From Manchester City to Magdeburg in less than five years

German giant FC Schalke 04 recently published their financial figures for the first half of 2024, and by doing so have continued to highlight their struggles. If you are still unaware of what is going on in Gelsenkirchen (the city Schalke is based in, and where England played a number of Euros games this summer) it has been a dramatic and sudden fall from grace for ‘Die Königsblauen’.

Life and success before the struggles

Since the turn of the century, Schalke had become a European powerhouse missing out on featuring in some form of UEFA competition just twice between the years of 2001 and 2019 (those two seasons were 09/10 and 17/18). Some of their notable triumphs during this era were reaching the UEFA Champions League semi final in 2011, reaching the UEFA Europa League semi final once, and the quarter finals three times (as recently as 2017), winning the DFB Pokal on three occasions and finally winning the UEFA Intertoto Cup back to back.

Just two seasons ago, Schalke were in the last 16 of the Champions League 🏆

Yesterday, they were relegated for the first time since 1988 💔 pic.twitter.com/rA9cbOfylD

— GOAL (@goal) April 21, 2021

It wasn’t just the team success that determined this period so well though, the Veltins-Arena also hosted numerous big stars such as: Klaas-Jan Huntelaar, Raul, Manuel Neuer, Julian Draxler, Joel Matip, Benedikt Howedes, Mesut Ozill and Leroy Sane. Those are just a few of the names, many of which came through the academy at S04.

Away from the pitch, Schalke also have one of the biggest fanbases on earth, as of 2023 the club has 178,000 official members, the fourth highest in the world in terms of membership figures. The love the fans show for the club is also reflected in their attendance figures, across the five opening home fixtures this season Schalke have averaged 61,063 fans at games, an incredible figure considering how far the club have fallen and one that amasses Liverpool, Arsenal and Man City. This is a trend that has been maintained as Schalke’s average attendance figure has not dropped below 60,000 since the Veltins-Arena was opened in 2001 (other than the three seasons that COVID-19 affected crowds).

Where and why it all went wrong

When you consider that Schalke finished second in the Bundesliga as recently as 2018, it’s understandable to be confused as to how it went so wrong so suddenly, but there are many factors behind S04’s demise.

Schalke players were attacked by their own fans after getting relegated from the Bundesliga.

Fans chased some of the players on the stadium perimeters in scenes that sources told @uersfeld were filmed early Wednesday morning.

(via @VoetbalUltras)pic.twitter.com/GTvNXnPKSs

— ESPN FC (@ESPNFC) April 21, 2021

It’s not unfair to label this case as bad luck, because Schalke were hit by the pandemic at truly the worst of times possible. But the beginning of S04’s inevitable decline started as early as 2016 when Christian Heidel was appointed as sporting director. Prior to this appointment, a lot of Schalke’s revenue came from developing top youth talent and selling them on for hefty transfer fees that they could then reinvest to remain competitive. Heidel oversaw Schalke’s ‘golden generation’ which included Joel Matip, Leon Goretzka, Sead Kolasinac, Max Meyer and Alex Nubel, who all left the club for free after contracts or transfers were failed to be agreed on. This cost them over €140 million in transfer fees.

Losses due to the inability to sell their stars was also mirrored with losses due to overspending on transfers that did not work out. After Sane’s sale in 2016 to Manchester City (the clubs last big sale), the club went on to make massive losses on failed transfers such as record signing Breel Embolo (€26 million), sold 3 years later for €11 million after scoring 10 Bundesliga goals. Nabil Bentaleb was signed for €19 million and left the club for free a few years later. Sebastian Rudy, Johannes Geis and Omar Mascarell are also other names who were signed for double digit million Euro fees in this period, and later left for free.

By the time COVID-19 came, the club had no revenue from sales to rely on whereas many others around them in the Bundesliga table did. Revenue from Schalke’s huge matchday crowds stopped completely. As well as the fact that the club had recently invested in a new and costly training facility. By 2020 the club’s debt had increased to 217 millions euros. This led to the club going 30 league games and almost 365 days without a Bundesliga win spanning from January 2020 - January 2021, one of the worst runs the German top flight has ever seen.

