The German Bundesliga Clubs and Their Future - An Outlook on the Robustness of the Clubs in Times of Covid-19 - Leipzig ...
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The German
Bundesliga Clubs
and Their Future
An Outlook on the
Robustness of the Clubs
in Times of Covid-19
Leipzig, May 14th, 2020
© GQ
The research is led by Prof. Dr. Henning Zülch, Philipp Ottenstein
and Ewald Manz as practical partner
Team Introduction
Heads of Research Practical Partner
Prof. Dr. Henning Philipp Ewald
Zülch Ottenstein Manz
HHL Leipzig Graduate HHL Leipzig Graduate Partner at
School of Management School of Management Odgers Berndtson
Chair of Chair of Sports|Media|Entertainment
Accounting & Auditing Accounting & Auditing
henning.zuelch@hhl.de p.ottenstein@hhl.de ewald.manz@odgersberndtson.com
+49 341 9851-701
2
The research team led by Prof. Dr. Henning Zülch conducted an
in-depth analysis of the German Bundesliga clubs
Team Introduction
Research Team
Moritz Leon Maximilian Tobias Lukas Roman
Moerke Lattermann Deutschmann Lienesch Schön Pastoors
MSc20 MSc20 MSc20 MSc20 MSc20 MSc20
HHL Leipzig HHL Leipzig HHL Leipzig HHL Leipzig HHL Leipzig HHL Leipzig
Graduate School of Graduate School of Graduate School of Graduate School of Graduate School of Graduate School of
Management Management Management Management Management Management
moritz.moerke leon.lattermann maximilian.deutschmann tobias.lienesch lukas.schoen roman.pastoors
@hhl.de @hhl.de @hhl.de @hhl.de @hhl.de @hhl.de
3
Agenda
1 Introduction and Motivation Pages 5 - 6
2 Recommendations Pages 7 - 14
3 Market Understanding Pages 15 - 18
4 Financial Analysis Pages 19 - 20
5 Bundesliga Scoring Model Pages 21 - 27
© Bayerischer Rundfunk
1 2 3 4 5 Introduction and Motivation
The outbreak of Covid-19 in Germany reveals several challenges for
the Bundesliga clubs
Covid-19 and the Bundesliga
December March 8th: April 15th: April 23rd:
January 27th: March 13th:
2019: Last regular Prohibition of larger DFL publication
First case of Decision on
Outbreak of matchday of events until August of ghost game
Covid-19 in Bundesliga
Covid-19 in German 31st German concept starting
Germany break
Wuhan Bundesliga government May 9th
December January February March April May
2019 2020 2020 2020 2020 2020
January 14th: March 11th: March 31st: April 17th: May 16th:
Mr. Seifert claims First ghost DFL web conference – Agreement with The Bundesliga is
collective action for game in 13 out of 36 clubs are broadcasters on the expected to restart in
youth development the 1. acutely threatened by payment of the 4th the form of ghost
during annual kickoff Bundesliga insolvency broadcasting rate games
5
1 2 3 4 5 Introduction and Motivation
The study follows a top-down approach considering both the
overall market and the single club perspective
Approach
Market Financial Multi-dimensional
Evaluation Recommendations
Understanding Analysis Analysis
Understanding the Understanding the Understanding the holistic Comparing the multi- Developing guidelines
Objective
business model financial situation of the long-term viability of dimensional for overcoming challenges
Bundesliga and the clubs as a result of the clubs going beyond performance of the clubs
relevant success factors Covid-19 short-term financial figures
effects
Covid-19 hits German Game break impacts Short-term financing is Identification of Ensuring future success
Why?
