Marco Lopes provides an update on Liverpool’s revenues from the 2011/12 season, as reported by the Deloitte Money League report for 2013, and provides analysis and insights on incoming revenues compared to past years, and other European clubs. This is the final article of a 3-part series.
A brief recap from parts 1 and 2 – Liverpool’s 2011/12 revenues look solid and have grown quite well despite the challenges of last season, most significantly that of no European football, driven largely by the club’s commercial revenues. The club stacks well in Europe financially, and look healthy in numbers even when compared ironically to other clubs currently enjoying the latter stages of the Champions League.
The issue is simple – Liverpool may be competitive in a Top 20 of Europe, but not (yet) in a top 4 of England.
When Liverpool finished 2nd in the League in 2008/09, a star studded Man Utd side was the only form of true competition that year. Spurs and Man City were a season away from their full emergence, Chelsea were indulging the instability that only changing managers can bring (only recovering under a caretaking spell with Hiddink), and Arsenal were still chasing profits and bragging about cost effective transfers instead of glory with their young, immature team.
Today, Rodgers faces an established Top 4 where Man Utd and Man City are firmly established superpowers, an underperforming Chelsea is still stronger than 90% of the league, Arsenal are absurdly rich but inconsistent, Spurs are showing potential for growth and teams like Everton, Swansea, Stoke and Newcastle serve to frustrate the journey near the top 6, never mind the top 4. Clubs like Man City and Chelsea have also used the strategy of making billionaire backed squad investments to drive improvements to “leap-frog” into the Champions League, effectively doing in a couple of years what may normally take a few to establish.
Note – In millions. Figures unavailable for Man City for 2006/07 season.
Judging by the above graph, while the strategy of the “blue” sides isn’t well liked – it has worked so far. The Premier League is rich… and viciously competitive.
If Liverpool are to break into the top 4, they need to do 3 things really well. Increase the revenues they can to support a better quality of playing squad. Use the increased revenues to bring in and retain that squad. And then leverage that improved squad to increase the revenues further through the financial spinoffs of successful on-pitch performances. It’s a logical circle that’s extremely difficult to create and balance.
I’m not going to dwell on how Liverpool should be spending their money – that in itself is a massive topic, and certainly a very relevant one – but it’s an idea to understand how Liverpool’s revenues may need to increase, where, and how. The revenues are critical to the long term picture, again taking into account the new Premier League financial rules, which may allow for clubs to have higher transfer limits and wage caps provided they can provide sustainable spending. In short, Liverpool can spend more if they can keep the income coming in to cover the expenditure to the levels required (as opposed to relying on extensive debt or rich owner intervention, which wouldn’t be permitted anyway… to some extent).
Do Liverpool NEED a larger stadium NOW?
Let’s reopen the stadium debate. My last blog on the stadium drama was clear – the biggest financial gap between Liverpool and its immediate rivals was that of Anfield’s form, function and capacity. Looking at the figures above, it still is, yet Man City and Spurs have both been very effective Champions League campaigners despite lower / similar earnings to Liverpool.
I was convinced the stadium was the golden egg – however, perspectives from Liverpool fan and architect Peter McGurk, comments by John Henry himself and the outstanding perspective offered by Rob Gutmann in his article “Be honest, John” in the first edition of the Anfield Wrap digital magazine (WELL worth the read) has made me think that while it is clear Liverpool do need to maximise the asset that is Anfield, the route of that maximisation may not necessarily take the form one may think. It’s not so easy to just build another 15k seats, and expect those seats to make up the revenue shortfall you want. There are challenging questions, the answers to which have different implications. Are those 15k seats the kind that you can charge a premium for (ala London, which is why Chelsea can have a smaller capacity but higher revenue)? Can a stadium revamp justify increases in ticket prices generally to maximise the revenue per seat to the level enjoyed by clubs in London? Is that a strategy that is even realistic for Liverpool to employ? Would Liverpool fans not object? What about investing in the “prawn sandwich” clientele, a key marked gap that Old Trafford currently enjoys?
In my mind, Liverpool do still need to expand and redevelop Anfield. The approach and timing is what is key. Perhaps it is FSG’s mind to invest in the stadium’s corporate hospitality first, enjoy the lift in revenues it brings and use that for a time to invest in further “normal” seating. Perhaps not. I would just ask FSG (if I could) that they decide quickly and tell the fans decisively to avoid the speculation and the contempt breeding due to lack of knowledge rather than lack of action. But it’s clear that apart from having Liverpool play at Anfield more often – it’s not likely that FSG can lift matchday revenues very quickly.
