As we have analyzed in previous articles, football clubs offer attractive investment opportunities for corporations and private investors, who may have various motivations. Across all major European leagues, there are established structures and mechanisms to lure investors, even foreign ones, to become club owners. Germany’s Bundesliga is an exception: it has not (yet) opened its doors for external stakeholders to hold a majority in a club’s ownership structure. What is the reason behind this? Why is the Bundesliga nevertheless able to keep up with the other top European leagues?
From registered associations to for-profit organizations
Traditionally, sport clubs in Germany used to be owned exclusively by members' associations, and were called registered associations (e. V.) from a legal perspective. They were controlled solely by their members, and private ownership was not allowed. Running a club as a registered association meant by definition being a non-profit organization and thus they were eligible for a reduced tax rate.
However, as football has become more and more professional over the past decades, a new ruling came into force in 1998, which allowed clubs to separate their professional football teams and convert them into profit-making public or private limited companies. Since then, most parent clubs are comprised of a not-for-profit registered association consisting of other sports departments such as handball, table tennis or women’s football, and the for-profit professional football club. (Fortuna Düsseldorf, Schalke 04, Mainz 05 SC, Freiburg and Union Berlin have not adopted this model and are considered to be special cases).
This ruling, better known as the 50+1 rule, also states that the registered associations, and by extension their members, must hold a majority of the voting rights – 50% plus one vote in the football club. The rule thus prohibits private investors or corporations from holding a majority in the ownership structure, in other words, preventing private investors from taking over the football club and prioritizing profit over the needs/requirements of members.
An exception to the 50+1 rule was added in 2011, stating that if another legal entity (e.g. a corporate) has continuously and substantially promoted the football segment of a parent club for a minimum length of 20 years, it can acquire a majority in the ownership structures. Even then, a majority takeover is not granted automatically, with the German Football League (DFL) ruling on such requests.
In 2018, for instance, German businessman Martin Kind bid for a majority of the stakes of Hannover 96 (currently in the second division), but was rejected by the DFL. Even though he had been promoting the club for 20 years, in justification of its veto the DFL argued that the amount of Kind's financial support should have been equal to or more than the revenues of the club’s actual main sponsor during those 20 years.
In contrast, Bayer Leverkusen and VfL Wolfsburg were allowed to be taken over by their long-term promoters (so-called Lex Leverkusen and Wolfsburg). As the names imply, Leverkusen was founded by employees of German pharmaceutical company Bayer, while Wolfsburg was established in 1945 by workers from the automobile manufacturer Volkswagen (VW). In both cases, the DFL decided to grant these requests, as these companies' continuous and substantial promotion over the years was evident.
More recently, Dietmar Hopp, co-founder of the German software company SAP, was allowed to become the majority stakes holder of 1899 Hoffenheim. “Crucial in the assessment of Hoffenheim’s request was that for more than 20 years Dietmar Hopp has provided considerable financial support for both the professional as well as the amateur teams of the club,” read a DFL statement at the time.
RB Leipzig, on the other hand, have avoided the 50+1 rule in a different manner. Most German clubs have a large number of members in their registered associations. Committed members not only serve as a significant source of revenue for clubs, but they also have voting rights, constituting a democratic decision-making process within the club. Leipzig, however, decided to limit the number of members who are eligible to vote to 19 – all of them being employed by Red Bull, thus the club was, in essence, controlled by a corporation.
The exceptions of the 50+1 rule are often criticized, mostly by fan groups who argue that such business practices will destroy the traditional values of German football. Fundamentally, fans fear that outside investors would bring too much commercialization of the game, make big clubs even bigger, raise ticket prices and ultimately worsen fan experience. They believe that the 50+1 rule secures a more stable environment and protects clubs from the risks of bad investor practices.
Hoffenheim’s majority owner, 79-year-old billionaire Dietmar Hopp has become the symbolic figure of criticism over the years: he is seen as the face of big-money football, when wealthy investors can hold too much power in a football club. Indeed, his wealth helped the fifth division, amateur league side in 2000 grow and rapidly advance through leagues to join the top tier Bundesliga in 2008. (Interestingly, while some weeks ago, Hopp was the subject of wild protests in Germany's football stadiums, by now he has become a national hero on another front, in the coronavirus pandemic: his biotech firm CureVac is working on a vaccine for COVID-19, and when US President Donald Trump offered to buy exclusive rights to the vaccine for the United States, Hopp said such a deal "would not be an option".)
On the other end, advocates of opening up the league to investors say that holding back investors limits opportunities for growth. They argue that a change could make the game more competitive, while, because of the lack of investment, the Bundesliga is one of the least competitive leagues in Europe. They also emphasize that more investments could help weaker clubs and also regenerate their communities.
Although the 50+1 rule eliminates the German Bundesliga from being a real option for investors who want control over an acquired club, there are investment opportunities in German football.
However, one characteristic feature is that those who do invest are almost exclusively German entities. Bundesliga prime Bayern Munich has a number of stockholders beside its members’ association, including adidas AG (8.33%), car manufacturer AUDI (8.33%), and insurance giant Allianz SE (8.33%). A recent major deal involved German entrepreneur Lars Windhorst acquiring 49.9% stakes of Berlin’s top club Hertha BSC for an overall sum of EUR 224M; for only EUR 60M more Southampton FC is currently up for sale on the market according to media reports.
Moreover, Borussia Dortmund is the only German club that is listed on the stock exchange. Despite the fact that only 5.5% of these shares are held by Ballspielverein Borussia 09 e.V. Dortmund, the parent association, it has the majority of the voting rights.
One might get the impression that the Bundesliga is lagging behind in terms of overall revenues compared to other big European leagues, where clubs are entirely open for investors. This is only partially true. While the gap to the English Premier League in terms of aggregate revenues is big, the Bundesliga is second, ahead of La Liga and the Serie A – although La Liga (as well as the Premier League) hosts 20 teams, which is two more than that of the Bundesliga. One main factor for this is that the revenue breakdown of the Bundesliga is more equally spread across the three main sources, making their clubs less dependent on the big money derived from European club tournaments.
By granting more power to fans compared to other leagues, the Bundesliga has been rewarded by a stadium atmosphere which is very often said to be unique among the five major European football leagues. With an average of 43k tickets sold per game, the Bundesliga remains the best attended football league in the world.
All in all, Germany’s Bundesliga recently reported that its 18 top-division clubs generated revenues of more than EUR 4 billion for the first time last season. That is also an increase of 5.4 percent compared to the year before, as well as the 15th successive year of record revenue.