The Bundesliga TV Rights and their Place in Europe
It was a beautiful day for the Bundesliga (BL), back in autumn. Christian Seifert, chief executive of the DFL (Deutsche Fußball Liga), Karl Heinz Rummenigge and other figures of power in German football were jubilant at the announcement of a new, much improved TV deal for the BL.
For the years 2013-2016, i.e starting next season, the DFL have managed to capitalize on a better product and market, in such a manner that the total pot will increase by quite a bit. Rummnigge’s somewhat inflated hopes of a doubling of the TV-money – perhaps more a case of hoping belief will create results, as it might on the pitch – did not come to pass, however it was closer than most had envisioned. The domestic TV-money rose from an average of ca. € 385 M a season unto € 628 M a season, a 63% increase. The increase in overseas broadcasting added a kicker: From the admittedly measly starting point of € 28 M from the last round of selling, it increased to just over € 70 M, reflecting an increased appetite for the Bundesliga abroad, combining to making the total pile of dough about € 700 M a season.
In other countries, the carving up of the money pie from TV deals has been at times fiercely contested – not so much in Germany. Apart from a rare call for Bayern to get a bit more of the pie, for instance back in 2008 by Rummenigge – no stampede of support from the other clubs to hand over more TV money to the crux of the league was noted – there really hasn’t been much of a fight over the model of distribution of TV money in the BL. The reason is rather simple: There is not much to fight over!
At present, Germany’s TV-rights deal ranks dead last among the 5 big European leagues, much inferior to even French Ligue 1.
It’s been even worse than you might have thought, as the number most often used in comparisons against other leagues, € 412 M on average, is actually shared with 2. BuLi, with 20-21 % going to them. This has left the real number, just under € 350 M, to be shared among the 18 teams from the Bundesliga.
This division of resources is rather unfortunate for the team’s in Germany’s top-tier, given that their rivals in Ligue 1 & La Liga , even more so with Serie A and of course the Premier League (the undisputed top predator in terms of TV revenue), don’t have to do so.
The way the Bundesliga distributes its TV money is different from the others, indeed no nation is similar to the other in this respect.
In Germany a points system is applied, giving 40% weight to the running season (at the moment 2012/13), with its league position for each matchday for each club, added together. 30% weight is given to the preceding season (2011/12), 20% to the season before that (2010/11), and 10% to the one 3 years ago (2009/10). For this season, Bayern’s 1st place in the 2009/10 awards 36 points, Schalke’s 2. is worth 35, and Werders 3rd is worth 34. The 1. 2. & 3.of 2010/11 is worth 72, 70 and 68, and the 2011/12 results worth 108, 105 and 102. You get the picture.
It is however important to note that these points only result in determining what place the clubs receives in the allocation of the money, the points do not directly translate into what proportion of the money is awarded. The one with the most points of course gets 1st place, which will result in (in the 2012/13-season) receiving exactly € 0,76 M more than the 2nd placed, as will it from 2nd to 3rd, and so forth. The 18th placed will receive exactly half of will the 1st placed team. As it stands, Bayern would receive € 25,84 M, Dortmund € 25,07 M and last placed Greuther Fürth € 12,92 M for the commencing season.
There’s also a small pool of money being allocated on merit payment, depending on amount of games that were televised by the different clubs.
The German TV-Deal – why is it so low, and is it a purely bad thing?
I think it would be fair to say Germans are relatively price conscious. This has certainly its advantages in an efficiently functioning economy, but it doesn’t always accommodate special interests, who naturally want to get paid the most for their narrow interests.
Germany is home to the perhaps toughest competitive TV-market in Europe, with dozens of free-to-air channels. Germans are therefore more accustomed to having lots of free TV than many other nations.
Earlier, a form of draw allocation was performed as to which channel could show the games, which is partly why one can often see “where can you see the game?” -articles popping up in local papers in Munich and the Ruhr Pott, on CL game days. Due to the new CL TV deal, the free games are now only on ZDF, but only some games – like f.i. Bayern v. BATE home game, but neither Schalke nor Dortmund on matchday 6 in the CL – were shown there.
