The view from Germany

Moneyball

June 25, 2013
By Uli Hesse
(Archive)

Hundreds of candles were burning in Duisburg last Tuesday - in vain. Some 3,000 MSV fans had congregated outside the stadium to pray and plead for their club. But on the following day a court of arbitration ruled that Duisburg's appeal for a Second Bundesliga licence would be rejected.

Bundesliga II
AssociatedDuisburg's Schauinsland-Reisen-Arena will not see Second Bundesliga football next season

What this boils down to is that tradition-laden MSV Duisburg will not be playing in the Second Bundesliga next season, even though they have avoided relegation fair and square on the field of play.

Somehow it was a fitting end to a season in which the foreign media were falling over themselves to laud the German game for all kinds of things - not least its financial stability - while things looked a lot less rosy from the inside.

So let's talk about money in this installment of the 'It's Not Quite What It's Made Out To Be' series. The first part is here.

• Uersfeld: The project to honour Dortmund's founder

First, let me explain what this licensing business is all about. You sometimes hear that the League bars clubs from participating in Bundesliga football if they have large debts or if their expenditures outstrip their earnings, some kind of German blueprint for UEFA's Financial Fair Play.

That's not quite correct. In reality, the licensing procedure is about one single thing only, namely erasing any doubt that a club will be able to complete the following season without becoming insolvent. To this end, a club opens its books to the League and says: this is what we will have to spend - on wages, stadium rent, debt repayment and so on - and this is what we hope to earn - from TV money, ticketing, sponsorship deals and so on. Some clubs even add surety bonds to their documents in which somebody, ideally a bank, promises to come to the rescue if need be.

In Duisburg's case, the League had too many doubts about too many items on the club's balance sheet. It considered MSV's financial situation to be so shaky that the club would be a risk factor in the Second Bundesliga. Hence the stop sign.

On the face of it you could say these events prove that the German licensing process, widely regarded as the reason for our clubs' supposed stability, is working well and will be applied with the necessary rigour. However, that's not even half the story.

It's safe to say that one reason why the League was so harsh on Duisburg is that there have been so many casualties of late. In the last eight months alone, a staggering amount of clubs have gone belly-up. The only reason this worrying development didn't draw wide attention was that it happened under the radar (read: below the top two divisions). However, many well-known clubs were involved.

Here are just a few examples.

In November, fourth-division VfB Lübeck declared insolvency for the second time in four years and stopped competing with immediate effect. Less than two weeks later, third-division Alemannia Aachen went into receivership. In the following month, another big third-division club - VfL Osnbarück - only stayed afloat because the city granted the club a loan of £3 million. In early June, Wuppertal could no longer pay the bills and were automatically demoted from the fourth division. At the same time, tradition-laden Kickers Offenbach were refused a licence for the third division. Four days later the club went into administration.

Most of these teams are reasonably well-supported - Aachen and Osnabrück drew well over 10,000 fans per game this season. Many have played in the Bundesliga or the Second Bundesliga not so long ago. They should have a lot of potential. Yet they can't make ends meet. In some cases the reason is simple mismanagement, in others it's a brand new and expensive stadium that has turned out to be a millstone around the neck, while in some it's still a big sponsor who's decided to get out of football. But whatever the particular background, the general fact remains that a great many of our clubs are not as financially healthy as we like to think, quite the contrary.

Oliver Bierhoff
APOliver Bierhoff has spoken out about the 50+1 rule

It may have been one reason why Oliver Bierhoff said in May: "I think we should be happy about companies or individuals who invest their money into football." What reads like an innocuous remark was in fact a controversial statement, because Bierhoff had been asked about the "50+1 rule" which prevents private ownership. "It's not automatically a bad thing when a private investor gets into a club," Bierhoff added.

Yet the vast majority of German fans disagree with that. The "50+1 rule" (explained in more detail here) is seen as a cornerstone of our game and viewed with envy in many countries where commercialism has run rampant. In January, even the BBC asked: "Is fan-ownership the answer to football failures?"

However, just a few weeks after Bierhoff had reopened the debate about "50+1", it became plain for all to see that the rule isn't as restrictive as it seems and that there are ways around it. That's because on June 2, RB Leipzig won promotion to the third division after a dramatic play-off game against Lotte (a small town seven miles west of Osnabrück).

Ostensibly, RB stands for Rasenballsport - Lawn Ball Games. That, however, is just a front. Everybody in Germany knows that RB denotes Red Bull, the energy-drink giant, and that this Austrian company runs the Leipzig club. The term is technically incorrect, but for all practical purposes Red Bull owns the team.

The company first tried to gain a foothold in the German game in November 2006. Red Bull approached Sachsen Leipzig, formerly Chemie Leipzig and at the time playing in the fourth division. The Austrians proposed putting a lot of money into the team if the club would be renamed Red Bull Leipzig. The city was a good choice, as Leipzig is large - more than half a million people live there - and has a long football history, yet no team in the upper echelons.

However, the company had to realise that corporate involvement is a lot more problematic in Germany than it is in Austria. Sachsen's fans were vehemently opposed to Red Bull becoming involved and the German FA informed the company that a club named after a commercial product would not be granted a licence for any of the top four flights.

So the Austrians retreated to think things over. Then they tried a different route. A couple of years later, they formed a new club and named it RB Leipzig. (In Germany, you need a minimum of seven members to officially register a club. RB Leipzig has eight - all of them Red Bull employees. The club has little interest in admitting new members.) In search of players, this new club approached small SSV Markranstädt, based eight miles east of Leipzig, and suggested incorporating - and, naturally, financing - some of Markranstädt's teams. Of course RB were really only interested in Markranstädt's top senior side, which had earned the right to play in the Oberliga Nordost, the fifth division.

RB Leipzig's long-term aim in Bundesliga football
GettyImagesRB Leipzig's long-term aim in Bundesliga football

The regional FA of Saxony agreed to the deal and also sanctioned RB's logo, which bears an uncanny resemblance to the image found on cans of Red Bull. Put differently, by the summer of 2009, the Austrian company had managed to infiltrate the German league system which supposedly bars commercial enterprises.

It took the team longer than planned to climb up to the third division, but RB's director of football Ralf Rangnick is certain there's no stopping his club. "The long-term goal is Bundesliga fotball," he says, adding: "As soon as possible."

RB are met with extreme aversion and contempt wherever they travel. Yet there's no denying they have given the city what it wanted: a competitive team. Last season, RB had an average attendance of 7,500 - almost twice as much as local rivals Lokomotive Leipzig.

And Sachsen Leipzig, the club that rebuked Red Bull's overtures in 2006? Well, that question brings us back to the beginning, because Sachsen went into administration in 2009, still didn't overcome its financial woes and went bust for good in 2011. In other words, the club technically no longer exists.

Was fighting - and defeating - the corporation worth losing the club for? It may surprise readers from countries where top-level sport has always been deeply commercial, but a great many Sachsen fans will answer that question in the affirmative.

However, the more big, tradition-laden and attractive clubs such as Duisburg or Aachen can't solve their money problems, the more likely it becomes that corporations or private investors will get into the game. And perhaps not even through the backdoor like Red Bull, but through the main entrance. Just look at what is happening at 1860 Munich.

But that, as they say, is another story.