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38. Bull, Bear & Beyond – Borussia Dortmund executive interview Squad development
6 Plays1 year ago
In the fifth interview, we discuss Borussia Dortmund’s playing squad. The club has a strong reputation in identifying emerging talent and financial prudence in its investment in the squad. We focus on how the squad is developed and Borussia Dortmund is able to attract young talent, the key accounting issues with respect to the squad and the implications of the emergence of new leagues in the transfer market.
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About ‘Bull, Bear & Beyond’
Bull, Bear & Beyond': features candid conversations with senior executives and from our own team of experts from across industries, exploring strategy, innovation, and the opportunities shaping their markets and 60-second pieces are a compressed summary of content designed to convey our message in a single, easily shareable hit.
About Edison:
Edison is a content-led IR business. We believe quality investment content should inform all investors, not just brokers. Our mission: engage and build bigger, better-informed investor audiences for our clients.
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Original interview published on 16/12/2024 and reposted as a podcast
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Transcript
Dortmund's Talent Development Philosophy
00:00:07
Speaker
So Thomas, Borussia Dortmund has a very good reputation in in identifying new talent, giving them the opportunity to play. So could you talk about your philosophy, how you scout the talent and how you develop them, please?
00:00:21
Speaker
Well,
Financial Strategy and Challenges
00:00:22
Speaker
I have to do a jump into the past. When I started here with my colleague Mr. Watzke, Borussia Dortmund was nearly bankrupt. Everybody knew that. And we had no money to invest in the transfer market. We were not able to buy players. So we
Investment and Youth Development
00:00:39
Speaker
decided to develop our own players to identify high talent and players to develop them to the first team and then to capitalize and that the value we are producing and we developed this to a very high level over the last 20 years and though we invest in those young talented players we accept that those young talented players are not that stable in their sportive of performance like a top star in the age of 25 28
00:01:14
Speaker
but we give them the possibility to develop and show their talent, which gives us a possibility to capitalize the value we produce and to cross-finance our squad, because for us it's important to have a competitive squad for international competitive ah competitions.
00:01:31
Speaker
And though we make out of a problem we had in the two thousand five-eighths to now and we are well known that we are able to develop those players and those players are coming to Dortmund.
00:01:47
Speaker
ah
Opportunities for Young Players
00:01:48
Speaker
Everybody in the European football industry knows the best talents in the market. But we can offer a package others can't. Because we offer of the package an acceptable salary and national and international appearance that they have the capability to show their talent and they can do the next step in their career.
00:02:11
Speaker
And we accept that over time we have from time to time to celebrate. That is what's different from other big football clubs. Big football, the big big football brands buy stars.
00:02:27
Speaker
They're not going develop young, talented players. though If a young, talented player would go to one of those big brands, he run the risk that he's sitting on the bench or on the tribune and he cannot show his and not develop his his talent. For that reason, those guys are coming to Dortmund.
00:02:46
Speaker
And
Scouting and Talent Identification
00:02:47
Speaker
beside of this, we have a big scouting apartment, modern software ah tools to identify players. And we have a lot of scouts all over the world and looking for new talents which could be fit in our team.
00:03:06
Speaker
and And so players and the squad, um that that they're quite you know that they have a lot of effects in terms of the financial statements and where they appear on the balance sheet and you know the gains you make on the players and the disposal. So could you just talk about what are the key accounting issues with respect to the squad?
Financial Aspects of Player Management
00:03:24
Speaker
and Okay.
00:03:25
Speaker
If you buy a player, do you have to invest the transfer money for for the players to pay to another club. Then you capitalize the money you pay for the players on the balance sheet on an asset immaterial asset and you write off the value all over his contract time. So we have depreciations, amortizations in your P&L account.
00:03:48
Speaker
The second is while the player is playing for you, pay him a salary. and This salary varies depending on his fixed salary and then you have variable parts in the salary depending of his appearance time, depending of the success of the team as a whole, for example.
00:04:09
Speaker
And after when you're gonna sell one of those players when he knew but he goes away, and you can sell him with a not an outrunning contract, then you negotiate with other clubs for the compensations ah to to a to give them the rights to to design the players.
00:04:32
Speaker
And then you have profits from transfers, which is not part of our revenues, it's a separate line in our P&L account. and this consists about the compensation to get for the players, less the concurrent book value have to book out, and the cost for advisors in the transaction, and in the bottom line you have the profit from transfers. Okay.
00:04:55
Speaker
So Thomas, in recent years there have been quite a few new leagues coming into perspective, so you know the Saudi market and and the us and the US Football League. Have
Impact of New Leagues on Dortmund
00:05:06
Speaker
they been a good or a bad thing for Borussia Dortmund?
00:05:09
Speaker
Well, thatness that's a very difficult question. if If you have new leagues like the Saudi league, the first thing what's happened is there's more money in the theut the football business because they buy players.
00:05:25
Speaker
They pay a lot of money for those players. And that money goes to Europe, the majority of that money. And this goes around through the industries. And that pushes also a transfer prices.
00:05:36
Speaker
But the big influence is not for Buster Dortmund because those leagues are buying elder players, riding to the sundown of their career, for example. And they do not buy the players we are selling.
00:05:53
Speaker
ah The influence actually is not that big for us, but it may be changed in the future because those leagues are not that attractive for the international football audience.
00:06:06
Speaker
Still not.