian.com/football/2014/may/01/premier-league-accounts-club-by-club-david-conn [Accessed 19 Nov. 2014].

[9] Sedghi, A. (2014). Premier League finances: turnover, wages, debt and performance. [online] the Guardian. Available at: http://www.theguardian.com/news/datablog/2014/may/01/premier-league-club-accounts-debt-wages [Accessed 19 Nov. 2014].

[10] McGowan, T. and Edwards, P. (2014). Report: Bundesliga most profitable, Premier League most wealthy. [online] CNN. Available at: http://edition.cnn.com/2013/06/05/sport/football/bundesliga-premier-league-deloitte-football/ [Accessed 19 Nov. 2014].

[11] bundesliga.com, (2014). Questions. [online] Available at: http://www.bundesliga.com/en/about/questions/ [Accessed 19 Nov. 2014].

[12] Fontevecchia, A. (2014). The Rise Of Bayern Munich: Can The World’s Best Club Keep It Going?. [online] Forbes. Available at: http://www.forbes.com/sites/afontevecchia/2014/05/07/the-rise-of-bayern-munich-can-the-worlds-best-club-keep-it-going/ [Accessed 19 Nov. 2014].

[13] Sheahan, M. (2014). Sky pays up to tighten grip on German soccer. [online] uk.reuters.com. Available at: http://uk.reuters.com/article/2012/04/17/uk-bundesliga-germany-rights-idUKBRE83G0KP20120417 [Accessed 19 Nov. 2014].

[14] FC Bayern München AG, (2014). USA office opens. [online] Available at: http://www.fcbayern.de/en/news/news/2014/bayern-open-new-york-office.php [Accessed 19 Nov. 2014].

[15] Associated Press. (2012). NBC wins $250m rights to broadcast English Premier League in US. [online] The Guardian. Available at: http://www.theguardian.com/sport/2012/oct/29/nbc-250m-english-premier-league-epl-broadcast-us [Accessed 9 Dec. 2014].

[16] FOX Soccer, (2014). 21st Century Fox, Bundesliga team up. [online] Available at: http://www.foxsports.com/foxsoccer/bundesliga/story/fox-regains-bundesliga-tv-rights-starting-in-2015-season-101413 [Accessed 9 Dec. 2014].

[17] Wilson, B. (2014). Premier League revenues break £3bn. [online] BBC News. Available at: http://www.bbc.co.uk/news/business-27667472 [Accessed 9 Dec. 2014].

[18] Ozanian, M. (2012). Old Trafford’s Naming Rights Could Fetch $1 Billion For Manchester United’s Shareholders. [online] Forbes. Available at: http://www.forbes.com/sites/mikeozanian/2012/08/11/old-traffords-naming-rights-could-fetch-1-billion-for-manchester-uniteds-shareholders/ [Accessed 9 Dec. 2014].

[19] bundesliga.com, (2014). DFL presents Bundesliga Report 2014: Ninth straight turnover increase to 2.17 billion euros. [online] Available at: http://www.bundesliga.com/en/liga/news/2013/0000284518.php [Accessed 9 Dec. 2014].

6 comments

      1. No worries, Liam. Well researched and well written btw. I am doing my dissertation on EPL and money, how I stumbled upon both these articles. Anyway, make sure you talk to the person at least, whoever did this.

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