The Czar Is Back

HALLO! BUNDESLIGA! (You have to watch Gol TV to understand)

And this time its personal. Not really. I just thought it would sound cool. Anyway, here is the newest bit from TK’s very own Financial Czar. The Serb has been busy researching his thoughts on fan ownership. It’s Bundesliga time:

Big Sleezy’s recent post about the fivepoundfootballclub.com a few days ago made the gears in my economist brain start to question…what’s the deal with fan ownership?  I like the idea of owning a portion of a football club, and will proudly place my ownership certificate from FPFC on the wall next to my National Geographic Society membership certificate (free with a $15 discount magazine subscription).  Recently, there has been a lot of uproar with dubious rich owners running clubs into the ground of insolvency and sinking the ship into the abyss of debt, but I don’t think that Chelsea and Man City fans are annoyed by their owner’s financial largess.  So what’s the deal with fan ownership?

The most poignant example is the Bundesliga, and Deutschland’s 50+1 rule.    Fans own the majority of the club, and the rest is open to investors. Simple and quality right?  Well…This system does have its drawbacks.  The 50+1 rule does restrict outside investment for players, stadiums, and other football related spending. Furthermore, fan ownership does not guarantee prudent club management as Dortmund and Shalke have shown, and wage restrictions (based on % of revenue) make it difficult to compete with big European clubs for world class signatures.  Ultimately, the biggest drawback can be seen with German clubs struggling to compete on the European level. Bayern and its robust revenue excluded, very few Bundesliga clubs have had sustainable success in the Champions League.  Hopefully Bayern Munchen can pull one out against Inter for all “Klubs in Der Faterland” (The Czar lived in Austria, hence his use of German) and up the UEFA coefficient for the Germans.  Any surplus revenue from Bundesliga clubs go right back to the club instead of paying off debt (like the Glazers like to do), or funding silly snuggie giveaways(a favorite of Mr Hicks). The board of director’s is made up of fan delegates, as well as other major private investors.  In this sense, the Bundesliga is about as Democratic as America, with a small group of elected representatives running policy with a handful of rich business men.

Unlike all sovereign governments, this set-up works in Germany because of the intense loyalty of the fans.  Bundesliga clubs have the highest game-day attendance numbers of any league, and as a result a very lucrative TV market.  They also feature the lowest ticket prices. Whether it works in other places like the MLS or the EPL is yet to be seen. (If you read my last post, you will see why I think it won’t), but the ultimate financial proof of its effectiveness is shown on the income statement as the Bundesliga is the most profitable league in the world. Now that, Sir Whining Baby Ferguson, is typically German.