Is Bayern Munich the Perfect Working Model of a Modern Football Club?

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Is Bayern Munich the Perfect Working Model of a Modern Football Club?
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The current campaign has already brought unprecedented success to Bayern Munich, and more very well could be coming. Crowned Bundesliga champions in record time, Bayern will play upcoming finals in the UEFA Champions League and German Cup with the chance to claim a historic treble of trophies.

The success likely will not stop there. Next season will mark the arrival of manager Pep Guardiola, previously the architect of FC Barcelona's rise to continental power. When he inherits the job, Guardiola will oversee a team brimming with talent and confidence, a club with financial might and an immense international following and a youth academy that ranks among the world's best and most productive.

Considering those ingredients, it is little stretch to say that Guardiola could be coming into a perfect situation where success will almost be guaranteed. With that in mind, one might wonder whether Bayern is currently the perfect model of a football club.

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So is it?

Perfect, it should be pointed out, is a problematic word. No club can win every match, claim every trophy with every roster spot occupied by homegrown players and keep every fan happy and every seat filled at every match—all while maintaining excellent financial health.

But in examining all those factors, as well as Bayern's performance in those areas against other elite European clubs, I found that Bayern comes surprisingly close to doing so—perhaps closer than any other club anywhere in the world.

That does not make Bayern the perfect football club, but it might just mean the Bavarian giants currently set the standard for footballing excellence.

 

On-Pitch Success

Bayern Munich is Germany's most successful club with 23 titles. The next-best total—nine—belongs to Nuremberg. Borussia Dortmund, which won the Bundesliga in 2010-11 and 2011-12, has won eight titles.

Such historic success has earned Bayern the title of Germany's most famous club. Membership in the official supporters' club FC Bayern Munchen e.V.—which owns 81.8 percent of Bayern's joint stock—rose to 187,865 in November 2012. Officially affiliated fan clubs have 231,197 members (stats via FCBayern.de).

Even by Bayern's standards, the 2012-13 Bundesliga season has been a stunning success. Bayern clinched the title with six matches to spare, a record and set new marks for points and wins. The 23rd title extended yet another record Bayern holds.

"We had a drought for two years. But now we're back where we belong—right at the top of the Bundesliga," Bayern captain Philipp Lahm said (per ESPN FC).

Bayern has won the European Cup/UEFA Champions League four times, most recently in 2001. That total ranks fourth all-time alongside Barcelona and Ajax (Real Madrid has won the competition nine times, most recently in 2002).

Bayern also reached the Champions League final in 2010 and 2012, losing on both occasions. The club's total of nine appearances in the European Cup/Champions League final ranks third all-time behind Real Madrid and AC Milan.

This season Bayern has marched to the Champions League final, embarrassing elite opponents like Juventus and Barcelona in the knockout stage. In the final, Bayern will be favored to defeat German rival Borussia Dortmund and Wembley.

 

Financial Stability

Bayern is also an elite club in terms of finances, though by no means the richest in the world or even Europe.

Real Madrid, the most successful team in European Cup history, consistently tops lists of the world's richest clubs. Deloitte's Football Money League has ranked Real No. 1 in revenue every year since 2008. In 2012, Deloitte calculated Real's revenues at €512.6 million (full report here). Bayern was fourth on the list behind Real, Barcelona and Manchester United.

This demonstrates that Bayern is not the world's richest club, but four considerations are necessary to create proper context. First, Bayern in 2012 generated 22 percent of its revenue—€81.4 million—from broadcasting, the lowest total and percentage of any club in Deloitte's top five. This is not entirely troubling, as The Guardian writes:

Broadcasting revenues, particularly for more performance-volatile teams…can fluctuate considerably from one season to the next, tied as they are to performance levels and tournament participation.

Thus Bayern's place in the rich list is less dependent on television contracts. As such, Bayern is in a more stable financial position than other elite clubs, who depend more heavily on fluctuating TV contracts.

 

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Commercial Empire

Second, Bayern generates the greatest share of its revenue—55 percent, or €201.6 million—via commercial interests. This indicates Bayern has a strong, committed network of sponsors and a dedicated fanbase that is willing and able to spend significant sums of money on the club.

“Bayern are in a unique position to attract mega-sponsors as the undisputed largest club of Europe's largest economy, Germany," Goal.com wrote in 2011. "They are also the only German club with a genuine worldwide profile, increasing their attractiveness to potential sponsors.”

Deloitte expanded on the theme in its 2012 report:

Merchandise revenue increased by €13.5m (31%) to €57.4m, whilst revenue from sponsorship and advertising grew by €10.4m. This relentless commercial growth was underpinned by an eight year extension to the club's long-standing relationship with equipment supplier Adidas, who still hold an interest in the club, reportedly worth €25 million per season through to 2020. The club continues to benefit from the strong German corporate market, adding Imtech to its portfolio of premium partners and extending its relationship with Samsung and local brewer Paulaner during 2011/12.

