The money mis-match

Bernie Reeves takes a look at the Champions League final and a clash of two very different financial philosophies.

This Saturday evening sees the pinnacle in the European footballing calendar - the final of the UEFA Champions League. Bayern Munich have already dispatched one big-spending English club in this season's competition by beating Manchester City on home soil. Can they repeat that feat against Chelsea in Saturday's showpiece final?

Spurred on by the prospect of playing the final in front of their home fans, Bayern have beaten Basle, Marseilles and many people's favourites Real Madrid in the knockout stages. Chelsea are boosted by the big-match experience of many seasoned professionals, having disposed of free-scoring Napoli, a dangerous Benfica side and the seemingly invincible Barcelona. Yet despite delivering similar performances on the pitch, it is the differences between them off it that provide interesting discussion. This is a game between Red and Blue, German and English. It's also a game between clubs with two very different business models.

Both clubs are immensely wealthy, but it is Bayern that is arguably the more financially secure. The laws and culture of ownership in Germany have made Bundesliga outfits an excelllent model for running a club with minimal losses. Bayern are the foremost example of this. They have succeeded in reversing the trend, recording profits in eight of the last nine financial years. Germany's '50+1' rule maintains that clubs must be at least 51% owned by club members. As it is, just over 80% of the club is owned by fee-paying members, many of whom are ordinary fans, and it's this pluralistic nature of ownership that contributes to their positive balance sheets. Building on the success they've enjoyed down the years, Bayern have accumulated a fan base close to 10 million strong, 150,000 of whom are official fee-paying members registered to official fan clubs.

Bayern's money-making merchandising machine. Photo courtesy FC Bayern MunichWith a support base this broad and with so many wealthy members paying their yearly levies, it's no wonder that two of the country's biggest companies thought it would be a good move to get their hands on a piece of the Bayern pie. Adidas and Audi are the club's two primary sponsors, both owning 9.1%. Adidas paid EUR77 million for their share in 2002 and signed a 25-million per year deal up until 2020, while Audi stumped up EUR100 million in three instalments between 2010 and 2011. The percentage of the club that such astronomical figures buy gives us a good idea of just how wealthy Bayern Munich are. The fact that their shares are owned privately and not traded on the stock market means that they are less vulnerable to speculation and takeover. And there is added security in the fact that Bayern are financially reliant on a multitude of private investors rather than one individual. There is essentially zero chance that they will go bust.

Whilst Chelsea can boast similar wealth, the financial decisions are made entirely according to the whims of one individual. Were the Russian owner Roman Abramovich to suddenly pull out of Chelsea - unlikely but it's a question worth asking - he would leave Chelsea with massive debts they would be unable to pay. It is a similar situation to the way Sheikh Mansour has taken control of Manchester City: both clubs are basically castles built on sand. Chelsea can boast high income from TV rights and matchday revenues, but their 42,000-seater stadium brings in notably less revenue than Bayern, even with two extra home games and higher ticket prices. The West London side do not, as yet, have the burgeoning fan base that Bayern can attract. The only way they can sustain their big spending is to continue to borrow from their oil-rich owner. As we will see later, this will soon be outlawed by UEFA.

Since Abramovich took over in 2003, 'Chelski' have spent just over £600 million on transfer fees alone, while last season's wage bill stood at £168 million for the year. Players who have seen most or all of the transformation under Abramovich, such as 'Lamps' a club legend. Photo Chelsea FCFrank Lampard, Didier Drogba, and John Terry are all earning upwards of £150,000 per week. It is worth mentioning here that Bayern are also able to offer astronomically high wages to attract and keep their best players. Captain for club and country Philipp Lahm, and Bastian Schweinsteiger are both earning 9 million Euros per year. And before Fernando Torres arrived at Stamford Bridge, Franck Ribéry was on a higher weekly wage than any player at Chelsea. But having won four European Cups, 15 German Cups, 21 Bundesliga titles and eight domestic doubles, Bayern posses coffers deep enough to pay high wages. Chelsea's continued ability to pay their astronomical wages rests on the patience of one individual.

In essence, Bayern are in a far better position to comply with UEFA's financial regulations, which come into force from 2013/14 season onwards. The Financial Fairplay rules (FFP) state that a club's expenditure (on player transfers and wages) may not exceed what it makes in revenue (from TV rights money, sponsorship deals and gate receipts). For President Uli Hoeneß and CEO Karl-Heinz Rummenigge, balancing the books has always been a priority. In the view of the former, Inter Milan's 2-0 triumph over Bayern in the Champions league final in 2010 was a hollow victory, since the Italian side posted a loss of over EUR100 million Euros that year. And in a shareholders meeting at the weekend, Rummenigge remarked that many neutrals will be rooting for Bayern next week because they are 'not like all the other clubs' (i.e. they live within their means).

The only outstanding debts that Bayern have are to Allianz, the banking and insurance group that financed the construction of the Allianz Arena, from whom the club borrowed EUR346 million. But they aim to have this paid off in six to seven seasons, meaning FC Bayern and its parent company FC Bayern AG will both be debt-free institutions, quite an extraordinary feat for such huge enterprises. Hoeneß' prediction that 'once the stadium debt is repaid, we'll be the richest club in Europe' may prove to be a little wide of the mark, but in the circumstances under which clubs will soon have to operate, the future looks very promising for Bayern.

Roman rules the roost at Chelski.It has been Abramovich's ambition to finally see his club crowned kings of Europe, but in recent weeks they have staked everything on winning this game, which was always going to be a huge risk. The team's league form has suffered due to squad rotation for the Barcelona semi-final and the FA Cup final, meaning the Blues could only manage a sixth-placed Premier League finish. Now the only way they can qualify for next season's Champions League, a feat they have managed eight times in a row, is by beating Bayern in their own back yard. If they fail, there will be a huge hole in their income without the security of Champions League participation next season. Not only that, it will directly affect how the Blues cope with adjusting to FFP in 2013/14. If Chelsea fail to win the Champions League, there will be a huge shortfall, both in the short and long term. Other ways will have to be found to finance the marquee transfers and lavish salaries.

Redeveloping Stamford Bridge or moving to a new stadium have both been proposed, but negotiations have been far from plain sailing. The Bridge is currently protected from developers by the Chelsea Pitch Owners, a fan organisation that bought the freehold to the land on which the stadium is built in 1993. But a vote to see the club buy the freehold back was rejected by the group last October. It seems ironic that the control which Chelsea fans exercise over the club - a move which would be heartily received among German football fans - is what is hindering Chelsea's ascent to a similar level of self-generated wealth that Bayern currently possess. Other sites for a new stadium have been mooted, such as Battersea Power Station, for which the club recently launched an official bid. But this is an idea still in its infancy, with the 2013 season and the beginning of those 'hard times' edging ever closer.

Saturday could see Bayern return to the summit of European football for the first time since 2001. Or we could be talking about Chelsea as Champions of Europe at the eighth time of Roman's asking. Whoever ends up winning, in financial terms at least, one club needs to win an awful lot more than the other.


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