The collapse of the Kirch media empire back in 2002 is perhaps the most important point, which set Pay TV and football TV revenue well back in Germany, and were at the time a shock to the clubs, contributing directly to the leagues woes after that point. It’s fair to say the relative strength of the Bundesliga receded quite dramatically in the early and middle 2000’s.
All this has made it very hard for Sky, owners of the majority of the rights, and the only place which airs all the matches, to build up its pay TV-service in Germany. Until last year they weren’t even managing to break even, running steady deficits and constantly needing wire transfers from Murdoch’s mother Empire. This led to some extraordinary ideas being tried, perhaps chief amongst them the decision to hire in an ensemble to do live improvisational opera during Schalke v. Bayern in the 2010-11 season. One might say that’s usually a move that smacks of desperation, had it not been for such a move obviously being unprecedented. Points for creativity, it was however not repeated.
The break-even requirement of about 2,7-2,8 M subscribers have in the last year finally been surpassed though, and the numbers were up to 3,2 M by 30 September 2012. The goal of continued growth for Sky Deutschland was instrumental to the new TV deal bidding ending on such a relatively high figure.
There’s also most certainly a correlation with the fact that BL spectators enjoy low ticket pricing. Cheap access to live football in the stadiums has certainly had a bearing on how much the average consumer is willing to dish out to see a live broadcast on their screen at home.
There is also an upside to this, in other areas of the revenue received, namely the commercial side of things. It’s an ill wind that blows no good, and with the TV deals being feeble, German clubs have been forced to seek revenue elsewhere. As ticket pricing is low, the solution for Bundesliga clubs has been to team up with local and national companies in the thriving Germany economy (which has fared so much better than most of Europe in the last years) for sponsoring – increasing the commercial revenue stream.
German clubs have long had high commercial income relative to its European peers, for instance in shirt sponsoring – the BL had the highest combined shirt sponsorship revenue until the EPL surpassed it last year – with many of the clubs getting over 50% of their incomes from the commercial revenue stream. The most evident case in point is Bayern Munich, who had the world’s highest commercial revenues in the 2011/12 season, filling their coffers with € 202 M – it was actually the first time any football club broke the € 200 M-threshold in any one revenue stream. In this respect, the BL is very different compared to all the other big leagues, many of them with TV incomes as their largest individual slice, in Italy even stretching up to 60% for some clubs.
Some critics have pointed out that this is a dangerous state of affairs for the Italian clubs, as their dependence on the TV networks financial health is far from ideal. The aforementioned Kirch collapse in Germany serves as a reminder, and more recently, if not so damagingly, as Barcelona had to seek a short-term € 150 M loan, because the holder of their TV rights, Mediapro, were seeking bankruptcy protection over a conflict with another company, and could not pay in time.
Not relying too much on TV deals – and getting some compensation in the commercial department because of it, where sponsoring is divided among multiple companies – can therefore be seen as a silver lining, in contributing to a stable and sustainable future for clubs and for the league.
As can be seen in the illustration above, the size of – and reliance on – TV deals, is very different from country to country. Way over half of the total broadcasting revenue of Bayern were from their run to the final in the CL – meaning the domestic TV revenue accounts for under 10% of the total revenue. HSV shows just how small the German TV revenue currently is – no Europe, no fun. Most teams in Italy are heavily dependent on their TV revenues, causing variations in the teams form and the participation in the CL to see annual revenues varying wildly. A team like Real Madrid gets enormous amounts of money in from their domestic TV deals, Europe only providing the topping. French teams are also getting most their money from TV.
Those differing European “styles” bring us neatly onto the Champions League. A very interesting development for German clubs this season, and in the future, is in the works. The UEFA re-negotiated the respective TV-deals in different nations for the 2012-15 seasons, which lead to a general 20% jump in revenues. This in turn resulted in ca. 20% increased pay-outs in all sorts of prize money – for winning or drawing matches, participation money for playing and in bonuses for advancing. A win and a draw which was last season valued at € 0,8 M and € 0,4 M, is now worth an even € 1 M and € 0,5 M.
