Bayern Munich’s finances remain on solid footing

In a recent interview with Frankfurter Allgemeine Zeitung, Executive vice-chairman Jan-Christian Dreesen discussed the state of Bayern Munich’s finances in the current circumstances. While the club has seen a drop in revenue like every other club, he is satisfied with the financial performance in the current year, and, once again, the club turned a profit.

Over-all turnover dropped by about fifty million euros from 750 million to 698 million, which was in line with everyone’s expectations. The bottom line also showed the impact of not having any fans in the stands with the profit lowering from just over fifty million euros to about ten million euros. Despite these drops Bayern was able to do a fair bit of business on the transfer market and bring home five pieces of silverware. The only functional impact at the moment Dreesen reports is a drop in the club’s liquidity.

The drop in revenue for the club is not over yet. Dreesen indicated that if fans are not allowed back into the stadiums at all this season, the total loss in revenue could hit the three digits, with some projections between 100 and 150 million euros in lost revenue depending on when fans are allowed to return. The estimate is that the loss could result in a loss of revenue for a full season of about 20%.

The Silver Lining

While a loss in revenue is never a good thing there is some good news in the package. Firstly, that years of prudent financial dealings left Bayern with more than adequate liquidity to deal with the crisis. While many teams have taken on debt, shed assets, or have had to file for court protection, Bayern’s “live within our means” philosophy continues unabated. At this moment a number of large investor groups are pooling capital to buy or loan money to distressed soccer clubs all over Europe. They won’t being doing any business with Bayern.

Secondly, while revenue was down, based on Bayern’s careful management and the players taking a voluntary salary cut, Bayern was able to expand their social programs during the crisis, rather than cut them back. The club has been a generous and respected part of the Munich community for decades, and has once again stepped up to give back to the community that supports it.

Lastly, the loss of revenue is occurring in the area of the club where it is least economically harmful. While the loss of fans tears at the very fabric of the sport and sterilizes the match day experience for everyone, attendance revenue tends to be the most expensive for the club to earn. While the media likes to get hyped about revenue numbers to make the losses sound large, the key figure to be concerned with is profit or net income.

If you spend fifty euros to make one hundred euros in attendance revenue, but you only spend twenty euros to make one hundred euros in sponsorship revenue, then losing the sponsorship revenue will hurt you more. Thus, while the loss of attendance or match day revenue hurts, the expenses of running the stadium make this type of revenue amongst the least profitable that the club sees.

To a large degree this success is due to the long-term financial prudence of Uli Hoeness and Karl-Heinz Rummenigge. The outcome of their generation long labours mean that Bayern Munich is set to come out of this crisis in as strong a position as any other major club in the world.