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The Challenge Ahead for Liverpool FC – On Football Finances and On-Field Success.



I came across a brilliantly written analysis of Liverpool FC’s financial situation and the hole we (yes, as fans we find ourselves part of the collective) found ourselves in following the Hicks/Gilett debacle. It provides an essential broad background view of the situation we’re in, that I’d recommend to all fans concerned with whether we face the risk of joining our blue neighbours as a mid-table club, our position to sign the transfers required to push us forward, if we’ll ever build a new stadium and the financial strength of the LFC business – because frankly, there’s no way to divorce ourselves of the reality that modern football is very much a global business. The article provides a great analysis of our revenues, our earnings, our wage situation by comparison to the likes of Manchester City, UTD, Arsenal and Chelsea, how we’ve managed to boost commercial revenues that have somewhat compensated for our failure to qualify for the Champions’ league, and the challenges and potential rewards of building a new stadium.

Simply put it’s a great article that makes it quite clear that we basically shafted ourselves with the help of Messrs Gillett and Hicks, and our new owners have a hell of a lot of work to do. Frankly, I’m impressed with how they’ve carried on, stayed out of the limelight and gone about business in The Liverpool Way despite the enormous challenges facing them. Everything they have done smells of professionalism and good sports and business sense, and they deserve kudos if only for the manner in which they’ve gone about themselves, while also showing an awareness of the necessity of on-field success for off-field profitability. They are looking at things from a long-term perspective, to boost both our footballing and financial performance, which is a welcome change from our recent experiences with the “leveraged buy-out” shamsters.

Here’s a short snippet:

…much of the damage at Liverpool is self-inflicted, as the fall-out from the Hicks and Gillett era proved very costly to the club’s finances, adding up to around £300 million, which would have bought a lot of good players or even gone a long way towards a new stadium.

This has been the toughest problem facing FSG, as they inherited a club in disarray. The situation was in some ways reminiscent of the old joke whereby a tourist asks for directions and an Irishman replies, “If I were you, I wouldn’t start from here.”

Specific areas that have hurt Liverpool include: a) hefty interest payments; b ) money lost through not qualifying for the Champions League; c) shortfall from lower Premier League finishes; d) compensation paid to sacked managers and executives; e) stadium expenses written-off.

a) In 2006, the year before Hicks and Gillett bought the club, Liverpool’s net interest payable was less than £2 million, but this rose significantly in subsequent years, peaking at £45 million in 2010 in the holding company. The total interest needlessly incurred to pay the speculators from across the pond thus amounted to a depressing £124 million.

b ) Liverpool’s failure to qualify for the Champions League last season and missing out on Europe completely this season are down to many factors, but arguably the most important was the lack of investment by the previous board, which did not provide Rafa Benitez with the means to build upon his team’s Premier League runners-up spot in 2008/09.

Going forward, the key to getting us back where we need to be will be on two fronts: 1) Getting back into the Champions’ League (a financial windfall that we’ve missed out on for too long, costing us ~£86m in lost revenue), and 2) building a stadium to compete with the revenues being generated at the other big clubs – the chasm in gate receipts means we are earning less than half the profit Arsenal and UTD each bring in on each and every match day.

Fortunately, the owners have shown they are aware that the only way to get back into the Champions’ League is to invest in the team, and while the return on last season’s investment has been extremely disappointing and culminated in Commoli’s departure (Werner: “We’ve had a strategy that we agreed on. There was some disconnect on the implementation of that”), they will likely continue to invest with the goal of getting us back into the top European Competition because there simply is no alternative for financial and footballing success.

We have also not been helped by the significant costs we’ve had to incur with the number of transitions at board and management level in recent years costing over £20m. This has further underscored the need for stability. FSG have shown, however, that they are prepared to act decisively where needed, and Comolli is a clear example of their willingness to act. So far they seem committed to Dalglish, however they will likely expect to see significant improvement on the field next season, with our recent signings being complemented with whatever investments they make in the playing squad this summer expected to show major improvements over this season’s poor league outing.

The challenge will perhaps be to find one marquee signing and a couple of more affordable players to provide more cutting edge against the smaller teams that were all too often able to stifle us this season, while also providing a bit of much needed squad depth. We can also look forward to the return of Lucas Leiva next season, who will be very much like a new signing.

All in all, we should be under no illusions: We have our work cut out for us in 2012/2013 and Kenny will be under some pressure to deliver. There’ll be a lot of work done this summer to make sure that happens, not least in the transfer market and on the training field, as 2012/13 could prove to be a pivotal season for Liverpool Football Club.

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About tettehotuteye

www.tettehotuteye.com

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