Deloitte elsewhere notes that Bayern's commercial strength will help it remain competitive with English clubs until the new Bundesliga TV contract—which will reportedly represent a 50 percent financial improvement—begins in the 2013-14 season.

Bayern Munich holds a unique place in German culture as the country's most successful and famous club. Germany has Europe's largest economy, meaning Bayern is in position to generate enormous wealth and thus continue the on-field success.

Posting Profits

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A third financial consideration is that Bayern has turned a profit each of the last 20 years. According to the club's figures, Bayern posted €86.0 million in operating profits in the 2011-12 fiscal year. The profit after taxes was €11.1 million (all figures here).

“We have always had one philosophy, and that’s not to spend more than we generate,” said Bayern Munich chief executive Karl-Heinz Rummenigge (per Bloomberg). “From the very beginning when I came into the executive in 1991 after my career as a player it was quite clear that we have to follow this way.”

Real Madrid, the world's richest club according to Deloitte, has turned profits regularly in recent years. But as the Swiss Ramble blog details here, academics disagree about whether that club's financial model is viable. Other elite clubs, like Barcelona, Manchester United and Chelsea, have posted losses at various times in recent years.

In addition to posting profits yearly, Bayern is financially healthy because it relies little on debt. According to Forbes, Bayern's debt-to-revenue ratio is five percent, well below English competitors like Manchester United and Arsenal. Chelsea has no debt but has relied on heavy investment from a single investor, billionaire owner Roman Abramovich.

Bayern relies neither on debt nor a single investor, who could leave the club at any time. Instead, fans own nearly 82 percent of Bayern (per CNN). This is by design. The Bundesliga requires—with rare exceptions—that clubs adhere to a 50-plus-one principle of ownership, meaning more than 50 percent of each club is controlled by fans (more at The Guardian).

Bayern is no exception to either requirement.

 

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Fan Experience

The latter leads to our fourth a final financial consideration: low ticket prices. In the most recent Deloitte analysis, Bayern derived 23 percent of its revenues on matchdays, the lowest total among the richest five. This seems to make little sense, considering Bayern plays in the Allianz Arena, a 70,000-plus-seat, top-class venue that opened in 2005.

One reason for the lower total is ticket prices. Bayern charges an adult fan the equivalent of £104 for a season ticket in the standing-section, according to the Daily Mail. "We do not think the fans are like cows, who you milk," said Bayern president Uli Hoeness. "Football has got to be for everybody."

As The Guardian explains here, comparing ticket prices from country to country is difficult. Bayern's prices, however, are quite low—lower than Real Madrid and Barcelona. In other words, Bayern could charge more for tickets and make more in matchday revenue, but it doesn't.

In choosing to charge less, Bayern maintains a happy and effective balance between fans and the bottom line. 

 

Youth and the Future

Like all elite clubs, Bayern at times spends heavily in the transfer market. Net transfer spending totaled more than £61 million for 2012-13 and more than £34 million in 2011-12, according to TransferMarkt.

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But Bayern also relies on a core of players developed in the club's own youth academy at Sabener Strasse. First-team regulars Philipp Lahm (who captains both Bayern and Germany), Bastian Schweinsteiger, Thomas Muller, Toni Kroos, David Alaba and Holger Badstuber came through the academy, as did several players who moved on to different clubs, like Borussia Dortmund's Mats Hummels.

With a yearly budget of approximately $6.5 million, Bayern maintains several youth teams and supports 185 players along with coaches, therapists, academic tutors and a doctor (per Soccer America). And as the names above imply, these aren't just any players. They often become world-class professionals and internationals. In fact, perhaps only Barcelona can boast a superior youth academy.

Thus, Bayern remains competitive by spending big on key signings and by developing young talent. It makes for a powerful combination, and the future promises even more success.

 

Conclusions

Bayern has experienced more success than any other German team. In European competitions, Bayern ranks among the elite, both historically and currently.

With Guardiola—who won 14 trophies in four seasons with Barcelona—set to take over as manager, it is only logical to expect on-field success to continue, or even increase. And with Germany massive economy, the Bundesliga's overall strength and sensible approach, Bayern has the backdrop to build more financial might in the coming years.

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It isn't all circumstance, though. Bayern turns a profit every year, and that is no accident. The club, which is owned mostly by fans, operates responsibly and sustainably. All together, this makes for a recipe few clubs—even at the elite level—can match.

Real Madrid makes more money than any other club but spends it almost as lavishly. Barcelona, Manchester United and Chelsea have posted financial losses while Bayern has remained profitable and relatively debt-free.

Manchester United has a balanced revenue stream, according to the Deloitte analysis, with matchday, broadcasting and commercial revenues forming roughly equal percentages of the larger total. But United operates with a debt-to-value ratio of 18 percent, according to Forbes.

With a better television deal coming, Bayern should see increased broadcasting revenue soon. Low ticket prices will ensure Bayern can't compete equally in matchday revenue, but they also generate goodwill among the fans, who also serve as the club's owners in a distinctly German arrangement.

In short, Bayern is a healthy football club both on and off the pitch, perhaps healthier than any other in the world.

 

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