Bundesliga during liquidity and solvency ensured by broadcasters differences and trends and increasing crises
booming resilience
Market analysis and Financial analysis of the Analysis of the clubs Scorecard development Understanding pain
international clubs with respect to regarding three additional based on relative points and comparing the
benchmarking against liquidity, solvency, dimensions: sporting importance of dimensions strengths and weaknesses
What?
other leagues (Premier investment management success, player-talents to create a unified ranking of clubs with potential
League, La Liga, Ligue 1, and operational development and challenges
Serie A) management and management quality
profitability
Report of the leagues e.g. Reports of the clubs e.g. Web-based research, Web-based research, Web-based research,
source
“DFL Wirtschaftsreport” annual statements, external studies and external studies and external studies,
Data
additional information rankings, rankings, interviews with clubs
provided by clubs interviews with clubs interviews with clubs
6
1 2 3 4 5 Recommendations
To overcome the crisis and ensure sustainable business
performance, different measures should be adopted
Recommendations
Short-Term* Mid-Term* Long-Term*
Strengthen equity
position
Diversify revenue Professionalize player-
streams talents development
Analyze board Enable transition to
Cost-cutting
structures professional squad
Enable access for Professionalize
investors financial reporting
Reassess performance of
Facilitate data access
player-talents development
Analyze internal processes
& competencies
*Short term: 3 years
7
1 2 3 4 5 Recommendations
Several recommendations will enable the clubs to improve their
financial situation
Recommendations – Financial Situation
What? Why? How? When?
Analyze cost
1 Cost-cutting
Improve profitability
& liquidity
structure & employ
opportunities
Short-term
2 Strengthen equity
position
Improve stability
Retain share of
broadcasting revenue
Long-term
3 Enable access for
investors
Improve liquidity &
stability
Change legal form to
corporation
Short-term
Weaken
4 Diversify revenue
streams
dependencies &
improve profitability
Create new business
models (e.g. e-sports)
Mid-term
81 2 3 4 5 Recommendations
Several recommendations will enable the clubs to improve their
management quality
Recommendations – Management Quality
What? Why? How? When?
Strive for
1 Analyze board
structures
Improve supervisory
board quality
independent board
members
Mid-term
2 Professionalize
financial reporting
Attract investors
Establish investor
relations department
Mid-term
3 Facilitate data
access
Improve
transparency
Publish current data
& reports online
Mid-term
Analyze internal Improve internal Check best practices,
4 processes and
competencies
communication
processes
also from other
industries
Mid-term
91 2 3 4 5 Recommendations
Several recommendations will enable the clubs to improve their
player-talents development
Recommendations – Player-Talents Development
What? Why? How? When?
Professionalize
1 player-talents
development
Increase pro
production
Allocate more budget
to youth department
Long-term
Enable transition
2 to professional
squad
Improve internal
transformation rate
Integrate promising
youth players earlier
Long-term
Reassess performance Improve controlling
3 of player-talents
development
concerning target
markets
Incorporate pro
production rate
Mid-term
101 2 3 4 5 Recommendations
The actions recommended for the previous dimensions will also
impact future sporting success
Recommendations – Sporting Success
What? Why? How? When?
As sporting success is hardly predictable, realizing the
previous recommendations is expected to pay off in terms
of sporting success in the long run.
111 2 3 4 5 Recommendations
In order to be viable in the future, it is strongly recommended to install a
DFL-Taskforce when considering the analysis’ findings
Answers to Research Question
Besides the five flagged clubs,
1 another seven clubs perform
mediocre regarding the four analysis
dimensions.
The high revenue dependence on The findings of this
2 match operation indicates
insufficient management
study strongly
How robust are the professionalization. support the idea of
German Bundesliga installing a
clubs in times of DFL-Taskforce to
The lack of data transparency
Covid-19?
3 reveals deficits in financial
communication.
develop respective
incentives.
The significant differences in
4
management quality imply a lack of
overall Bundesliga governance
standards.
121 2 3 4 5 Recommendations
The guiding principles of the DFL-Taskforce should be based on
strong leadership pillars
Leipzig Leadership Model - Application for German Football
It is time to bring football back to its base!
To do that, football clubs should learn ...
... to know their purpose and direct all their actions towards it,
... to be effective in terms of strategic action,
... to be innovative in the sense of entrepreneurial action and
... to be responsible in a holistic sense.
Source: Kirchgeorg, Meynhardt, Pinkwart, Suchanek, Zülch (2019). Das Leipziger Führungsmodell: The Leipzig Leadership Model. Leipzig: Academic Press.
131 2 3 4 5 Recommendations
The Bundesliga clubs have to establish professional financial
communication and ensure credibility as well as transparency
Disclaimer
Disclaimer
“ Es fehlt an
Glaubwürdigkeit
The data represented in this study was collected and analyzed in
the best knowledge and belief. However, the data and especially
recommendations are to be understood without prejudice to not
available or reliable data.
