…or how fan ownership works…
German Football. Yesterday. Earlier this year.
Here’s a post I wrote in True Faith issue 85, written on January 16th 2011. It’s a bit dry, but I can’t do wit and jokes about animal sexual activity every time…
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In the wake of our ownership’s reasoned decision to sack our league-winning manager with us sitting in 11th place (when most of us would have ripped the hands off anyone who would have offered that, assuming people who have that kind of power actually exist), it seems that now is a good time to look at how fan ownership works in practice in Germany.
In a time where Mike Ashley has been unable to run our club without resorting to common sense even once since sacking Fat Sam, and foreign owners have saddled Liverpool and Manure with huge debts when ‘buying’ them, fan ownership has never been a more popular solution to the ills of the modern English game. Many people refer to the way German football clubs are run as an ideal solution, the antithesis of the rampant greed and survival-at-all-costs mentality of many Premier League owners. While the German system does offer some solutions to the current problems in the English game, it does, as does any system, find itself vulnerable to its own unique problems.
To start with, saying German clubs are fan-owned is pretty misleading. With the exception of Bayer Leverkusen and VFL Wolfsburg, which were founded as the works teams of Bayer and VW respectively, all professional teams (3rd division and above) have to be majority-owned by the club itself (at least 51%). Using FC Bayern as an example, 81% of the club is owned by FC Bayern München e. V. (the members), with Adidas and Audi paying €77million and €90million respectively to each own slightly over 9% of the club. Fans can ‘buy’ membership in their clubs for a nominal annual fee (for Hertha BSC, the capital’s largest club, it is €60), which gives them some, albeit limited, voting rights. There are differences between clubs as to how this actually works in practice: once again, using Hertha as an example, the members meet twice per year, usually in May and November. In May, they vote for a board (which serves a one-year term) and in November there is a mid-term meeting to keep the members updated. The fan-elected board choose a President, who serves a four year term. The President selects a CEO, and together they choose a Manager (in England this would be the Director of Football) if there isn’t one already – or they don’t like the one they have. The Manager has a say in any coaching (managerial) appointments and is ultimately responsible for the football side of things. The example above is taken from Hertha, but the majority of German clubs are run along similar guidelines, although the length of terms and exact responsibilities may differ from club-to-club.
It is also important to realise that, as always with such situations, such mass membership will include varying degrees of member activity. Hertha has nearly 20,000 members, but only around 1,200 of its members usually turn up for meetings. There is always a danger that such a system could be open to a degree of exploitation by the more militant minorities within the membership, especially if the actual percentage of members attending meetings is so low.
So, fan-ownership is not actually correct: fan representation would be much more correct. While it would be a great thing to have a say in how our club is managed, or mismanaged as the case may be, should we adapt a similar system we would only have a choice of people to represent us. Sure, it would immediately be better than the current ridiculous situation (where it seems we are not just ignored, but our wishes are forcibly kicked in the bollocks at every turn), but in practice, once we have chosen, we can then do nothing until the next election. In the meantime, important decisions would be made on a daily basis, and our only recourse would be to not vote for the same board members next year, by which time the damage could already be done. Although the potential for someone like Mike Ashley running a club is definitely lower, as club employees do not actually have any profits going into (or losses coming out of) their own pockets, the system is not immune to corruption at board level: with ‘Average Joes’ drafted in on an unpaid basis to represent their club, there is the potential for board members to act in the interests of the President (who controls any bonus payments to board members) at the expense of the members who elected them.
The German FA’s restrictions on club ownership do, however, restrict the ability of someone, such as Putin’s monkey (Abramovich) or the dude who owns Citeh, buying up the club and using it as a personal plaything. At the end of the day, many in England would argue that this is a good thing, as this can lead to a distortion in competiveness (who can match Citeh in the transfer market?), and place a great deal of a club’s policies at the whim of someone who has no real ties to the club or the area.
There have been comments within Germany, however, saying that their system is outdated, and proposing something closer to the English model, where outside investors would be allowed to control more than 49% of the club. Hannover 96 President Martin Kind recently challenged the wisdom of the 50+1 rule, protesting that it leaves German clubs at a competitive disadvantage compared to clubs in England, Spain and Russia. He complained that under the current system, his team only managed to turnover around $70,000,000 per year, making them unable to compete with teams like Bayern and the privately-owned Wolfsburg and Leverkusen. For comparison, according to Forbes’ list from April 2010, we turned over double that, and were the twentieth richest football club in the world.
