The planned entry of investors into the German Football League failed due to too many dissenting votes from the clubs. Sports economist Christoph Breuer on the reasons – and the future of the DFL.
Mr Breuer, the DFL general meeting of the 36 first and second division clubs voted against the partial sale of their marketing rights to an investor. It was clear that the vote would be close – but did the vote surprise you?
Yes, the result actually surprised me. I didn’t think there would be a definitive no. I would have thought that the final decision would be postponed.
Why did the Bundesliga clubs decide this way?
That’s a good question. First of all, the interests of the 36 clubs are very different. In addition, a rift seems to have opened up between clubs that want to be internationally competitive and clubs that have no international ambitions and whose club management is interested in maintaining a good relationship with their active fan scene. The active fan scenes are particularly critical of co-determination by investors.
However, some rejecting clubs have primarily justified their vote with a lack of transparency.
It is clear that not everything could be negotiated. In addition, the process of finding a consensus within the DFL means that there are always shifts – for example with regard to the specific distribution of funds. In addition, many clubs know from personal experience that even without formal rights, an investor will certainly use informal avenues to exert influence. In addition, there are different opinions in the group about possible financing alternatives through outside capital, which have not been adequately examined – but represent a no-go for others. All of this can lead to a feeling of insufficient transparency.
In the course of time, the investment sum has also become smaller and smaller. At the beginning there was talk of almost 3 billion, at the end of almost 2 billion. Is the Bundesliga too unattractive and the sum has therefore become smaller and smaller?
The attractiveness of an investment also depends on the participation rights of an investor. And the more it became clear that formal co-determination rights were being curtailed, the less attractive the investment became for potential investors. In this respect, this development is not surprising. The lack of participation rights were more or less priced in by the interested private equity companies.
Following the decision, some media wrote that the Bundesliga could break up as a result. Do you think so too?
It has become very clear that the DFL is not a homogeneous organization. But this was clear in principle earlier. The question was whether she could pull herself together on key future issues. But I don’t see a direct split, even if the rifts within the DFL may have gotten bigger for the time being. But I suspect that after a period of licking wounds, people will remember that they depend on each other to produce the Bundesliga product. You are a competitor and a cooperation partner at the same time. However, the more internationally ambitious clubs are threatened with being economically left behind by English, Spanish and Italian clubs, the more they will question whether solidarity is a one-way street. I’m not assuming a direct split between the first and second divisions at the moment. For one thing, I don’t even know whether the voting difference actually ran along the border between the first and second divisions – I have certain doubts about that. On the other hand, the spin-off according to the articles of association is not that easy. As far as I am informed, such a spin-off also requires a two-thirds majority. And it would be more than economically unreasonable for second division clubs to agree to such a spin-off.
Could the current decision upset top clubs like Bayern and Dortmund so much that they now want the Super League?
The question is not Super League or Bundesliga, it is: Super League or Uefa Champions League. No club would be able to make ends meet without a national league competition. But maybe the result of the vote will be so shocking that at least the emotional distance to the Super League will decrease and the whole competitive system of professional football with its economic risks and its equal opportunities will be considered again soberly. But I expect actual changes only on a small scale.
Some fan representatives argue against an investor solution that most fans don’t really care about international success. Fans of Heidenheim or HSV don’t expect their club to be there internationally in the near future anyway. So why should they support these ambitions with the investor package?
Anyone who takes this attitude underestimates how important TV income is for their own club and how uncertain it is in the future. The Bundesliga has been so successful in recent years because it has become a media company under ex-DFL boss Christian Seiffert. This is associated with constant further development because, on the one hand, the competition is fierce. Not only through other leagues, but also through other sports like the NFL or basketball or streaming portals like Netflix. The Bundesliga is part of a complex entertainment market and has to assert itself there.
And not only the supply side is changing, but also the demand side. Especially with social media, the viewing habits of younger generations in particular are changing significantly. In order to be able to find appropriate answers, investments are necessary. So it’s not just about the international competitiveness of individual German clubs, but about securing the most important source of income for all German professional clubs.
But this week in particular shows where the real interest of the fans lies: Bayern Munich could hardly lose the championship when suddenly millions of people are interested in football again. So shouldn’t football invest much more in sporting competition – through radical redistribution?
The challenge is that the Bundesliga is in two competitions at the same time, the national and the international. And what benefits the balance of national competition harms balance at international level. This conflict could only be adequately resolved through closed competitions without promotion or relegation and without qualifying for international competitions. But this American model does not seem to be wanted – especially not by the active fan scenes, although viewed soberly this is the main cause of the distribution conflicts.
In addition, the economic balance of power between national and international competition has shifted significantly in recent years. Sometimes I can’t redistribute so much nationally that revenues from the Champions League and the resulting competitive advantages of successful top clubs are balanced. This alone shows that the Bundesliga has lost its economic capacity to act. And if you don’t want this to be curtailed further, you have to invest in the development of your media products.
Would the entry of an investor mean that the clubs could have invested more? Some clubs were only promised amounts of around €2 million per season. That’s hardly a significant sum in football.
That’s right, gaps to the English Premier League could not have been reduced. Especially since player advisors would certainly have priced in this higher liquidity in their negotiations with the Bundesliga clubs. The result would probably have been a specific inflation in the market for so-called non-differentiators. This partial measure would only have really helped those clubs that have massive liquidity problems and would have used the money differently. I therefore saw this possibility of use more as an internal political prize in order to increase the overall probability of approval for investor entry. For the future of the league, however, it is much more important that the core investment is actually made – that is, to advance the Bundesliga media brand.
Could this core investment be achieved in other ways without immediately triggering a fan protest? So, for example, about raising outside capital – even if the DFL supervisory board chairman Hans-Joachim Watzke initially ruled it out?
In principle this is possible. From my point of view, you wouldn’t have to get 2 billion euros on the capital market, but only the sum that is essential for the core investment in media development – i.e. without infrastructure measures and player purchases by the clubs. I don’t know the business plan of the DFL here. But according to the last usage code, this would only have to be 40 percent of the 2 billion. Of course, that makes a huge difference as to whether I have to borrow EUR 800 million or EUR 2 billion.
The article first appeared on capital.de.