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German Soccer Clubs May Gain $385 Million From Ruling

German Soccer Clubs May Gain $385 Million From Ruling
Soccer clubs VfB Stuttgart, SV Werder Bremen and 1860 Munich were all sponsored by the Vienna-based bwin until regional courts deemed the relationships illegal in 2007. Photographer: Jason Alden/Bloomberg

Sept. 3 (Bloomberg) -- German soccer clubs may tap into revenue from the nation’s 7.8-billion euro ($10 billion) betting market when the European Court of Justice decides on the legality of the nation’s sports gambling laws next week.

The Luxembourg-based court is scheduled to rule Sept. 8 on whether Germany’s inter-state gambling treaty breaks European law.

A decision to overturn the law could boost teams’ income by 300 million euros, with sponsorships and agreements giving them a slice of gambling revenue, the Frankfurt-based German Football Association estimates. Unregulated online betting currently accounts for 3.9 billion euros, or about half of Germany’s sports gambling market, according to a study by media research company Goldmedia GmbH.

“The current state monopoly on sports gambling is fundamentally flawed,” Rainer Mutschler, chief executive officer of VfB Stuttgart Marketing GmbH, the commercial arm of the Bundesliga club, said in a telephone interview. “A controlled, licensed sports betting market should be introduced.”

Even with Germany’s ban on sports-betting sponsorships, gambling operators are featured on the jerseys of 20 clubs in Europe’s five most popular leagues, more than any other industry. Nine-time European champion Real Madrid is sponsored by bwin Interactive Entertainment AG, in a deal estimated by the Remote Gambling Association to be worth 45 million euros over three years.

Changes in other leagues have increased club incomes. In France, teams got a 20-million euro boost this season after legislation partially liberalizing the nation’s online gaming market came into effect in June, according to Andreas Ullmann, head of market intelligence at Sport+Markt, a German sports marketing research company.

Player Investments

“The extra money would certainly strengthen German clubs’ position in the transfer market,” Mutschler said, “Most German clubs are not run to make a profit, but rather to reinvest money in the playing squad.”

Discussions are already underway which could result in a cut of betting income going to German football should the laws be eased, according to Hartmut Schultz, a spokesman for bwin.

Germany’s laws maintain a state monopoly on sports gambling, a ban on online betting and on advertising for oddsmakers. Three cases at the European Court of Justice, the first to deal with German gambling laws, will rule on the legality of these measures.

Hints at Ruling

“The state treaty is in my opinion not in conformity with European law,” Gebhard Rehm, a professor of law at the Ludwig-Maximilians-Universitaet in Munich who published a paper on the topic in 2008. “But the European Court of Justice has hinted in previous decisions at the legality and the admissibility of the system and you never know what the German government has tried to do behind the scenes in order to have that accepted in Luxembourg.”

Soccer clubs VfB Stuttgart, SV Werder Bremen and 1860 Munich were all sponsored by the Vienna-based bwin until regional courts deemed the relationships illegal in 2007. St. Pauli and Bayern Munich get some funds from casino and online poker operators.

bwin offers sports betting as well as poker online. Before the ban, its German subsidiary spent “between 60 and 70 million euros,” with an emphasis on soccer, on marketing, bwin spokesman Schultz said. The German unit had in comparison a marketing budget of 3.7 million euros in 2009.

Restored Budgets

“If the market were to be liberalized again, this budget would naturally be restored,” he said.

There are concerns about liberalizing gambling. Armin Koeppe from the German Center for Addiction Issues said more young people are being treated for online gambling addictions.

Former German soccer referee Robert Hoyzer was sentenced in November 2005 to two years and five months in jail for match-fixing as part of a betting ring. Hoyzer admitted that he had accepted bribes to fix four matches, including a German Cup game in which SC Paderborn 07 rallied from 2-0 down to win 4-2 against SV Hamburg, a club two divisions above it at the time.

Many remain dissatisfied with the status quo, Rehm said. The treaty is set to expire at the end of 2011, and at least a partial liberalization is likely to be introduced then if the European Court of Justice fails to overturn it beforehand, according to Rehm.

“Everybody in Germany is unhappy about this state treaty,” he said. “The sports industry is unhappy about it, the betting industry is unhappy about, the German states are unhappy about it, even the lottery industry is unhappy about it because they can’t really do any marketing.”

To contact the reporters on this story: Alex Webb in Frankfurt at awebb21@bloomberg.net

To contact the editors responsible for this story: Christopher Elser at celser@bloomberg.net.

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