The German league association DFL fear that they will be left behind by the Premier League and other European leagues. The idea to bring in fresh money from external sources did not convince a large swath of clubs, shipwrecking the bid of the DFL.
Just days before the most exciting season in a decade, German football was at a crossroads: bring in an investor to provide €2bn for the 36 clubs in the top two divisions? The answer on Wednesday was a resounding ‘no’, with only 20 clubs voting in favour, 11 against and the rest abstaining.
The plan? Bring in fresh money!
The DFL, the German football league, proposed to sell a 12.5% stake in future TV revenues to an outside investor for an immediate windfall of €2 billion in an attempt to increase revenues. The deal was to run for 20 years before being renegotiated. If TV revenues continue to grow, this would be a win-win situation. The money will be used to improve the marketing of the Bundesliga abroad. This immediately brings to mind the fact that only a handful of clubs play in European competitions, let alone generate significant interest outside Germany. For some clubs, the money would be better spent on infrastructure, sustainability and, of course, players.
But there is another catch.
This deal resembles a bill of exchange for the future; a gamble on the future. There is a risk involved: The clubs would have to give up some of their future revenues for short-term gains. There were questions that were not sufficiently answered, which is why Cologne and St. Pauli voted no. FC Magdeburg’s sporting director, Otmar Schork, pointed out that the DFL is currently without a CEO, which may be more urgent than discussing how to increase revenues in the short term.
And this gamble brings back some dark memories. In the late 1990s, German businessman Michael Kölmel approached a number of clubs. He pitched the idea that clubs could benefit from better marketing deals than they actually had. To achieve this, Kölmel proposed that the clubs should cede some of their television rights in return for a loan from his company, Sportwelt GmbH. The idea was to increase revenues so that both sides would benefit. This immediately brings to mind the fact that only a handful of clubs play in European competitions, let alone generate any significant interest outside Germany. For some clubs, the money would be better spent on infrastructure, sustainability and, of course, players.
This did not work out, and the majority of the clubs were left with greater problems than before the collapse of the deal. Worse still, Kölmel sued the clubs for failure to repay his loan. FC Magdeburg, Union Berlin and Borussia Mönchengladbach were among the clubs affected. This may explain Schork’s no-vote.
An investor, regardless of his background, would always demand something in return – be it influence in decision-making at all levels, despite the DFL’s assurances, or something else. Given that the proposed investors are all private equity firms, it seems unlikely that money would flow in one direction but not in return.
Furthermore, only €300 million of the €2 billion would be available for the clubs to spend as they see fit, while the bulk of the money would be invested in marketing abroad and in the structural infrastructure of the DFL and the clubs. One can only assume that the DFL needs the money to survive.
For the time being, the DFL will have to do without the extra cash from any external source. The answers show that the idea is still flawed and unconvincing. The overall question is whether it is necessary. Should the Bundesliga not be trying to win over fans who have questioned its commitment during the Corona pandemic and the clubs’ behaviour?Good writing does not come by chance, so consider a little tip:
© image credits: Paul Jean Clays: The Day after the Shipwreck, Public domain, via Wikimedia Commons