The Money Game: Bundesliga 2008/2009 Financial Results
By: Jan | January 28th, 2010
The DFL released a detailed report on the economic state of professional football in Germany on Wednesday. The financial results had previously been part of the DFL’s Bundesliga Report, due in August, but have now been released separately, earlier and in more detail. There is less text, more numbers and the glossy photos have been replaced by grittier bleached counterparts. The Bundesliga means business. What else is new? Increased revenue, increased equity, increased debt and Borussia Mönchengladbach bears the brunt of the blame.
Revenue
Revenue rose by 9.5% to a record €1.715 billion. The combined revenue of the two Bundesligas (first + second division) broke the €2 billion barrier for the first time. Advertising has become the biggest contributor to the league’s revenue pie. The economic crisis could have a negative impact on this revenue stream this season, although a lot of major deals like kit sponsorships are long term and experts suggest that football’s popularity shields it from the problems other sports face in finding/retaining sponsors. Sponsorship still centers around typically male products like beer, cars and DiY stores, but the DFL expects that the advertising industry will eventually recognize the growing popularity of the league among women and families. The current TV deal runs until 2013 and will slightly increase by €50m over that timespan, while international TV deals will also contribute an extra €20m. Overall no massive improvements can be expected here. Matchday revenue has been maxed out and without any increase in ticket prices will remain at the current level as well.
One thing you can do is adjust the revenue by subtracting one-off fees from transfers. This is what Deloitte like to do for their Football Money League and Annual Review of Football Finance. In this case revenues would have risen by €58,7m to €1.438bn in 2008, and by €136,9m to €1.575bn in 2009. The market leaders Bayern Munich more or less repeated their financial results from the previous season, so they didn’t contribute much to this increase. The deep cup runs by Bremen and Hamburg have contributed to record revenues for both clubs. Apart from that, a lot of the growth is probably also down to the newly promoted clubs. Cologne and Mönchengladbach alone have probably generated around €50m more than the likes of Rostock and Duisburg, and the Hoffenheim “fairy tale” has also helped this team to quickly attract a healthy mix of sponsors, while their new stadium will have also helped to drive up revenues. The potential relegation of clubs like Hertha can thus also have a negative impact on the league’s total revenue next season.
Profitability
The league recorded a profit of €31m, or an average of €1.72m per club, 14.2% less than in the previous season. Though, the average EBITDA of the clubs rose by 15% to €14.6m. EBITDA as the report explains stands for “earnings before interest, taxes, depreciation and amortization, and is the performance indicator commonly used in financial analyses”. The number of clubs that broke even sank from 15 to 11. Hertha, Schalke and Hoffenheim have been three new entries to the clubs in the red. Not sure about the fourth one.
Equity and Debt
Equity capital increased by 21% to €521m resulting in an equity ratio of 35.5%. As the report explains: “This ratio, which describes the contribution of equity capital to total assets and enables an evaluation of financial stability, is high compared to many other sectors.” Cough banks cough. Debts rose by 30% to €610m. Both increases can mostly be blamed on the return of Borussia Mönchengladbach, who added their whole Borussia Park stadium, training and youth centre financing package to the books of the league. Three years ago equity was as low as €294m and debts as high as €569m, so the league has build some muscle during this time. It’s worth noting that debt obviously isn’t a good and/or sole indicator for the financial burden of clubs. E.g. part of Hamburg’s stadium financing deal is a rather unfortunate liaison with sports marketer Sportfive, who receive a percentage of Hamburg’s TV money. Such a deal doesn’t show up as debt, but can be a bigger burden for a club than an interest free loan by an “evil” club owner like Roman Abramovich.
If that wasn’t yet fun enough for you, then you can download the report as PDF here.
Some Related Bundesliga Posts:
Category: Data
Comments
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Great summary.
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The ticket price comparison is interesting. The Spanish League has prices twice as high as the Bundesliga but not half as many spectators. So they are making more money from the fans overall than in the Bundesliga. While I think it is great that it is so cheap to see the football here, maybe if teams charged €40 a ticket they could afford more top quality players?