Schalke’s 4-0 win over Hoffenheim means that they have ended their winless streak of 30 games 🙏

A new (Matthew) Hoppe 😉 pic.twitter.com/KWqGWFDcsn

— GOAL (@goal) January 9, 2021

The list of reasons supporting the club’s downfall continues, including the departure of long time chairman/member of the board and billionaire Clemens Tonnies in 2020, after being involved since 2001. This left them with even less financial power than they previously had. Even the Russia-Ukraine war played its part, as the club had to abruptly cut ties with historical main sponsor, Russian state-owned gas company Gazprom in 2022, less than a year after their first relegation.

BREAKING: German club Schalke have ended their partnership with Gazprom.

The energy company is majority-owned by the Russian state and had sponsored Schalke since 2007. pic.twitter.com/4CZF2htlHx

— DW Sports (@dw_sports) February 28, 2022

Schalke also seem to be on a run of bad managerial decisions as since the start of this decade (2020s) Schalke have had 12 different managers coach a game for the club. So much chopping and changing leaves a squad without stability and identity, as well as also being an extra cost for the club.

Life in the second tier

Since ‘Die Knappen’ - or ‘The Miners’ an ode to Gelsenkirchen’s rich coal mining history - left the Bundesliga in 2021 for the first time in three decades it has been nothing but a rollercoaster. Achieving promotion straight back to the top at the first attempt in 2022. Yet due to extreme financial precaution, the club struggled to compete and toppled straight back down to the Bundesliga 2. This time it did not go to plan, with Schalke spending most of last season fighting relegation to the third tier before eventually finishing 10th in a league of 18 teams. Unfortunately it seems to be no different this campaign as Schalke are currently placed 17th and inside the relegation zone with nine points from 11 games.

Schalke have now officially reached the relegation playoff spot and they could still fall into direct relegation this weekend.

This is the 2nd season in a row a club that ranks in the global top 10 for average attendance is battling relegation to the 3rd tier 🫠 pic.twitter.com/8jznNnyZmE

— 𝗙𝗜𝗔𝗚𝗢 (@fiago7) November 1, 2024

A relegation to the third tier could result in liquidation as the German Football Association has granted them a ‘conditional licence’ if they were to end up outside of the top two tiers. The licence notes that a ‘liquidity gap’ must be bridged if they are to operate in the third tier. If they were to be relegated and not meet the financial conditions, it would result in automatic demotion to amateur regional leagues. This stress is combined with the cost of maintaining the whole Veltins-Arena and its training ground, which has become too much of an expense for a club playing in the second tier.

The Bundesliga 2 TV revenue is estimated to be around a quarter of the fee clubs receive in the top flight, which has been clearly proved correct by S04’s earnings (roughly €77m in 2020/21 but sat at around just €22m in 2023/24). The recently published financial reports show that the club is still in major debt, meaning that tight budgeting and little spending will continue to be implemented for the foreseeable future. Some fans have even suggested that the famed 50+1 rule in Germany should be disregarded by the club as the situation is too dire to have the fans controlling over half of the investment. Chief Financial Officer at the club, Christina Ruhl-Hamers, seemed confident in their process though, saying: “Streamlining our operations has allowed us to become more effective and adaptable, ensuring we’re equipped to handle future demands,”.

Schalke's uncertain future

So what’s next for the Ruhr-based club? It would be unfair to expect another return to the top flight in the near future, especially with many other fallen giants currently playing in the Bundesliga 2 (Hamburg, Koln and Hertha Berlin are just a few of the names). For now it is about survival and stability. Whilst it seems that every aspect surrounding the club is doomed, a few players this season have managed to bring joy to the pitch including forwards Kenan Karaman (six goals in all comps), Moussa Sylla (six goals in all comps) and left midfielder Tobias Mohr (four goals and three assists in all comps). Most will know of how passionate supporters in Germany can be, so as long as those involved in the club can keep the dream they were living less than a decade ago alive, everyone in the city of Gelsenkirchen will continue to bleed royal blue and white no matter the circumstances.