Liverpool Risks Losing It All If It Doesn’t Expand Now

The narrative that Liverpool is a ‘well-run club’ is pretty well accepted, but is it necessarily true?

This afternoon it will kick off its Premier League
PINC
season against Leeds United for the first time as champions of the competition.

Liverpool is enjoying its most successful periods of success this century, both financially and on the pitch.

But according to Professor Simon Chadwick, the strategy behind this glory remains a mystery, he sees huge opportunities being missed by the club.

“For me, Liverpool, in many ways is an enigma.”

“They seem to position themselves [as] this looming corporate behemoth and yet, in many ways they’re not.”

He explains that, while rivals like Manchester United and Paris Saint-Germain have embarked on gung-ho commercial expansion in new territories, Liverpool has held back, even in regions where its brand value is strong.

“I would go so far as to say is that the most popular football club in the Gulf region is possibly Liverpool,” Chadwick continues. 

“But they don’t go there to tour, there are no Liverpool retail outlets there [and] they’ve got no commercial partners from the region.”

The danger, Chadwick believes, is that by not seizing the initiative to expand globally Liverpool risks falling behind its long-term rivals.

‘The risk of a return to the Spice Boys years’

At the moment Liverpool’s brand value couldn’t be higher, they have a hugely successful team, filled with individual stars and a charismatic coach.

But in soccer, this can all change, rapidly. Indeed it has done for Liverpool on several occasions in the past.

The two previous seasons when the club seemed destined to win the Premier League title were followed by years of failure.

After second-place finishes in 2008/09 and 2013/14 the club only made it to 7th and 6th place the next time around.

Last season was when this pattern was broken, Liverpool responded to its 2nd place 2018/19 finish with the title. 

There is every possibility Liverpool could continue to dominate. The trouble is there is little recent president, only one club has retained the Premier League trophy in the last decade.

The last English team to truly monopolise success was Manchester United in the 1990s.

During that period Liverpool was better known for having a group of fun-loving players the tabloids called ‘the Spice Boys’ than winning trophies. 

The iconic image of the 90s team is of them wearing cream Armani suits to the 1996 FA Cup Final, not lifting the trophy. 

Chadwick warns that a return to that bleaker period of the club’s past, is not out of the question if it doesn’t capitalise its current position.   

“I really find the way that they play and [Jurgen] Klopp as a as a coach, and the whole stadium experience to be hugely compelling,” he says.

“But I very often think that it’s a you know, it’s like [cream] suits at Wembley waiting to happen all over again. We’re just waiting for a return to the Spice Boys years, because I personally get no sense that Liverpool is attempting to move on strategically in any way.”

Is FSG risk-averse? 

Undoubtedly the ownership of Fenway Sports Group (FSG) for Liverpool has been a massive upgrade on previous propitiators Tom Hicks and George Gillet.

When they weren’t publicly feuding, Hicks and Gillet were loading the club with debt and recording sizeable losses.

FSG has done an admirable job in tackling both of those financial issues. 

Debt has been substantially reduced and it recorded the biggest profit in the history of the sport in 2017/18 when it earned £125 million ($ 156.8 million).

Plotting a trend-line across the clubs financial performance since FSG took charge shows a healthy upward trajectory.

A similar line of steady improvement can be drawn across its league finishes for the same period. 

The only issue is that profits from transfers that have powered many of the most impressive financials.

It was the sale of Philip Coutinho for £140 million which was responsible for the world record results in 2017/18.

Transfer fees are accounted for in stages by a buying club, using a process called amortisation, but profit from sales are booked up-front in full.

This means shifting a star player for a hefty sum improves the bottom line of a balance sheet, but doesn’t equate to more cash available for the business to spend.

A thread from acclaimed soccer finance blogger the Swiss Ramble, which went viral this week, explained this and detailed exactly why Liverpool was not might not be spending in the transfer market.

As the club is still paying off substantial sums for previous transfers and its wage bill has continued to rise.

There is simply not enough money to risk investing in new talent, unless it takes on more debt.

Borrowing money doesn’t necessarily have to be to buy players, it can be used to expand the business in other ways which could generate income.

Both of course carry a degree of risk, Chadwick speculates that an aversion to this may be the critical factor in FSG’s strategy, demonstrated not just in soccer, but in other sports.

“We’ve got FSG saying: ’Boston Red Sox, we’re going to stay at Fenway Park [stadium], it’s best because that’s what people know.’ 

“Same at Liverpool: ‘stay at Anfield, extend the stadium.’ 

“Then it’s being spun [that the stadiums’] are part of the brands. When in actual fact what it may be a reflection of is a risk-averse culture inside the organisation. 

“Whilst you’ve got all the other top European clubs doing wild and wacky things around the world in completely new territories, Liverpool are just not.”

Being risk-averse is not necessarily a bad thing. Just ask Liverpool’s opponents for its opening fixture Leeds United. 

The Yorkshire club’s owners threw caution to the wind two decades ago, it backfired and the club has floundered in the wilderness until now.