However, despite such limitations on ownership, five German clubs were ranked ahead of us in that list: FC Bayern were 5th, Schalke 04 were 11th, Hamburg 14th, Werder Bremen 16th and Borussia Dortmund 19th. With this in mind, perhaps it is naive to assume that German clubs suffer due to the restrictions on how money comes into their clubs. Perhaps some German clubs are actually extremely good at maximising revenue, despite the ‘handicap’ of not being able to sell out completely to a rich benefactor. Either way, German clubs seem happy with the current situation: Kind’s proposal was voted down by 32 of the 36 Bundesliga clubs (three teams abstained, leaving Hannover 96 as the sole voice against the status quo).
Looking at the above-mentioned ‘rich’ German clubs in more detail, it is easy to see that Bayern are obviously doing something very well (both on and off the field), despite being over 80% owned by its members. Schalke actually have a huge level of debt, comparable the debts at Liverpool, Man Utd and Real Madrid (in terms of percentage of the club’s value, at a massive 50%), although a highly generous sponsorship deal with Russian energy giant Gazprom has helped their finances. Schalke is actually 100% fan-owned, but the fact that it is still able to accumulate such levels of debt is worrying.
I spoke to a friend who is a member of Hertha and, although he can tell me his club has debts of €37 million, he can’t tell me anything more detailed about their finances than that. Despite the perceived level of fan involvement, fans are not actually kept up to date with the full picture of their club’s actual finances – and in many cases it is fair to assume that fans may not be interested in all of the grizzly details, especially if a club is doing well, as Schalke has been recently. Dortmund have a smaller proportion of debt (32% of their value – although, this doesn’t compare favourably to Bayern at 14%, Bremen and Hamburg at 0% and the Toon at 8%), and have quite a different organisational structure to other Bundesliga clubs. They, somewhat confusingly, created a new listed entity to run the club. However, the shareholders of this company are in a minority when it comes to voting at the annual meeting. The member association actually owns less than 10% of the shares in the company that runs the club, but has the majority of the votes when meetings are held. Basically, investors can buy shares in Dortmund, but the fans/members still have the largest say when it comes to board elections. Creative, albeit confusing to get the head around.
After the comprehensive vote against Kind’s proposal, the President of the German Football League commented that “The Bundesliga remains faithful to itself and will continue to build on the factors which have made a decisive contribution to making German football successful over recent decades. These are stability, continuity and being close to the fans.” And German football has certainly thrived – at least domestically. The Bundesliga has the highest attendances and the lowest ticket prices in Europe (as the majority of profits go back into the clubs, enabling them to set prices lower). In the last ten years, five different teams have won the Bundesliga (although Bayern has won it six times in this period), compared to three in England (with Manure winning it five times).
But why are the two ownership models so different?
The game was organised later in Germany and certain social factors lead to it evolving in a different way. In Germany, football became one of a number of sports that sports clubs played (alongside gymnastics, for example). These sports clubs catered for their members, who paid to be part of the club. Professional football did not arrive in Germany until the early 1960s (the ’54 World Cup winning team were amateurs), by which time the football clubs were entrenched within their sporting clubs. In England, football clubs were by-and-large independent football clubs from their foundation, and in order to build facilities, clubs had to form limited companies in order to raise the necessary financing. Simply put, in England, clubs have always been run in the boardrooms, whereas German clubs have always been run, to an extent, with the inclusion of the community.
The whole argument about which system is better is subjective, as neither solution is perfect. We currently accumulate a lot of money from around the globe due to the high quality players our league attracts, our teams are regularly amongst the elite in European competitions, and there is always the chance of a Geordie billionaire taking over our club and running the club in our interests. However, there is also the chance of a Cockney billionaire taking it over and… hang on… that has already happened. Also, our national team is shite (though personally I don’t care about that). If we changed to the German model, the league would struggle to attract the best players in the world (and whether we currently do is another argument for another time) and the club would attract less quality players (ha!), but the majority of any profit made would go back into the club and the area, and we would at least have some voice in the way our club is run.
There are differences between the two models obviously, and there is a lot more that can and will still be said on the debate as what is best for English football (and more importantly, our club).
Stripping away the arguments, the basic trade-off is between enhanced prosperity and the soul of your club.
I know which I would choose.
Keep the faith.