What’s the price of a regular type ticket in Munich? In Berlin it is €20 or €22.
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@Paul: Actually, I doubt that Spanish teams have significantly higher matchday revenue. Except for Barcelona and Real Madrid that is.
Here is an example from the 2006/2007 season:
Valencia averaged over 41000 in 19 home matches in the league and played six CL home games and generated matchday revenues of €24.5m.
Bremen averaged over 42000 in 17 home matches in the league, played three CL home games + 4 UC games and generated matchday revenues of €22.4m (source: Deloitte Football Money League 2008).That’s not a big difference at all.
Now, one reason could be that the big two in Spain can afford to charge very high prices and in return also lift the average of the rest of the league. Another very likely reason is the lack of VIP boxes and business seats in Spanish stadiums or the fact that Spanish clubs can only charge significantly less for these premium seats than Bundesliga clubs. Because VIPs contribute a considerable amount to a Bundesliga club’s matchday revenue these days and the majority of Bundesliga clubs have a stadium with a high amount of VIP boxes and business seats.
Still, charging more for a ticket is certainly one way for Bundesliga clubs to increase revenues. But you need to find a way to communicate it to the fans. E.g. Cologne has significantly raised ticket prices this season under the premise that the club will use the extra cash to finance players like Podolski. That worked like a charm. Average attendance is only marginally down and that’s mostly down to fewer fans from the visiting teams. But in the current economic climate with unemployment predicted to rise this year, it would be difficult to sell a significant rise in ticket prices to the fans.
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Any idea how this compares to other leagues? Not necessarily just raw profit/loss but stability wise too? Is the Bundesliga in better shape than say EPL in some respects with so many clubs taking on a ton of debt-
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I don’t know really. But generally: there is a consistent level of doom mongering when it comes to football finances, but the actual amount of doom is always rather low. Football clubs are like banks, the big ones are too big to go down or to get punished for their sins and excesses.
Just pointing fingers at clubs with debts is a bit too simple as well. As long as you can service the debts there’s no problem and you can run a sustainable football club, despite huge debts. Also, a club could have €300m declared as debts, but if this money was lent to the club in form of an interest free loan without a specific due date, then the danger for the club is rather theoretical. See Chelsea, where Abramovich converted his interest free loans into equity just like that and wiped out all debts.
So equalling high debts with low financial stability isn’t necessarily true.
There are a lot of unsustainable clubs in Europe of course. But some enjoy the benefit of a rich benefactor, who is willing to pay the bills. Others are in trouble. In the end, the Bundesliga shouldn’t hope or wait for somebody else to go bankrupt. That’s maybe Uli Hoeness’ wet dream. UEFA’s plans in terms of club licensing and forcing financial sustainability onto clubs should enhance the Bundesliga’s financial competitiveness though. Especially compared to Spain and Italy. The EPL is still generating several hundred million Euros more each year. That’s something where the Bundesliga needs to find new revenue streams to catch up and rely on good youth development and clever scouting in the meantime.
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Wasn’t it Valencia that still had problems this year in just meeting their payroll? And left their players unpaid for long stretches? Why aren’t there regulations against that kind of stuff and why is it allowed to go on and on for many months!
The Bundesliga does have the most teams in the top 12 for attendance average which is a pretty imppresive feat in itself.
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Well for a quick answer, anytime you have massive amounts of debt you will be unstable. Even with positive forecasting… anything can derail that. Now with the economy in its situation, this will just add to the problem. Even when you have owners like Roman Abrahmovic and the middle eastern contingency of Man City who can pour millions into a club, sooner or later it comes a time when they lose interest and try to sell off. Hopefully this wont happen because as much as I despise clubs like Man City, Chelsea and Manu, I dont want them to disappear into lower leagues let alone disappear completely. However I am so much looking forward to getting our 4th seed back into CL! Its just too bad we arent taking it from the EPL instead of SerieA.
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