50+1 and the Green Bay Packers – The Power of Community Ownership

50+1 and the Green Bay Packers – The Power of Community Ownership

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Manuel Veth –

The ownership structure has been a major point of confusion for those who have just started watching the Bundesliga. When explaining the 50+1 Bundesliga ownership model, I often use the American Football Green Bay Packers from the National Football League as an example.

The comparison between the Green Bay Packers, who are a very successful team in the NFL, as the only membership-based club in North American professional sports, and the membership-based clubs of German football, which are governed by the 50+1 rule, is an intriguing comparison in terms of club structures, stability, and community support that membership clubs can generate.

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The 50+1 rule in the Bundesliga has been deeply engrained in German football since the foundation of the Bundesliga in 1963. The rule means that the membership associations, from which almost all the clubs originate, have to own at least 50+1 of the shares of the organization that runs the football business of the club.

The rise of RB Leipzig has changed the dynamic of football ownership structures in Germany

The rise of RasenBallsport Leipzig, and the rather complicated ownership rules of German football has meant that ownership has been big topic in the early episodes of the World Football Index Gegenpressing –Bundesliga Podcast. Within Germany, it has also meant that there has been a major debate about ownership structures in general.

Officially, RB Leipzig are a membership club, who through heavy membership fees have severely restricted the number of members at the club, and, as a result, all members are high ranking employees of RB Leipzig’s sponsor Red Bull. Consequently, many Traditionsfans (traditional fans) have criticized the club as a marketing vehicle by Red Bull, which clearly circumnavigates the 50+1 rule.

RB Leipzig, however, is not the only club that has been criticized for its ownership model. In 2011, Hasan Ismaik bought 60% of the voting rights of  1860 GmbH & Co. KGaA for €18 million. On paper, the membership club remains the main owner of the team, however, as the club still owns 51% of the 1860 GmbH & Co. KGaA.

Ismaik’s involvement, and his recent heavy investment in the club, however, has been criticized by some 1860 fans, and in general by many fans from other clubs, as it is considered another circumnavigation of the 50+1 rule.

RB Leipzig, and 1860 Munich aside, the 50+1 rule also includes an exemption which allows clubs that were founded as company teams to be owned by the company under which the team was founded—such as Bayer Leverkusen (owned by Bayer AG), and VfL Wolfsburg (owned by Volkswagen Gruppe).

 50+1 and the 20-year exception clause

Another exemption to the 50+1 rule is the 20-years-of-investment clause, which allows investors who have held minority stakes in clubs to take over the team as the owner if they have invested in a team for over 20 years. There are currently two clubs in Germany with such owners: 1899 Hoffenheim, is owned by Dietmar Hopp, and Hannover 96, will be owned by Martin Kind from 2018 onwards.

Members continue to have voting power at the same time, however, and the two teams remain membership associations. Dietmar Hopp, for example, owns 96% of the Spielbetriebs-GmbH, which runs the day-to-day football business, and the members, who are represented by the president, hold the remaining 4%.

Martin Kind (r.) will become the de-facto owner of the Hannover 96 in 2018 - Image by Bernd Schwabe

Martin Kind (r.) will become the de-facto owner of the Hannover 96 in 2018 – Image by Bernd Schwabe CC-BY-SA-4.0

Things are a bit more complicated at Hannover 96. Here, the Hannover 96 GmbH & Co KGaA. has run the professional team since 1998. In 2014, the club sold all its shares to the Hannover 96 Sales & Service Gmbh & Co. KG (S&S), which is now the sole owner of the club. The owners of S&S are Martin Kind (52.73%), and several other businessmen, who all hold minority stakes at the club.

Officially, the business is run by the team owned Hannover 96 Management GmbH, which has two seats on the six-member board of the club, and therefore guarantees that members continue to have a say, although just a small one, in the running of the club. This sort of setup allows Martin Kind to control the club through S&S, even though he cannot become the full owner of the club until 2018—when S&S will officially fulfill the 20-year exemption.

To some extent, Kind is breaking Bundesliga rules at the moment but. He had fought a long legal battle with the Deutsche Fußball Liga (the governing body of the Bundesliga), however, which granted the compromise that allows investors to become majority owners if they have invested in a club for more than 20 years.

The compromise meant that Kind refrained from suing the league through the European Union courts. Legal experts have long criticized 50+1 for not complying with EU corporate law, and the DFL, therefore, adjusted its principles to appease the current investors. Also, it is for this reason that the DFL has done very little to challenge the business activities of Hasan Ismaik at 1860.

Membership associations are the very core of German football

This means that 50+1 has become a more or less voluntary rule by Bundesliga clubs. Membership associations, of course, have become the very core of German football, and the power of fans to vote for the decision makers at any given club has meant that German teams have been able to preserve their presence in the community to a much greater degree than teams from other sport leagues.

Today, there are very few examples around the world of the same corporate model. In Spain, despite the fact that 50+1 is not enshrined in the rules of the league, many clubs are still membership organizations—most famously FC Barcelona, Real Madrid, and Athletic Bilbao. At the same time, either corporations or individuals now own most Spanish clubs.

The Green Bay Packers, here in their historical uniform, are the only community owned club in the NFL - Image by Mike Morbeck     CC-BY-SA-2.0

The Green Bay Packers, here in their historical uniform, are the only community owned club in the NFL – Image by Mike Morbeck CC-BY-SA-2.0

The model is also popular in South America. In Argentina, for example, all clubs are owned by their members, and are also listed as non-profit organizations—a system that has come under more and more criticism. In Uruguay, several of the big clubs, such as the Montevideo based clubs Peñarol and Nacional, are also membership clubs.

