The three worlds of football capitalism and why Bayern Munich dominates the German League

Germans say money doesn’t make you happy, but it is comforting. In this sense, money clearly is not everything in modern football, but it is more than often decisive. On average, the wage bill of a team in the British Premier League accounts for some 70 to 80% of the variation in table position (my calculations on basis of data from here.) In other leagues this may be less, but not by much. For the last years in the Bundesliga the correlation is around 60% despite the fact that some well-known big clubs such as Stuttgart and Hamburg notoriously try to proof the power-of-money thesis wrong.

Of course, correlation is no causation, and there are some quabbles about what kind of money is important (transfer fees, salaries etc.). But the fact is, money matters.

There are several main sources of income for football clubs: TV deals, and merchandising, match-day revenues and commercial sponsorship (see the excellent Swiss Ramble on the details). And then there is debt. Football clubs differ tremendously in the amount of debt they can accumulate without being punished. This can be due to either state intervention (tax arrears, subsidies etc.) or, for the lack of a better word, a sugar daddy in the form of an investor who doesn’t look too much at the returns of his or her investment (insert here you favourite Sheik, oligarch or other big-pursed aficionado).

The big leagues not only differ in the overall amount of revenues there clubs make, but also in the mix between these forms of revenue. In some leagues (relatively or absolutely) a lot of money comes out of TV deals (the Premier League being the outstanding example), in some it’s commercial sponsorship (especially the Bundesliga), and in others money comes from of ‘soft budget constraints’ (La Liga): big donors/ owners plus ‘sympathetic’ politicians. As for the latter, just think about the Lex Beckham, a provision in the Spanish tax law that gave favourable income-tax treatment to foreign players. Or think about the ways how clubs can accumulate tax arrears and get away with high loads of debt. This is not to say that these types of revenues don’t matter also in the other leagues, but the relative importance differs. There are clearly three (or more?) national variants across the main leagues.

These types seem to be strong related to what in social sciences is called varieties of capitalism. Some political economists claim that there is a crucial difference between ‘liberal’ Anglo-Saxon countries and ‘coordinated’ Continental Europe. In the first, the emphasis predominantly lies on market exchange (e.g. the UK), whereas in the second, there are strong corporatist arrangements between firms. Some also claim that these two are different from a Southern European type in which traditional social arrangement dominate. Moreover, in all three modes the government intervenes in the (football) market to a different degree and in different forms.

While these configurations or types are never perfect, they have some interesting stories to tell about the varieties of football capitalism. Germany being the industrial powerhouse of Europe, it is no coincidence that Bundesliga clubs make relatively more money out of sponsorship deals. Bayern Munich, for example, makes 60% of all revenue out of commercial activities among which sponsorship is the most important one (see Deloitte Football Money League 2015). The Bundesliga is much less successful in acquiring lucrative TV deals, and since fans-owned Bundesliga clubs also look down on the uninhibited involvement of tycoons these types of income are similarly limited.

So if commercial sponsorship rules for the whole of the league, it still doesn’t explain why Bayern also dominates nationally. Former boss Uli Hoeness would argue that this is entirely due to good shop-keeping, and thorough accounting (even if he himself seemed to be rather creative about these things). But is it really all due to good management? Other clubs should and clearly have emulated management practices at various times, and while some clubs clearly don’t – ahem Hamburg –, I doubt that good management is the full story.

Of course, one may also say that it was sheer damn luck in the form of a golden generation in the 1970s, but other clubs also had golden generations. Or rather they would have had, if these teams hadn’t been taken apart by bigger players in the food pyramid.

So we are back again to money. Indeed Bayern can look back to a long row of powerful sponsors such as Allianz, Audi, Telekom, Opel, Commodore, Iveco, Magirus Deutz etc. As Soccernomics argues it is fundamental for a club to have a good industrial environment to get this kind of corporate attraction. But again, other cities in Germany would have similarly good economic environments: Stuttgart, Frankfurt, Cologne, Hamburg are all cities with a decent network of large companies that could or do give money to sports.

I think there must be something else in the mix, a more sinister force, if you will. And my hunch is, it is Adidas, currently the second largest producer of sports accessories and clothes in the world. Adidas has gotten some bad press recently, because it is one of FIFA’s most loyal corporate sponsors and still clinging to Sepp Blatter. And the critique is well placed: Adidas made Blatter big, and Blatter made Adidas big. From the 1970s onwards Adidas became the main sponsor of the FIFA world cup. And Adidas is the oldest and arguably by far the most important sponsor of Bayern Munich. As early as the 1950s Adi Dassler gave money and equipment to the club Bayern Munich. What followed was a symbiotic co-evolution: each Bayern success meant better sales for Adidas and in return more sponsorship money. Perhaps the clearest example of this intimate relationship is the fact that Adidas currently holds 8 per cent of the shares of the Bayern AG.

Adidas is very different from all the other sponsors. Sponsors usually do give money to raise the profile of the company, to improve the public image. So they often lose interest after a while, especially if a team hits a bad run. Or maybe the companies loose interest because the go through a financial quagmire (Is Wolfsburg’s clock ticking?). But Adidas makes direct money out of sponsorship. With such a sponsor at the side, Bayern could wither away lush periods of sportive stagnation and easily bounce back every time, whereas other clubs like Gladbach, Cologne or Bremen would go into a vicious spiral of loosing on the pitch and in the corporate field at the same time. So good shop keeping perhaps, but cozy business relationships need more than that for a club to become the Bundesliga’s monopolist.

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3 responses to “The three worlds of football capitalism and why Bayern Munich dominates the German League

  1. Pingback: It’s time to Turn the Heat on FIFA’s Bribers | Polidigwerkschdaeddle

  2. Pingback: FIFA elections and Adidas | Polidigwerkschdaeddle

  3. Pingback: FIFA elections and Adidas, an afterthought | Polidigwerkschdaeddle

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