Fans of FC Bayern München (“FCB”) have it pretty good these days. The European football club from Munich, Germany consistently challenges for top honors in every competition it enters. Domestically, FCB has won the Bundesliga (German national league) 25 times, more than any other club since its inception. It currently tops the table in contention for an unprecedented 4th consecutive title. Internationally, FCB is routinely among the favorites to win the UEFA Champions League, the most coveted trophy in club football. They have already won it 5 times, surpassed only by Real Madrid and AC Milan, but the growing fan base is hungry for more silverware.
FC Bayern’s financial performance has matched its sporting success. Revenues have grown at a 10% CAGR over the past five years, most recently reaching €523m in the 2014-2015 season, the third highest of any football club globally . Last season also saw them earn a record after-tax profit of €24 million . Most impressive, however, is not FCB’s relative scale, but its relative financial health. FCB is the only club of its size to be completely debt free, with equity of €412 million . The club recently paid off its flagship stadium, the Allianz Arena, 16 years earlier than originally negotiated .
As FCB Chief Executive Jan-Christian Dreesen put it, “there is no doubt that Bayern is at a stage they have never been before, both on a sporting level and financially” . Contributing to this success is a highly effective alignment between the club’s business model, its operations and key stakeholders.
FC Bayern has three main sources of revenue: match day, broadcasting and commercial activity. Match day revenue includes ticket and corporate hospitality sales. Broadcasting refers to the distribution of broadcasting rights domestically and internationally. Commercial sources include sponsorship, merchandising and other commercial operations. In 2014, match day comprised 18% of revenues, broadcasting 22% and commercial activities 60% .
Wages are the largest expense, primarily for the players, but also for coaching and support staff managing training facilities and the stadium. The quality of the squad is the top priority and FCB invests significantly into increasing its talent pool. When it comes to developing players, a club has three general options: build, buy or borrow. The club can develop budding players through youth academies, buy contracts of players developed at another club, or sign a player temporarily on loan. FC Bayern is active in all three areas, trying to complement home-grown stars with high-potential and seasoned outsiders. In some years, transfer activity contributes positively to net income as player sales can exceed player purchases.
It is important also to consider the context in which FC Bayern operates. Since 2001, the German national football league forbids corporations from owning a majority stake in football clubs. This is intended to maintain public ownership of the club and ensure each club is managed with a long-term perspective. Furthermore, UEFA “Financial Fair Play” was passed, requiring clubs to balance budgets over several years to prevent financial distress, which was common after periods of overspending .
Along several dimensions, FC Bayern has organized itself effectively to transform its assets – players, coaches, the stadium and the fan base – into drivers of value. Overall, there is a strong focus on aligning incentives of all key stakeholders around the sustained success of the club.
Organization & Management – The professional football club is run under the FC Bayern München AG, effectively an unlisted joint-stock company. The AG is owned 75% by FC Bayern eV, a sports non-profit representing the collective ownership of over 250,000 members , and 25% by long-term corporate partners . This ownership structure ensures that the interest of FC Bayern’s fan base is ultimately aligned with the organization’s priorities. FCB rose to prominence under the executive leadership of several former players, primarily as Uli Hoeneß, Karl-Heinz Rummenigge and Franz Beckenbauer. These individuals contributed greatly through their experience, loyalty and vision. They also maintained close relationships to Germany’s political and corporate elite.
Transfers – FC Bayern has been highly successful at maintaining a squad that is able to compete at the highest level. To this end, they focus primarily on their own player development. Operationally, this takes the form of dedicated training facilities and coaching staff for youth players, but also frequent interaction with the senior squad. The most talented players receive opportunities to debut for the senior squad, even if they are still under 18. Home-grown talents include World Cup 2014 winners Bastian Schweinsteiger, Philipp Lahm and Thomas Müller. Bayern have also managed incoming transfers well, spending large sums, but more selectively than Real Madrid, Barcelona or the likes. While aggressive spending can drive success in some years, over time it drives volatility as overspending cannot be sustained. FCB’s shrewd management of transfers is bearing fruits and enabling it to finance top player purchases without debt.
Stadium – Stadiums are major investments and operations to maintain. FCB was lucky that, after the 1972 Munich Olympics, it could play in Munich’s iconic Olympia Stadion. As the club rose to international prominence in the 1970s, it was able grow into the existing 57,000-seat stadium. While ticket sales are an important source of revenues for the club, its member-ownership always ensured that ticket prices stayed affordable for all fans. This also meant that stadiums were full, as they are at most top-flight games in Germany today. In 2005, the new Allianz Arena was inaugurated (see image on the right). Its setup was carefully managed, to ensure a world-class stadium was built without the expenditures burdening the club. The stadium was built together with lower-division football club 1860 München. Eventually, FCB bought 1860’s share and leased the stadium back to them for their games. The flagship arena also generates revenue through concerts, national football games and other hosted events. It seats 75,000 and sells out most games.
Corporate partnerships – To fund the growth of its operations, FC Bayern has established deep partnerships with major German corporations. 8.33% stakes each were sold to Adidas, Audi and Allianz . Most recently, FCB negotiated an extension of its sponsorship deal with Adidas, which will bring in €60m every year until 2030 . FCB has also partnered with Germany-based SAP to run its ticketing systems and provide software for advanced game analysis . This careful selection of partners, regionally based and long-term focused, ensures that FCB’s interests are supported by the broader community in Bavaria.
Culture – Another critical component to FCB’s success, and in particular the dedication of its players and staff, is the club’s culture. The club emphasizes that it treats every member as “family” and demonstrates this in meaningful ways. Beyond helping youngsters and foreigners settle in, the club members are loyal when times are tough. Breno, a once-promising Brazilian defensive talent, was sentenced to jail after setting a fire in his own home in Munich. FCB honored its contract and supported his re-integration into the sport after his prison term. When the club’s long-time leader Uli Hoeneß was sentenced to jail for tax fraud, there was an outpouring of support from club and players alike, while the general tone in German press was much harsher. Bayern extends its loyalty and earns it from supporters in return.
FC Bayern has the same business model as other professional football clubs, but it has managed to scale with a sustained financial health that is unmatched. As Chief Executive Dreesen explains, the club’s maxim is “maximum sporting success alongside financial prudence” . FCB has done well to operate in the spirit of legislation like UEFA’s “Financial Fair Play” or the Bundesliga’s requirement for non-corporate majority ownership. The club has not cut any corners. It has managed its finances conservatively, focused on internal youth development, selectively bought international top stars, and ensured that everyone puts the interest of the club ahead of their own. This culture, the atmosphere in the Allianz Arena and the serious contention for titles are driving growth in FCB’s fan base. With typically German aspiration for “slow, sustainable growth”, to date FCB has focused predominantly on developing the domestic market. After the recent record results, however, management has decided to increase the focus on international expansion. The mission was underscored by the opening of a new FCB office in New York, with the aim of building presence in North America. With the organization run as it currently is, fans old and new can be hopeful that the Champions League trophy is theirs again soon.
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