However, due to increased interest in the Champions League with Germany lately doing better than before, added to that the grabbing of the 3rd spot from Italy in the UEFA coefficient rankings – which determines European contestants from each league – meaning a 4th CL spot, the German CL TV-deal made a much more substantial jump. Sky and ZDF shelled out € 50 M and € 54 M respectively for the rights for each season. 75% of the money goes directly into a “Market pool”, which is going to be distributed exclusively to the German contestants reaching the CL group stages and beyond.
This meant a jump from € 47 M last year – with Dortmund receiving € 17 M, Leverkusen € 15,2 M and Bayern € 14,8 M from the Germany specific market pool – to € 78 M this year, an increase of 66%. Now that Germany have 3+1 spots in the CL, there’s a chance the sum will be divided between 4 teams each year, but for the 2012/13-season where Gladbach didn’t make it in, BVB, Bayern and Schalke will divide it all amongst themselves.
The market pool is divided into two equal parts. One half (€ 39 M) is distributed in fixed amounts, depending on which place the teams achieved in their domestic leagues. For 2012/13 it will be BVB € 17,5 M (45%), Bayern € 13,7 M (35%) & Schalke € 7,8 M (20%). The other half is divided by how many matches the teams play, i.e. how far they get in the CL.
Last season Bayern took almost half of the performance related share of the CL TV revenue, as they made it to the final (13 games), whilst Leverkusen played 8 and BvB only 6 games. With all 3 teams having made it to the knockout stages this time around, the distribution is likely to be more even. Assuming for instance BVB and Bayern going to the semifinals, Schalke would receive € 9,8 M, with BVB and Bayern each gettting € 14,6 M of this half.
In 2011/12, Bayern received € 41,7 M (final), Leverkusen € 28, 2 M (round of 16) & Dortmund € 25,4 M (groups) from CL-participation. As you can see from the graph, all of this years participants will receive a higher payout, substantially so in this plausible progress scenario.
Due to this uplift, even Schalke (receiving lowest amount of the fixed part of the market pool) will earn not far off what Bayern did from CL last year, when they made it to the final, when participation bonuses, win bonuses and the likes are all counted in.
Should Bayern and BVB both make it to the semis, they will both recieve over € 50 M directly from UEFA, before ticketing and other associated incomes are counted in.
Furthermore, this means that the CL payout is likely to continue being more substantial than the domestic TV money for the German contestants, even after the uplift of domestic tv revenue starting next year.
The English TV-rights are, more and more, one of a kind. Already the highest in the world of football, they made an astonishing leap to over 5 billion pounds for the 3 year period commencing from the start of next season. Predictably they made large gains in overseas markets, particularly in the east, but they also squeezed out an amazing increase of their new domestic deals, a lemon that to many already appeared fully squeezed.
It’s split in 4 parts: 1 equal share (50%) for all, 25% “merit payment”, depending on league finish, and 25% “facility fees”, depending on how often the games are televised. The overseas TV money is split equally among all clubs.
Because of the large, equally split overseas element, the ratio from top to bottom drops from approximately 1:2, to 1:1,6, Manchester City receiving £ 60,6 M(ca. € 75 M) and 20th placed Wolves received £ 39,1 M (€ 48,9 M) – almost double of the highest payout in the Bundesliga.
This also makes the distribution the most even amongst the top leagues in Europe. Due to the vastly increasing element of overseas TV money, it will actually become even more equitable in the coming years, as long as it’s divided the same way as it is now. There are a lot of things wrong with the way English football is run, but this is at least a very equitable distribution of money – even somewhat counterintuitively equitable, as even more so than in England, viewers abroad tend to watch the biggest teams the most.
