Germany's professional soccer league is splashing out so much on new players that earnings are dwindling despite record sales. They’re pinning their hopes on TV rights deals – and on interest from Netflix, Amazon and Facebook.
Hope those simultaneous viewers see it.
Source: imago/Team 2
The 36 clubs in Germany’s first and second soccer divisions scored a record €4.42 billion ($5 billion) in revenue over the 2017/2018 season – second only to the English Premier League – thanks to a flood of cash from the sale of broadcasting rights, according to the DFL German Soccer League’s 2019 business report.
But despite this booming business the league, or Bundesliga, has fallen down on profits, with overall returns dipping to just 2.7 percent from 4.4 percent in 2015/17 and 6.3 percent in 2015/16. Total net profit was a mere €102 million.
Germany’s top soccer league, the Bundesliga, will rake in more than €1.1 billion, or $1.3 billion, per season from broadcast rights following the signing of a record four-year deal.
Earnings are being squeezed by writedowns on players and astronomical salaries paid to top stars. The clubs’ stable of players is currently worth €1.19 billion, exceeding the combined value of stadiums and club buildings for the first time.
The true competition, aside from winning titles of course, lies in snapping up players cheap and selling them at a profit. Borussia Dortmund is a master at this, divesting stars for tens of millions of euros and purchasing fresh talent like Jadon Sancho, an English winger. Archrival FC Bayern München is also investing in newcomers like Alphonso Davies and Jann-Fiete Arp, both just 18 years young.
With costs rising, all eyes are on the broadcasting deal for the 2021/22 season due to be agreed early next year. The biggest purchaser, pay TV broadcaster Sky, shelled out €1 billion for the current deal.
Sky’s subscriber numbers have stagnated at 5.2 million, well below the 6 million needed to really afford the rights. But the reach of football broadcasting became evident in early February, when Sky became the TV market leader with 2.15 million viewers by simultaneously showing two matches featuring top clubs Borussia Dortmund and Bayern München.
Such viewing figures “showed the power such parallel matches have on one day at the same time,” said Sky spokesman Ralph Fürther. What he didn’t say was that it’s rare for such top matches to coincide. Games are played on four days over the weekend, from Friday through Monday, and there are seven different kick-off times.
The chief executive of Bayern München, Karl-Heinz Rummenigge, hopes major internet players like Netflix, Facebook and Apple will get in on the act and trigger a fresh surge in broadcasting revenues. “The rights will explode. The most important players aren’t even in the game yet,” he said.
In 2016, US web retailer Amazon for the first time won web and mobile audio broadcasting rights for Germany for the 2017/18 season. Eurosport, an established pan-European sports channel owned by U.S. firm Discovery Communications, was a newcomer to the market, grabbing the rights to live broadcast Bundesliga games on television. Dazn, owned by American billionaire Leonard Blavatnik, also entered the German market, concentrating on the Bundesliga to cover highlights. But it plans to get into live Bundesliga broadcasting in future.
FC Bayern, which runs its own TV channel, is heading towards annual revenue of €700 million thanks to intense marketing abroad. Together with Dortmund and Schalke 04, it accounts for 40 percent of the €3.81 billion generated by the Bundesliga's first division.
Germany is among the world’s great soccer nations, but traditionalism is stifling investment and development. Calls to allow foreign investors and commercialize the game are now growing.
Meanwhile, clubs are getting inventive in a bid to lessen their dependence on TV money. They’ve sold advertising on soccer shirt sleeves to the tune of €40 million. Dortmund is trying out “virtual advertising” in which stadium ads change according to the country where the matches are broadcast.
DFL is marketing TV rights around the world, acquiring internet sports firms and pushing e-soccer, a video game tournament in which 22 of the 36 clubs are taking part. The league is determined to keep expanding after 14 years of consecutive growth. DFL boss Christian Seifert likened the league to a media organization.
“What the Bundesliga has lacked was the English pay TV market as well as Messi and Ronaldo,” he said. “As we can’t conjure that up we’re focusing on our entrepreneurial tasks. Only if we keep on developing the business side of the Bundesliga will it preserve its social acceptance.”
Hans-Jürgen Jakobs is a senior editor at Handelsblatt. David Crossland adapted this story into English for Handelsblatt Today. To contact the author: [email protected]
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