Could the German ownership model could ‘save football’?

“Preposterous arrogance, subversive practices and disenfranchising their own supporters”- Could the German ownership model could ‘save football’?

Key Contact: Jonathan Geen

Author: Tom Geen

The “Rebel Alliance”

It has been a whirlwind week in the footballing world. A daring plot for a 15-team “European Super League” conceived by a “rebel alliance” of billionaire owners has been shot down by the sheer weight of public condemnation just as it lifted its head above the parapet. 

The ‘ESL’, that was set to usurp the established UEFA Champions League and “Americanise” European football competition,  included the so-called ‘big 6’ English teams and proposed a closed shop league that would guarantee annual membership for those involved and the constant stream of massive income that would be earned as a result.

In the hours following the proposal, the billionaire owners built a wall of silence, while the British media, government, and public condemned the proposal in no uncertain terms. Perhaps the disdain for the plan and the creators was best put by Everton FC, who branded the owners as demonstrating “preposterous arrogance, subversive practices and disenfranchising their own supporters.” Spanish newspaper Marca simply called it “Super ridiculous”.

While the severe backlash has meant that fans and the status quo has prevailed on this occasion, the trust held in the international owners of the clubs involved has evaporated overnight. Questions remain regarding their suitability to appropriately govern the clubs. Indeed, the ongoing struggle that the top English clubs face between being  1) globally recognised money-making machines, and 2) a pillar of their respective communities and valuing their fans and history, has come to a head. The next few weeks and months will be decisive.

It is somewhat comforting for those that see football as a local game, played for fans rather than profits, that the British prime minister Boris Johnson responded to the proposals by claiming the government would “drop a legislative bomb”. Keen observers would also have spotted that the culture secretary, Oliver Dowden, stated that a football review would be conducted which would “consider the German 50+1 rule of fan representation”. 

The 50+1 rule

No German teams joined the rebel alliance. This is partly because those in charge of the German clubs live near or in the cities of their respective teams so any backlash could come to bite them on a personal level. This is not the case for the international owners of the ‘big 6’, who are somewhat detached from the cities and clubs they own.

The 50+1 ownership rule adopted by the German Football League refers to a clause in its regulations stating that, in order to obtain a licence to compete in the German league, a club operating as a private or public limited company must hold a majority of its own voting rights. The rule is designed to ensure that the members of the club, ie the fans, retain overall control of the club and the majority of voting rights.

In essence, the rule guards against private investors coming in and being able to prioritise profits over the wishes of the supporters. The ESL debacle is a clear example of investors doing just that.

This rule has also ensured that ticket prices have stayed a level far lower than in the Premier League. It has also meant that German clubs operate with a greater degree of sustainable fiscal planning. Ironically, while most teams in England run at a loss, most top-level German clubs return a profit.

English Adoption

In theory, the English Football Association could implement the 50+1 rule. As most English clubs are private limited companies, 51% of voting rights would give supporter members the decision-making majority.

However, fundamentally altering the structure of these clubs could cause a number of potential issues, some of which are outlined below.

To reach the 51% threshold, shareholders will have to concede a proportion of their shareholding. This reduction of control by the owners will require shareholder consent which might not be forthcoming as it is not in the interests of the majority shareholders currently running the clubs.

In addition, almost all the clubs in England have taken out substantial loans in order to finance day-to-day operations, transfers, and infrastructure projects. It remains to be seen whether the debt funders of these loans will agree to continue providing these facilities that have already been taken out if the shareholding of the clubs changes dramatically.

The changes may also breach some of the conditions of the loans, meaning that the clubs could have support withdrawn or default on their loans. Changing the structuring and financing of many of the top clubs could be precarious, to say the least.

These, and other financial complications, mean that while the end result is undeniably desirable, the route out of the current model may not be. It remains to be seen how the government and Football Association respond to recent events, but an overhaul is certainly required if we are to avoid football being placed on the brink again.

For further information or advice on any of the topics raised please contact Jon Geen or a member of the corporate team today.