As aforementioned the transparency of financial as well as
organizational data was limited, however, every club was asked to
participate in this study and provide up-to-date data.
Therefore, transparency and credibility of data disclosure can be
und Transparenz identified as one major deficit of German Bundesliga clubs.
Due to the Bundesliga clubs’ role as protagonists in German
business reality, solving this deficit should be considered as major
Sven Mislintat,
imperative. The hereby generated transparency and
Sports Director VfB Stuttgart
credibility should be comparable to the one implemented on
29.04.2020
capital markets.
Quote Translation: There is a lack of credibility and transparency
141 2 3 4 5 Market Understanding
Considering its revenue diversification and personnel expenses, the
German Bundesliga is the most stable European league
Market Analysis Before Covid-19
Revenue Distribution Personnel Expenses
Matchday Sponsoring & Merchandising Total Revenue in m€* Personnel expenses
Broadcasting Others Personnel expense to
by revenue
revenue
100% 6,000 100%
16.10%
21.75%
27.08% 31.04% 30.04%
80% 5,000 75% 80%
66% 66%
27.53% 20.21%
4,000 59%
60% 53% 60%
In m€
3,000
59.01% 52.36%
40% 58.37% 40%
39.39% 46.75% 2,000
20% 20%
1,000
13.92% 16.98% 16.60%
11.59% 11.29%
0% 0 0%
Compared to the European top leagues, Bundesliga Compared to the European top leagues, Bundesliga
displays best diversified revenue profile displays lowest personnel expense ratio to revenue
German Bundesliga displays the most diversified revenue profile and lowest ratio of personnel expenses to
revenue
151 2 3 4 5 Market Understanding
The development of revenues and transfer activities indicates a
strong growth of the Bundesliga during the last decade
Market Analysis Before Covid-19
Revenue & Expenditure Transfer Cashflow
Revenue Expenditure Transfer expenditure Transfer revenue
4,000 1,000
900
800
3,000
700
600
in m€
in m€
2,000 500
400
300
1,000
200
100
0 0
2008/09 2013/14 2018/19 2005/06 2012/13 2019/20
Continuously growing revenues with a CAGR of 8,9% Steep increasing transfer cashflows
Proportional growth of expenses Several years with deficits in transfer balance
Even though transfer market might be overheated, the overarching circumstances in a booming market should
have enabled Bundesliga clubs to successfully drive business
16Have the Bundesliga
clubs been leveraging
the booming market in
order to stabilize their
financial situation?
171 2 3 4 5 Market Understanding
A Kicker article raised several questions that provided the impetus
for the analysis of the Bundesliga clubs
Starting Statement
Key Questions
“ 13 der 36 Profivereine
droht wegen der
Which clubs are affected?
Why are these clubs at risk?
Corona-Pandemie die
Insolvenz noch in
dieser Saison What are the implications?
03.04.2020
Quote Translation: 13 of 36 clubs face bankruptcy this season due to the corona pandemic
