DFL is heading for escalation
What’s behind the billion dollar dispute between the Bundesliga clubs
December 9, 2023, 11:28 a.m
The fans are raging, the opposition is forming – and the supporters are threatening a split: professional football is once again heading for a breaking point in the heatedly debated investor issue. When the bosses of the 36 first and second division teams vote again on the possible billion-dollar deal in the Sheraton Hotel at Frankfurt Airport on Monday, in the worst case scenario there will be a big bang.
What’s up?
After an investor’s entry into German professional football failed in May and there were severe upheavals as a result, there is a second attempt. On Monday, the heads of the 36 first and second division clubs will gather in Frankfurt/Main to vote again on a deal with a lender.
How did that happen?
The Presidium and the Supervisory Board of the DFL each decided by a majority (not unanimously) that a new attempt should be made to find a donor. If the vote is positive, the two DFL managing directors Marc Lenz and Steffen Merkel would be given the mandate to complete the deal.
What is the new plan?
Six to nine percent of the shares in a DFL subsidiary, to which all media rights are outsourced, are to be sold for 20 years. There should be between 800 million and one billion euros for this. Ideally, 600 million will go to the DFL central administration to further develop the business model (digitization, streaming platform, etc.). According to the valid distribution key, the clubs will receive 300 million to compensate for the initially resulting shortfall in media income. The remaining 100 million will be used to create a compensation system that rewards clubs that travel abroad for advertising purposes.
Who are the possible donors?
There are said to be four interested parties from the so-called “private equity sector”. These are equity investment companies that specialize in forms of investment. The assets managed by private equity worldwide amount to several trillion euros.
What do the fans actually say?
Despite various changes, the project is still viewed “very critically” in fan circles, as Thomas Kessen from “Our Curve” emphasized. Especially from the point of view of the second division clubs, approval would be “completely paranoid”. It wasn’t just on the last Bundesliga weekend that there were massive protests in the corners. The citizens’ movement Finanzwende also considers the new plans to be “dangerous”.
What is the history?
The first attempt to get an investor on board failed. At that time, the necessary two-thirds majority was missed. The plan called for selling 12.5 percent of the shares in a subsidiary over 20 years. Two billion euros should be raised. The model was risky because even with moderate growth in revenue (currently just under 1.3 billion per season), 12.5 percent would have been significantly more than 3 billion over two decades – so all in all a huge loss-making business.
Why did the deal fail back then?
Many clubs did not agree with the distribution of the money. “Only” 750 million of the 2 billion euros should be put into central marketing and the development of a streaming platform. The rest should go to the clubs through various pots. The opponents feared that the sporting balance of power would be further cemented and that a financier would exert influence.
So what did the process look like?
Lenz and Merkel informed the clubs about the plans in several rounds of discussions. “Red lines” were drawn. Sovereign rights should not be surrendered. There should be no “co-determination rights of a partner with regard to competitive games abroad, kick-off times or in the area of game planning”. And: “After the temporary minority shareholding expires, the licensed rights would automatically revert to the DFL eV.”
What are the weak points of the plan?
The planned buffer of 300 million euros compensates for the shortfall in income through the percentage payment to the investor for approximately three seasons. Revenues would have to increase dramatically within this period – otherwise there is a risk of another loss-making business, at least temporarily. The question also arises as to why the clubs cannot provide the necessary investment amount of 600 million euros on their own. If the sum were to be invested over a period of three years, that would be 200 million euros per year – an average of 5.55 million euros per club and year. That seems feasible. Especially since the money would not be collected as a lump sum, but based on the distribution key. Then the big ones would have to provide more and the small ones less.
Why don’t the DFL bosses want this internal financing?
Merkel does not believe this path is capable of gaining a majority. “Internal financing would mean significantly higher taxes from the clubs to the DFL,” said Merkel: “That would reduce the financial resources of all clubs, thus restricting individual design options and ultimately possibly also reducing competitiveness.” In plain language, this means that the budgets are so tight that they cannot afford to pay taxes even in the small millions.
How does it end?
This time things look better in terms of the necessary two-thirds majority, as the new plan does not provide for any distribution of fresh money to the clubs. Criticism regarding the further cementing of the balance of power cannot arise. According to a “Kicker” survey, the vote is still open. 13 clubs have now confirmed their approval. 15 clubs did not provide any information, two clubs (Cologne, Freiburg) announced their rejection, and one club (Osnabrück) wanted to abstain. German football “with its history and its anchoring in society” does not “culturally” fit the approach of a private equity company, emphasized 1. FC Cologne.
What happens if the investor entry is rejected?
Already in May, when an investor’s entry failed under other conditions, there were severe upheavals within the league association. The separation of the Bundesliga from the rest as a result of the disagreement no longer seems unrealistic. But: We have to “be careful that we don’t end up in a situation in which the second division dictates what the DFL should do,” warned Bayer Leverkusen’s managing director Fernando Carro in the FAZ – and threatened with a view to the second division clubs. If the slimmed-down deal falls through due to their rejection, one would have to “seriously think about the future governance of the DFL.”