With a gentle clunk the car door shut I was anxious not to wake the neighbours it was 3am. I was heading for Rivington Pike a small mountain 20 miles away from Liverpool. I had just made 10,000 posts on Koptalk and I needed to find myself. Two and a half hour hours later I sat on top of the mountain and let my mind do its work.
The sun rose from the eastern sky as the dawn heralded the birth of another day. But I was troubled I have been told all is well and FSG have a clear plan to restore Liverpool to what we once were.
I thought of Ian Ayres recent meeting with SOS and of John Henry’s first visits to Anfield waving with his startlingly attractive wife 30 years his junior. No more waving today or even visits.
I think FSG’s plan is this.
They see Liverpool as not expensive but undersold and there is untold revenue waiting to be extracted and a huge capital profit awaits in a few years. It goes like this introduce tiered pricing leave the kop marketed as prices the ordinary can afford (but still £700 to say £1000) then market the other areas of the ground as premium seating. Any hint of success on the field under Rodgers will accelerate this and see large areas of Anfield seating rebranded and price increases will not be £70 but well beyond that taking us to the £1500 to £2000 territory within a few years. There was clear clues of this in Ayes minutes to SOS where he stated we were well behind the London clubs. This is clearly the aim.
But...
Surely Liverpool is a commercial business is the customer demand is such that revenues can increase then surely that is what any business must do? Let’s look at that.
Most fans who attend Anfield are earners some comfortably off but few are what you would call rich. If the prices go up and they pay them they make reductions elsewhere to compensate less merchandise, less cup games or ticket sharing. It is likely the recent increase will not generate more revenue if this is behaviour is factored in which I bet Ayre has not thought of. Some fans won’t pay the prices and will leave to be replaced by those on the waiting list. Who are these people on the waiting list? I believe they are pretty much the same as those who have season tickets now in terms of the demographics. Earners but not rich. Once they get their ticket their behaviour is likely to be exactly the same as those they replaced careful and prioritising expenditure. Indeed once they get their ticket they might cut out all merchandising which they might have bought before. And what happens when those eager fans on the waiting list are all taken up. My estimate is from a figure of say 50,000 only 20,000 are really going to take up the offer when realisation of the expense and lack of product at Anfield is realised.
Let’s look at Liverpool’s ground
Firstly Anfield the biggest item of neglect in football history was 20 years ago when the then directors of Liverpool FC let the powerhouse of a club (the greatest force in history) simply wither on the vine. No ground no investment at a time when sky was pumping money into football like there was no tomorrow and building costs and materials were reasonable.
This creates two problems for us today
One we have reduced revenues over our rivals and sell a poor product for viewing on the television in a small old ground. Two at an era when our rivals are in possession of new stadia we are in the position of having to finance it from a position of being behind them in football status and without champions league revenues. We have to extract disproportionate revenues from our fans to do so,
We have owners....
Who won’t invest their own equity but also have the red sox to deal with who also have their own problems. Where is the investment for new players and the ground in order to play catch up with our rivals why in the pockets of fans of course. Henry I am sure believes we are underpaying for the product being offered so it’s YOU who will be doing the investment and in advance of the new ground being built. Given the scale this is completely unrealistic.
Our financial performance.....
Liverpool like all clubs have a simple financial model fixed cost base and variable income. Their cost to income ratio is high at around 80%. What this means is this Liverpool have (before they get out of bed) have something like £150m of costs to clear before they make a dime. What this means is when revenues are high providing they don’t increase their cost base they will make money. But because their cost base is largely fixed and because their cost to income ratio is high and fall in revenues is disastrous. Liverpool is massively vulnerable to a renegotiation of a sponsorship contract or a fall in match day revenue or lack of interest in merchandising. And of course if this restricts transfer budgets this accelerates the process.
Remember....
This is just for the club to break even never mind make a profit or surplus funds to build the ground.
Yeah but what about TV money and sponsorship?
This is no advantage but financially neutral we get sponsorship but so do our competitors. In fact sponsorship is a threat to us because we need to stay in competition with our rivals. We are extremely vulnerable with our lack of on field success in being unable to obtain a similar deal in future. TV money we are behind our rivals and cumulatively the gap gets bigger ever year we are out of the champion’s league
Yeah but our fan base is huge
Fans are human beings they are not a fixed entity. Liverpool’s fan base is large because of the success in the 70’s and 80‘s. Compare Liverpool to Everton who are much smaller in terms of fan base. Yet in the 1960’s Everton were a much bigger club than Liverpool sponsored by John Moores they were known as the millionaires. What changed that? Success on the field! Right now Liverpool has a big fan base still but we are static or falling our rivals are increasing. In the main new fans follow success and no slick marketing by FSG in the Far East will change that over the medium to long term.
How do we get out of this ?
We don’t basically.
There are only two ways we get out of this given FSG reluctance to risk their capital. One we hope 6 or 7 Kenny Dalglish’s or Robby fowlers or john Barnes comes out of the youth ranks in the next 18 months Rodgers is a success and we achieve success that way. But I don’t feel that’s very likely personally. Or FSG sell up and we get new owners who will put their own equity in.
The FSG model of organic growth I simply cannot see happening because
1. We are too far behind our rivals
2. The macro economic conditions are not with us
3. There is no sufficient upside in the fan base to finance the ground investment either home or overseas.
4. Sponsorship is no advantage to Liverpool over any of the top clubs it’s our position relative to the others that counts
5. Our worldwide fan base and its financial contribution is too far down the line to rectify our financial hurdle and in any event is likely to decline. Again it is our position to our rivals that matters.
6. Every year we are not in the champion’s league makes all this a bit harder.
This is not a mindless negative rant unless we get new owners I cannot see anything other than us remaining broadly where we are and in a few more years the hurdle will be impossible to breach ever. The damage was done 20 years ago and compounded in the botched sale to Gillet and Hicks and then John Henry. I cannot see financial fair play making a blind bit of difference it might favour us slightly over city and Chelsea but not enough to breach the gap.
That’s my opinion you may disagree please feel free to tell me why.
I would agree with you, in fact I said it last summer that unless we can spend big and get back to winning ways, the fan base and revenue will decrease worryingly, I don't think there are a lot of new fans coming up the ranks.
However, how do we get a rich sugar daddy to buy himself a toy like LFC and not an investment to get returns? First thing to do is to get FSG fed up with LFC and wanting to sell without a huge profit. For that to happen revenues have to go down, therefore, no more buying of merchandise and tickets, unless of course FFP can change the landscape, don't know how likely this is. Good news is , life goes on even without LFC.
