Borussia Dortmund: The smartest club in the world?
A few years ago, news of Borussia Dortmund buying a 17-year-old for €8.6m would have been greeted with cries of “football has gone mad!” in Germany. But times have changed. “Another transfer coup for BVB,” was the headline in Germany’s biggest tabloid, Bild, after Swedish teenage striker Alexander Isak’s move from AIK to the Black and Yellows was confirmed last week.
It’s fair to assume that no one at Bild or indeed any other German publication would have seen much of Isak in the Allsenskan. But the unanimous praise for Borussia’s latest recruit reflects a strong belief in the expertise of sporting director Michael Zorc and chief scout Sven Mislintat – who beat Real Madrid to the signing– as well the quiet realisation that €8.6m is so small an outlay as to be almost negligible: Isak’s book cost to Dortmund is only €1.5m per season (wages excluded) as the transfer fee is amortised over the length of a (unconfirmed) five-and-a-half-year deal.
What’s more, any kind of progress by the player will instantly create value for Dortmund, adding yet another extremely marketable young player to a squad brimming with in-demand talent.
Franz Beckenbauer, the former Bayern Munich president, used to complain that his club behaved too much “like a bank,” saving money rather than spending it on stars at the beginning of the 21st century. Bayern have changed their ways since moving into their new stadium in 2005 but Dortmund do indeed act like a bank, albeit an investment bank: they’ve made it their business to buy low and sell extremely high.
Player sales this season accounted for €111m in revenue, which is roughly a quarter of their total income. That extra liquidity has in turn allowed them to spend a Bundesliga record €120m on new players, Isak included, in order to re-build their squad.
Player sales this season accounted for €111m in revenue, which is roughly a quarter of their total income. That extra liquidity has in turn allowed them to spend a Bundesliga record €120m on new players, Isak included, in order to rebuild their squad.
Dortmund are the vanguard of a broader Bundesliga trend, an increased focus on value. The recognition of players as assets and an important part of the revenue mix is a logical reaction to the hyper price-inflation over the last two years. Whereas income from transfers for the whole league amounted to only 8.8 percent of combined revenue in 2014/15 (€230m), the figure nearly doubled to 16.6 percent (€532m) last season. Total turnover stood at €3.24bn.
In the current campaign, €534m worth of transfer income has been wholly eaten up by transfer spending of €611m. But to run a relatively small, sustainable trade-deficit of €77m, the net outflow for non-Bundesliga recruits, is a healthy state of affairs. It shows that the German top flight is not a selling league but actively reinvesting for future gains. Total turnover for 2016/17 should be just shy of the €4bn mark, ahead of the new €1.16bn per year TV deal kicking in the following season, which puts the transfer deficit roughly at the two per cent mark (of all revenue).
It’s instructive to contrast the Bundesliga clubs’ transfer strategy with that of the Premier League. The top 20 English clubs have cumulatively spent €1.54bn so far, and sold players for €753m. That’s an international trade deficit of €784m, ten times the Bundesliga’s figure in absolute terms and somewhere in the region of 15 percent of total turnover.
Buying players expensively abroad is a hit the Premier League can absorb in light of revenues nearly doubling from €4bn in 2014/15. But it does make you wonder about the huge, systemic wealth destruction that underpins this business model. Since there’s little demand for incredibly expensive English players abroad, they don’t bring in money from abroad into the league. As a result, the Premier League’s riches increasingly keep the wheels of the European leagues turning: over the past five years, there’s been a net outflow of more than €3bn.
The inflationary pressure on transfer fees and wages created by England’s insatiable hunger for foreign imports makes it vitally important for Dortmund and clubs of similar size to either produce players themselves or to acquire them at a young age, ahead of the wealthier competition.
Adding future stars such as Isak and Ousmane Dembélé to the portfolio early is not only smart but the only option for all but a handful of super-rich clubs. The only complication arises from the need for immediate dividends, by way of results.