181 2 3 4 5 Financial Analysis
Compared to the Kicker statement, this analysis shows that five
1. and 2. Bundesliga clubs face financial distress
Financial Analysis
Research Method Flagged Clubs Limitations
Analysis of ratios in the 1. Bundesliga Conservative interpretation
following categories of the respective ratios
FC Schalke 04
Liquidity Restricted financial
1. FC Union Berlin transparency of 1. and 2.
Solvency
SC Paderborn 07 Bundesliga clubs
Investment Management
2. Bundesliga Dark figure significantly
Profitability & Operating
higher due to restricted
Management VfL Osnabrück
financial transparency
Karlsruher SC
Five clubs of the 1. and 2. Bundesliga are financially unstable. The dark figure might be significantly higher due
to missing financial transparency of clubs
191 2 3 4 5 Financial Analysis
The deal with broadcasters ensures the short-term survival of
German Bundesliga clubs
Broadcasting Deal
Takeaways
“ Germany’s
Bundesliga could be
“ Rettungsgeld von
Broadcasters will ensure
short-term liquidity
Sky: 230 Millionen Financial view is not
the first major enough to evaluate the
Euro sollen
football league back clubs’ business forecasts
Bundesligaklubs das
playing amid the
Überleben sichern
coronavirus A holistic approach is
pandemic necessary to assess the
clubs’ future viability
24.04.2020 21.04.2020
Quote Translation: Rescue money from Sky: 230 million euros should ensure the
20
survival of Bundesliga clubs1 2 3 4 5 Bundesliga Scoring Model
The final ranking is based on four dimensions namely sporting success,
financial situation, management quality and player-talents development
Methodology
Data limitation: Sporting Success Financial Situation Process limitation:
Reasoning for importance: Reasoning for importance:
Data availability: Key performance indicator Base for all other dimensions Relative ranking and
Due to the different Impact on public visibility and thus Highly affected by Covid-19 corresponding base
legal forms, revenues Premise for future club success line
disclosure is Core business of soccer clubs
For the ranking on
heterogeneous across Elements: Elements: different dimensions, a
clubs Recent Success, Market Value, National 30% 40% Liquidity, Solvency, Investment relative approach was
Data reliability: Players, Trainer Team Management, Profitability and used.
The usage of external Operating Management
While the best club
studies reveals the
Player-Talents received the score of
risk methodological Management Quality
Development 36, all clubs that did not
errors or biased
results Reasoning for importance: 15% 15% Reasoning for importance: publish any data,
Revenue generation Deployment of resources received one point less
Punctuality: Long-term impact on sporting Coordination of all other dimensions than the worst club that
Different fiscal years, success Company-like structure requires published data.
external study origins Attraction of new talents strategy and risk management The reasoning is that
and the timeliness of
Elements: Elements: transparency of clubs is
data might result in
Pro Production, Average Age, Pro Board Quality, Governance, Public already accounted for in
deviations
Transformation, DFB Youth Players Disclosure, Financial Transparency management quality.
Insights from financial analysis:
As the financial position is highly affected by liquidity and solvency, flags for those two dimensions are introduced.
Flags did not impact the score itself, but rather the future financial stability.
211 2 3 4 5 Bundesliga Scoring Model
A combined analysis shows that certain 2. Bundesliga clubs
perform better than some 1. Bundesliga clubs
Rank Club Total Points Prognosis Rank Club Total Points Prognosis Legend
1 FC Bayern München 31,6 19 1. FSV Mainz 05 20,3
2 Borussia Dortmund 30,3 20 SV Werder Bremen 20,0
Strong position
3 Eintracht Frankfurt 28,1 21 FC St. Pauli 19,8
4 TSG 1899 Hoffenheim 25,5 22 Fortuna Düsseldorf 19,7
Stable position
4 Hertha BSC Berlin 25,5 23 1. FC Union Berlin 19,6
6 Bayer 04 Leverkusen 25,3 24 VfL Bochum 19,1
Mediocre
7 FC Augsburg 25,2 25 DSC Arminia Bielefeld 18,0
(to be reformed)
8 RB Leipzig 24,8 26 SV Darmstadt 98 17,7
9 Borussia Mönchengladbach 24,5 27 Dynamo Dresden 17,3
Flagged
10 Hamburger SV 23,4 28 SSV Jahn Regensburg 16,8
11 FC Schalke 04 23,3 29 SC Paderborn 07 16,3
12 1. FC Köln 22,8 30 SpVgg Greuther Fürth 16,2
13 VfL Wolfsburg 22,6 31 FC Heidenheim 15,5
14 VfB Stuttgart 21,5 32 FC Erzgebirge Aue 13,6
15 SC Freiburg 21,1 33 SV Wehen Wiesbaden 13,1
16 Hannover 96 21,0 34 VfL Osnabrück 12,2
16 Holstein Kiel 21,0 35 SV Sandhausen 11,9
16 1. FC Nürnberg 21,0 36 Karlsruher SC 11,7