There was earlier a sort of north-south “divide”, because Italy until the 2011/12-season(like Spain) were on an individual negotiation-system. However they moved back to a collective bargaining scheme last year. The system entails the money being carved up in a somewhat complex way, with 6 different factors determining total payout.
This includes a fixed, equally shared amount (40%), a part based on number of supporters (25%), a part based on results during the last 5 seasons (15%), a part on historical results (10%), a part for last seasons league position (5%) and finally one based on home town population (5%).
Five of them are more or less objective (although some Inter and Juve-fans might disagree on the past results bit), but the allocation based on numbers of supporters, is described as one of the best kept secrets in Italian football. The payment received from this part of the TV agreement differs significantly from team to team, with the national brand Juventus gaining € 56,5 M from this part, whilst Siena gets a measly € 1,5 M.
All in all the return to the selling of collective rights constituted a significant boost to the smaller clubs of the Serie A, they now enjoy at least some of the pie – they receive about as much as or more than the winner of the BL until the new German deals kicks in.
However, the northern juggernauts of Inter, Milan, and on top, Juventus earns 3-4 times as much as the lowest placed teams, hence maintaining a more uneven distribution than does the BL and EPL.
Which brings us nicely on to Spain, widely known for it’s “no system”-system, a free-for-all which produces staggeringly uneven results.
This permits Barcelona and Real Madrid to run off with not far from half of the total earnings of all clubs in La Liga (43%), at € 140 M per season. Two clubs, Valencia and Atletico Madrid, managed to pull in € 48 M & € 46 M, thereby getting 1/3 of the behemoths. However, 12 of the 20 teams in La Liga earned only € 13 M – € 18 M, a whole 7 of them getting € 14 M – or exactly 10% of what Real Madrid and Barcelona make.
The two clubs immense power and prestige, the weak and incompetent Spanish League Federation (LFP) and other factors conspire to make a collective deal a pipe dream in the short-term. However, there are signs of the idea gaining traction, mostly due to a collective pressure from the rest of the league and the disastrous state of Spanish football (economically speaking).
Future developments in Germany:
The German TV-deals have frankly been pathetically low from the collapse of the Kirch empire and until now. Germany has the highest population of the biggest 4 leagues by some margin and it’s only fitting that it’s now starting to catch up to countries with a smaller populations in terms of domestic TV revenues.
The medium term goal must be to catch up with Italy in terms of revenue and to grow faster than the PL in relative terms. Growing as fast in absolute terms seems to be a pipe dream, given the flabbergasting pace of growth the PL enjoys, particularly abroad.
Special significance must be given to developing the BL brand in overseas markets. The PL overseas deals is overtaking the size of its domestic deals, and it’s here the majority of any growth will come in the coming years. Most people who get to know the Bundesliga like what they see, it’s the most goal rich of the big 5, and it’s generally highly appreciated among football fanatics around the world – the difficulty is to translate this to general football consciousness.
The BL has hitherto been quite bad at this aspect, the excellent Raphael Honigstein commenting, about 18 months ago: “The Bundesliga remains world-class when it comes to making an exciting product sound and look ordinary – they film the game from the vantage point of migrating storks and turn down the stadium noise to a dull, ambient rumbling”.
There’s been some improvements in this area, but the BL needs to focus on making the most out of what is a very good and exciting league. Though preferably without resorting to lows as for instance Sky’s endless droning on about the “World’s Best League”.
There are also certain things & thresholds one would not want cross – f.i. giving the TV companies complete control over scheduling, as is more or less the case in England, or scheduling kick-off times to cater to overseas markets – in the race for TV money – one of the best things in the BL is it’s mostly fan friendly nature.
Continued CL success is also important – flagship teams, as much as an exciting league, sells football globally – it will be very interesting to see how far the boys in red-white and black-yellow might get in the competition this year. A win, so long overdue, seems to be a realistic possibility again – and now for more than one team! – it would do wonders for international recognition.
Europe beware: The Bundesliga is on the up.
Gard Lid Aabakken
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