Billions in Broadcasting
The tricky element to handle is that of broadcasting money. The spending power of the top 5 will increase collectively with the lucrative new TV revenue deal for the Premier League effective next season. Liverpool gains and loses with this in that while they become stronger, so do their opposition in the same league – again maximising the problem that Liverpool have of just getting to the Champions League. The current revenues illustrate this – Chelsea and Manchester United may have expensive squads, but those teams are doing well enough to bring in the money to pay for them. ManchesterCity are rising quickly in this respect too.
Broadcasting revenue ultimately comes down to doing well on the pitch. For Liverpool this season and next season, it means finishing higher in the league, doing well in domestic cups, and ideally a good Europa League cup run as well. Liverpool’s semifinal berth in 2009/10 earned the club nearly €3 million. The following season’s run to the round of 16 earned €6 million. It’s not the amounts of the Champions League, but it’s money Liverpool need to earn, at least until they do finish 4th or higher.
FSG’s £35 million statement of intent in Carroll and other controversial transfers has forced them to become timid with player investment, unless the value for money makes sense. But the club’s perceived reluctance to sign experienced players is something that FSG may want to reconsider, especially if that is a key issue in getting the team to improve in its on-pitch performances. Liverpool simply have to punch above their weight. They are not the richest, and may never be – they need to leverage what they have – a strong brand, a great young manager and hopefully the ability to sign the right players and get them playing the best football they can to get the results.
Where Opportunities Knock
Improved performances will hopefully empower Liverpool to grow their commercial revenues, something which FSG have sought to address immediately, and something which in hindsight, has allowed Liverpool to keep their revenues at competitive levels, but only just. It’s not going to be easy to command improved commercial deals however, if the results on the pitch don’t match the reputation the brand commands. Ultimately, the signs are that FSG want to make Liverpool self-sustaining, a team whose success on the pitch finances its success off it and vice versa. That’s not conservative – it’s realistic and prudent, and something which Liverpool can effectively implement.
Most Liverpool fans understand the current need for patience for improvement of matters on the pitch. The expectations on Liverpool may dictate that Rodgers needs to focus on results more decisively, but that may not be such a bad thing. Financially, matters are clear. Liverpool are playing in a league which is unforgivably competitive – and even though the club stacks well in financial terms amongst the majority of Europe, it counts for little when only 4 places exist for the club to move into the Champions League and its riches. Liverpool need to move fast to close these gaps, bearing in mind that their competition in the league remains poised to become richer, not poorer. Arsenal lack significantly in commercial revenue but that is likely to change in coming years, and the impetus to spend will be intense if they finish outside the top 4 this season. Chelsea’s squad is strong and their interim manager rather exceptional, but even though the club is notoriously unstable, they are making very good money to stay competitive. Spurs have done equally well in investing and performing on the pitch, and look likely to return to the Champions League come the end of this season. It’s unlikely that Liverpool will “dethrone” either Manchester club from the top 4, simply because their squads are too well built and their finances too established to allow for backsliding at present. If the Reds are going to force someone out of the equation, Arsenal, Chelsea and Spurs are the likely targets.
It offers the thought that FSG’s prudence in trying to throw transfer money at the right players is frustrating for some, but ultimately the right thing for Liverpool to do. Are they big billionaires who can throw money at everything? Maybe not, but a really blind person ignores their investments, and the lessons they’ve learned from them (Carroll, Downing, Hendo, Adam, Allen, Sahin, Assaidi, Sturridge, Coutinho). The Sturridge deal is a good example of a transfer that can empower results while still representing value for money. Some of those other investments have been ironically restored to some form (Downing, Hendo) thanks to their bold choice of manager in the summer.
Maybe some Liverpool fans are envious of oil sheikhs who can waste big sums of money, and high profile managers, but I’d rather have owners who question transfers in the right manner, and a manager who seeks to establish a squad based on a firm playing philosophy whose execution can beat anyone on its day – than oil billionaires who buy the latest stars of the period only to see them falter as expensive failures. Both FSG and Rodgers seem to be ticking those boxes. They have made – and will make more – mistakes, but they’ve shown a propensity to learn from them and the potential is there for all to see.
FSG and Rodgers have their work cut out for them – but if Liverpool are already “punching” above their means in the world of European football finances – as long as the spending makes sense, it may not be long before the foundation is fully in place for them to establish the club back where it belongs.