Flagged: Regardless of the overall situation of the club, the financial situation requires special
22
attention. For example, FC Schalke 04 shows financial instability, but its overall structure, especially
the development of player-talents, can be considered stable and positive1 2 3 4 5 Bundesliga Scoring Model
While five clubs show urgent financial deficits, additional seven
clubs reveal an overall insufficient performance
Explanation of Shortcomings
To Be Reformed Flagged Clubs Clubs ‘To Be Reformed’
FC Heidenheim SpVgg Greuther
Analysis of all four dimensions Analysis of financial situation SV Wehen
Fürth
shows deficits in clubs’ reveals significant deficits Wiesbaden Dynamo Dresden
business model regarding regarding liquidity and SSV Jahn SV Sandhausen
Sporting Success solvency Regensburg FC Erzgebirge Aue
Financial Situation These shortcomings in one
dimension are expected to Flagged Clubs
Player-Talents Development
overshadow the clubs’ FC Schalke 04
Management Quality performance in other 1. FC Union Berlin
dimensions SC Paderborn 07
VfL Osnabrück
Karlsruher SC
Five 1. and 2. Bundesliga clubs reveal an unstable financial performance. Additional seven clubs show an
unsatisfactory performance regarding the four analysis dimensions
Please note in this regard the limited data access and limited financial transparency
231 2 3 4 5 Bundesliga Scoring Model
Future sporting success requires an effective and efficient player-
talents development in terms of a high pro production rate
Deep Dive Player-Talents Development – Pro* Production Rate
„Das Ziel eines Trainers darf es nicht sein, die meisten Spiele zu gewinnen,
sondern die meisten Spieler zu entwickeln.“ - Markus Krösche, Sportdirektor RB Leipzig (2019)
50% New KPI - Pro Production Rate
Player- Formula (Ratio) Evaluation Results
Talents Total youth players that Effectiveness – Pro
Develop- reached 1./ 2. production in European SV Wehen Wiesbaden
Bundesliga, European top leagues as target TSG 1899 Hoffenheim
ment market Holstein Kiel
top leagues**
Number of years that Efficiency – Pro
FC St. Pauli
the club has been in production in terms of
SpVgg Greuther Fürth
the 1./ 2. Bundesliga clubs’ professional
SC Freiburg
history
Several established Bundesliga clubs fail in producing European top players whereas younger clubs perform
better considering player-talents development since joining the Bundesliga
*Pro=Professional ** Premier League, La Liga, Serie A, Ligue 1; Source: Rblive (2019)
Quote Translation: A coach's goal should not be to win most games, but to develop
24
most players1 2 3 4 5 Bundesliga Scoring Model
Consolidated key findings resulting from the four-dimensional
analysis are the foundation for future recommendations
Key Findings
Sporting Financial Overall, five clubs show flags indicating
Success Situation financial instability
Clubs with higher recent national and
Clubs organized as corporations perform
international success tend to have a higher
better
national player quota
Majority of clubs shows sufficent stability to
Clubs with higher recent national and
overcome the crisis
international success tend to have a higher
team market value Opaque data landscape likely leads to
underestimation of the number of clubs under
pressure
Newcomer perform relatively better than Majority of board members is not
established clubs independent
Several clubs fail in producing pro players for Variety of legal forms does not ensure
European top leagues consistency
Overall, 1. Bundesliga clubs perform better The majority of Bundesliga clubs lack
than 2. Bundesliga clubs Player- transparency
Talents Management
Development Quality
25“Ist die Krise
überstanden, wird ein
Umdenken stattfinden
müssen.
Ein 'Weiter so'
kann es nicht geben.”
Robin Dutt, Ex-DFB Sports Director
“Ein 'Weiter so' kann
und darf es nicht geben.”
Lutz Pfannenstiehl, Sports Director Fortuna
Düsseldorf
Quote Translation:
Once the crisis is over, a rethink will have to take place. There can be no 'business as usual'.
There can and must not be 'business as usual'.
Source: Sport Bild (2020), WDR (2020); Picture: Frankfurter Neue Presse (2019)“Es muss ein Konzept für
den neuen Fußball geben
und der beinhaltet für
uns zum Beispiel eine
gerechtere Verteilung
von Fernsehgeldern, aber
ganz klar auch die
Verpflichtung, nachhaltig
zu wirtschaften.”
Helen Breit von der Faninitiative “Unsere Kurve”
Source: Helen Breit as interviewed in ZDF (2020); Picture: Veltins-Arena (2020)The German
Bundesliga Clubs
and Their Future
An Outlook on the
Robustness of the Clubs
in Times of Covid-19
Leipzig, May 14th, 2020
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