Now to put this in the American perspective, a membership club is almost like the NFL’s Green Bay Packers—we will get to the differences in a moment. The Green Bay Packers are the only club in any major North American sports league that is owned by its fans.

 The Green Bay Packers are the American equivalent of a Bundesliga club

Established in 1919, the Green Bay Packers have been community owned since 1923. This means that 112,158 shareholders, who together own 4.7 million shares of the club, own the Packers. Like members of the membership-based clubs in Germany, shareholders of the Green Bay Packers do not receive dividends. Furthermore, limitation of the number of shares that an individual can hold, guarantees that investors cannot buy the club outright—another wonderful parallel to 50+1.

In fact all the money earned by the franchise is invested straight back into the team. Like the board of directors of most Bundesliga teams, the board of directors of the Green Bay Packers have only two interests: to remain solvent and to field a competitive team. The model has not only kept the franchise in the smallest market of any of the top four professional North American sports leagues, but it also has meant that the team has been one of the more competitive teams in North American sport whilst also running a profit.

The model is, in many ways, the closest that North American sports gets to the way Bundesliga clubs are run today. Lets use FC Bayern München as an example—a club that has been the most successful team in Germany, and also one of the most competitive teams in the world.

In its ownership model, the Bayern München football team is run by the FC Bayern München AG, which is a non-traded stock company. The membership club, FC Bayern, holds 75% of the shares of FC Bayern München AG—the reminder are owned by the strategic partners adidas (8.33%), Audi (8.33%), and Allianz (8.33%).

As is the case with the Green Bay Packers, this sort of set up has guaranteed that Bayern, like most other Bundesliga teams, are focused on making a profit for the sake of sporting progress rather than paying dividends to their owner.

 Bayern and the Green Bay Packers show membership associations are more profitable

In its annual ranking, Forbes considers FC Bayern the fourth most valuable club in the world, but the ranking overlooks the fact that Bayern are also the world’s richest in terms of savings—unlike the three teams ranked ahead of Bayern ( Manchester United, Real Madrid, and FC Barcelona) who are all heavily in debt— the Bavarians regularly finish the season with a profit, and have no debts owed to investors or owners.

Bayern’s ability to run a yearly profit has led to the rather cheeky comment by Bayern President Uli Hoeneß that “when teams go to the bank to get money to buy players, other teams go to the loan department to buy players, Bayern, however heads to the savings department.” Bayern’s legendary savings account now totals €190.3 million, which makes them the club with the most liquid capital in the world.

Playing in the Allianz Arena FC Bayern München are the richest team in the world in terms of savings – Image by Richard Bartz, Munich aka Makro Freak CC-BY-SA-2.5

It appears, therefore, that Bayern are the Green Bay Packers of world football. But perhaps what is more remarkable is the fact that Bayern are not the only club that, on a yearly basis, runs a healthy profit in the Bundesliga. Bayern’s biggest competitor, Borussia Dortmund, has gone from being a massively indebted club to a club that has been able to, not only put money aside, but actually pay dividends to those who have bought shares in the Borussia Dortmund AG—unlike Bayern, Borussia Dortmund is public company—, which runs the day to day business of the club’s professional team.

Of course, being a membership club does not guarantee sporting and financial success. Ultimately, all these clubs are more or less run on democratic principles, and, as such, can easily run afoul of the democratic process—like in real world democracy, every club is really only one bad election away from being run into the ground.

Membership associations keep clubs grounded in the community

Membership associations have, however, by and large, proven that they work to keep clubs grounded in the community. In the case of the Green Bay Packers, this has meant that a city of roughly 100,000 people has been able to maintain a team in what is arguably the world’s most profitable, but also the most expensive league in which to compete.

In Germany, membership associations have helped clubs stay close to their roots as well and, in fact, it has helped smaller teams like SC Freiburg, 1. FSV Mainz, and FC Augsburg, not only to play in the Bundesliga but also to be competitive. These clubs in particular, and many other teams in Germany that also operate that way, are the backbone of football in the country.

By operating with 50+1, the local community has a large say in how the clubs are operated and, therefore, are also inclined to keep a local flavour to the team, which in turn means that teams are far more inclined to give players from the region, who were developed in the youth team, a bigger chance, than would a foreign owner who wants to see quick success. It is, therefore, fair to say that 50+1 is worth preserving.

But, perhaps, not at all cost. Sooner or later someone will sue against the ruling, and will likely win. It is, therefore, not surprising that Uli Hoeneß has recently stated that the rule should perhaps be softened. He believes that the mentality of German football will ensure that big teams, like Bayern, will not fall into the hands of a foreign investor, and will ensure that the club will always give its members a say.

I personally believe that he has a point. The 50+1 rule will always remain a core identity for German football and foreign investment, and the investment by sponsors such as Red Bull is unlikely to change that. The example of the Green Bay Packers, who were able to grandfather their structure into the modern NFL, shows that the collective of a membership club makes the right decisions more often than not.

Manuel Veth is a freelance journalist,  writer for Bundesliga.com, and podcaster for WorldFootballIndex.com. He is also a holder of a Doctorate of Philosophy in History from King’s College London, and his thesis is titled: “Selling the People’s Game: Football’s transition from Communism to Capitalism in the Soviet Union and its Successor States”, which will be available in print soon. Originally from Munich, Manuel has lived in Amsterdam, Kyiv, Moscow, Tbilisi, London, and currently is located in Victoria BC, Canada.  Follow Manuel on Twitter @homosovieticus.

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