Despite the sporting crisis, Schalke 04 has made progress on its chosen course of consolidation. But the traditional club still has an income problem. It is unclear how things could proceed in the event of a possible relegation to the third division.
There hasn’t been much good news for Schalke 04 in the past few weeks. The traditional club is stuck in the bottom of the table, the home premiere of the new coach Kees van Wonderen turned into a fiasco. Due to the 3-4 defeat against SpVgg Greuther Fürth, the Royal Blues slipped to 15th place in the second division, level on points with Eintracht Braunschweig, who are in the relegation zone. The fear of relegation is growing.
The economic situation also remains tense – although there are further positive effects on the path to consolidation. “Over the past four years, we have been able to position ourselves in such a way that the structures are adapted to the current challenges, regardless of the league – that was not the case after relegation in 2021,” explained Schalke’s CFO Christina Rühl-Hamers. Almost four years ago the club was relegated from the first division.
A year earlier, Schalke had already found itself in an extremely tense situation: Due to the loss of income due to the Corona measures, a working capital loan of 35 million euros was taken out, most of which was guaranteed by the state of North Rhine-Westphalia. As a result, drastic cost-cutting measures had to be implemented. Schalke became an elevator club: relegation was followed by promotion in 2022. In 2023 they went back to the second division.
It was a painful process to adapt to the new circumstances. Budgets had to be slashed and staff reduced. “Today our office employs almost 200 people, more than 50 fewer than before the pandemic,” says Rühl-Hamers. In addition, it was possible to reduce running costs by ten million euros during this period.
Schalke reduces total liabilities
When the report on the first half of the 2024 financial year was presented on Monday, it became clear: sales revenues were within the expected range at 74.3 million euros, and total liabilities were even reduced from 168.1 million euros to 162.7 million euros. However, negative equity increased slightly – from 103.3 million to 104 million. “Based on current planning, we assume that we will achieve the prescribed improvement in the calendar year,” says Rühl-Hamers.
That would also be absolutely necessary: a five percent reduction in negative equity is an important prerequisite for obtaining a license from the German Football League (DFL) for the coming season. Otherwise, Schalke might have to start the coming season with a point deduction.
Despite considerable efforts that have been made in recent years, the future challenges are great. Above all, there is the sharp decline in television income. While they were still at 77 million euros in the 2020/21 relegation season, in the second division year there were only 25 million. In the 2022/23 season (after being promoted again) Schalke received 45 million. In the last second division season just 20 million. In the coming season, when the newly negotiated TV contract comes into effect for the first time, there could be even fewer. On the one hand, because the general market environment has become worse. On the other hand, because it could be that Schalke will only finish in a double-digit place in the table again – which should be sustainable in terms of the distribution of funds.
An average of 61,300 spectators per game
Rühl-Hamers is therefore calling for a different distribution key that primarily takes into account the attractiveness of the popular, traditional clubs. “Unfortunately, the value added by the clubs with strong fans for German football is hardly taken into account in the current distribution system; from our perspective, this urgently needs to change,” she explained. In fact, last season Schalke was in third place across leagues and 14th in Europe with an average attendance of 61,300 – even if their performances on the pitch hardly corresponded to this.
On the other hand, the club itself has problems when it comes to marketing its popularity, which it has emphasized to the DFL not for the first time. It was only after a long search that a new main sponsor, SUN AG, was found in July. The Swiss company pays between 2.8 and almost four million euros per year – this does not correspond to the demands that club officials had communicated internally in the previous months.
Despite all their consolidation efforts, Schalke has an income problem. CEO Matthias Tillmann announced a few weeks ago that he wanted to sell the cooperative’s shares in the club’s own arena. “The first relief would be if we took in around 50 million,” he explained. The money could then also be used to pay off loans that would be due in the coming years. The Corona loan in particular is hanging around the club’s neck like a millstone.
There are no statements in the annual report about the worst-case scenario. What happens if it actually goes to the third division? The goal is to get promoted again within the next three years. The royal blue prospects remain uncertain.
