In part 4 of his series on the Bundesliga’s financial and supporter model, John Fisher explores
It is not often that the Bundesliga and German sports in general, get a decision wrong, but back in March of 2006, that may well have been the case – the repercussions of which may still be unfolding.
After deliberating on the issue of whether to allow private companies to offer sports betting and gambling operations within Germany, the German High Court decided against breaking up the state monopoly on sports gambling, then controlled by Oddset.
The High Court’s decision was not a universally approved one. Each year, Oddset brings in around 500 million euros in tax revenue, which was then paid to the German government. This money is then distributed around the country to local sports associations – a vital lifeline in promoting sports at local, regional, as well as national levels.
However, the decision angered private sports betting firms and also several powerful associations, notably the German national football association. They wanted sports betting opened to private companies, because the association knew that the 500 million euros in tax revenue each year from Oddset would be dwarfed by the potential earnings from private sports betting sponsors.
At the time, however, the high court ruled against this opportunity, even if experts such as Köln lawyer Dieter Frey declared that “the entire system is coming to an end. The monopoly virtually no longer exists.”
The decision of the high court to not allow private companies’ involvement in German sport hit home immediately in the Bundesliga when Werder Bremen, who had agreed on a sponsorship deal with Bwin, were forced to remove their sponsor’s logo from their shirt. In protest, the club had the logo “we win” written across their shirt for their match with VfL Bochum.
Bremen’s hope was that the European Commission would rule that the state monopoly for betting services in Germany would infringe on competition regulations within the free market.
The European commission were looking into the matter, along with how sports betting services, or the lack of them, were being dealt with in other European countries. Germany revised its legislation in 2008, but in the EU’s eyes, the country didn’t go far enough.
However, that situation changed in 2012 when, after great pressure, and under advice from the EU, whom they had asked for advice, the German Interior Ministry announced that they would award 20 sports betting licenses as part of the Interstate Gambling Treaty.
The treaty allowed up to 20 licenses to be granted to private companies (as well as Oddset) to offer sports betting services around the country and to become involved in sponsorship of sports teams and similar, a compromise, which of course, immediately piqued the interest of Bundesliga club.
The 41 companies vying for one of the 20 slots were sent documentation which outlined what their bid would need to require to be successful. They submitted their bids throughout 2013, but in November of that year, the Interior Ministry announced that not one bid had been successful in meeting the criteria required for a license to be granted.
Each applicant was sent correspondence outlining why their application had failed and were advised to resubmit their forms before March 14th 2014.
The period from 2008-2012, when almost all forms of Internet gambling were illegal and companies were prohibited from engaging in sponsorship deals, was a nadir for the sports betting industry in Germany. However, 2012 and beyond has been more optimistic.
Yet Bundesliga teams are not likely to be too happy with the current situation, especially given the amount of money that a successful sponsorship deal between a bookmaker and a top level football team can generate.
For example, in England during the 2013-2014 season, three Premier League teams were sponsored by bookmaking companies. Aston Villa by dafabet, Stoke City by Bet365 and Fulham by Marathon Bet. In the past, many other Premier League teams have been sponsored (and continue to be sponsored in the Championship) by sports betting companies.
These clubs regularly take in several million dollars a season for shirt sponsorship deals, even for a mid to low-range Premier League. Furthermore, Bwin’s recent shirt sponsorship deals with both Real Madrid and AC Milan (now inactive) cost the betting even significantly more.
As of now, Bundesliga clubs have not had access to these kinds of funds. Clubs are allowed to offer “official betting partners.” For example, Bet-at-home list Schalke 04 as an official betting partner, as well as FC St Pauli from Germany’s second tier. Yet even in these cases, the money these clubs make from such arrangements are small compared to shirt sponsorship deals.
Of course, a state-owned company can still sponsor a team in the Bundesliga. For instance, FSV Mainz are sponsored by the state-owned Lotto Rheinland-Pfalz, but they receive just 950,000 per annum as a result of the deal. This amount is considerably less than many Championship sides in England and even less than what some of the bigger League One are likely to receive.
You only need look at this study on traffic figures from the most popular online sports betting firms conducted by bettingwebsites.org to see the amount of potential spending power within the betting industry. Couple that information with this report on how the trend is for smaller clubs to benefit from these type of deals and suddenly you’ve got a situation where the less affluent clubs are held back financially because of the state-level legislation in Germany.
The problem here is that having state-owned-and-run sports betting, even though it is now being slowly deregulated, makes both investing in the German market and the Bundesliga far less enticing for bookmakers.
This situation may mean that the likes of Dortmund or Bayern Munich miss out, which really doesn’t matter since these heavyweights are always likely to have an alternative available of equal or better value. However, the lack of competition in the online gambling industry really hits home German clubs lower down the pecking order like Werder Bremen, Kaiserslautern, VfB Stuttgart, or Nürnberg, Cologne and SV Hamburg, who are denied the chance to find a lucrative sponsorship deal with a sports betting firm, due to restrictions, or the somewhat contrived and lengthy process betting firms need to go through in order to gain one of the 20 approved licenses.
The German betting industry is heading towards a greater liberalisation and for many Bundesliga teams this movement cannot come soon enough. In a country where the leaders so often get it right, for many clubs and bookmakers, they have for once, got it spectacularly wrong this time around.
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