Better Off Walking Alone?

Let’s talk about FSG, baby. Under the reign of Fenway Sports Group, Liverpool fans have been able to enjoy *that* night in Madrid, which was swiftly followed by countless electric nights at Anfield – all culminating in their 19th top-flight League title. Any yet, with the confetti barely even swept from the streets of the city (the Red side at least), the Liverpool faithful are desperate for their club’s ownership to change hands.

In the following article I will be exploring if these fans are being self-entitled in their demands, or if they are actually justified in their actions.

Sleeping Giants

Liverpool is a beautiful city, rich in culture thanks to its contributions to music, art and literature. For football fanatics however, there are two cultures – Red and Blue. Whilst both sides are enriched in their own unique history, it is Liverpool rather than Everton who have enjoyed the better of it since football-fever was caught by its population.

From Bill Shankly to Bob Paisley to Kenny Dalglish, the Red side of the city have basked in unrivalled success since the early 70’s, winning a total of 18 First Division titles and 4 European Cups. However, following a ban from European competitions (along with all other English clubs after the Heysel disaster), compounded with by a series of managerial changes, the club were left struggling to emulate their previous success in the newfound Premier League.

(Bob Paisley (left) and Bill Shankly (right) brought great domestic and European success to Liverpool in the 70's and 80's)

Barring one 2nd place finish during the 2001/02 season, the club failed to finish in the top two positions in any of the first 16 Premier League seasons, often dipping in and out of the Champions League qualification places throughout that time.

It is important to remember that in football, especially for clubs the size of Liverpool, successful periods often come in cycles - meaning that there will undoubtedly be times where the club run through a slightly barren period, whilst others around them prosper. Of course, Liverpool in the 1990’s were the most successful club in the country, and their fans would have been demanding for trophies, but their period of success came during a time when the league was simply not that lucrative.

What separates Liverpool’s success in the 80’s to Manchester United’s success in the 90’s is that the latter were able to enjoy this period of dominance during the beginning of the Premier League era – allowing for greater revenues in the form of prize money, broadcasting rights, as well as improved commercial deals owing to the export of the Premier League ‘product’ to all four corners of the world.

Alongside Manchester United, the red team from Merseyside were competing against Chelsea, who were catapulted up the league table following the takeover by Russian oligarch Roman Abramovich; as well as Arsenal, whose strict fitness and training methods instilled by manager Arsene Wenger were so far advanced when compared to other English sides of the time.

The abilities of Gerard Houllier and then Rafa Benitez to operate under relatively strict financial constraints (in comparison to some of their biggest rivals) still provided great moments in Liverpool’s history, not least *THAT* night in Istanbul in 2005 - but their success could still not compare to that enjoyed by Liverpool fans of the previous generation.

(Steven Gerrard (captain) and Rafa Benitez (manager) celebrate their Champions League victory in 2005, despite being 3-0 down at half time)

Ownership struggles pre-FSG

The club was also family-owned, having been in the hands of the Moores family for over 50 years. Eventually their shares were sold - the same route the majority of family-owned clubs in England went down - and in February 2007 the keys were handed to American investors Tom Hicks and George Gillett who had paid a total of just £218.9m. A short-lived reign marred with protests, public fall-outs with managers, and unfulfilled promises – the duo were seemingly unaware of the term ‘financial stability’.

By purchasing the club through a leveraged takeover (see the current #GlazerOut protests for public opinion about this method), they had already started their relationship with the fans on the wrong foot. Failing to invest in the playing squad (leading to another shaky relationship with gaffer Rafa Benitez), as well as not coming through on their promise of a new stadium – the Americans simply created too many enemies at the workplace. Loading the club in debt ultimately led to a qualified audit opinion being issued by KPMG in their year-end accounts due to their heavy reliance on short-term bank loans to operate as a going concern, which had left them on the brink of administration.

The club’s creditors soon took them to court, who ruled in favour of the club being sold to New England Sports Ventures – later renamed as Fenway Sports Group (FSG), owned by yet another American investor - John W. Henry (pictured below).

Sold for just £300m in October 2010, many fans had hoped that given the experience of the FSG group in the sports industry, with their ownership of the Boston Red Sox, that this signalled the beginning of great success for the club and – more importantly – financial stability going forward.

Beginning of the FSG era

With a change in ownership came a number of changes to key personnel.

Managing Owner: Mike Gordon.

Chairman: Tom Werner.

Managing Director: Ian Ayre.

Director of Football Strategy: Damien Comolli.

Head of Performance: Michael Edwards (2011).

Changes were not limited to just the boardroom. In the dugout, Roy Hodgson was swiftly replaced by Kenny Dalglish who, after just over a year in charge, made way for Brendan Rodgers.

FSG’s objectives for Liverpool was clear from the outset: Attract the best players, win trophies, realise the club’s commercial potential, and provide financial stability. Despite Liverpool being considered as one of the top two biggest clubs in the country, it could not expect to rely on its rich history to instantly increase commercial revenue – and so their objectives should not be considered in isolation, but more as steps towards the end goal of financial stability.

The key to this was buying low, selling high – and it begun in their very first transfer window. In January 2011, Liverpool sold star-striker Fernando Torres to Chelsea for £50 million, a record British transfer fee. To replace him, the club brought in Andy Carroll for £35 million and Luis Suarez for £25 million. Whilst Carroll didn’t quite go to plan (with Liverpool still able to recoup £15 million of this transfer fee two years later), Suarez was an incredible at Anfield. The controversial Uruguayan scored an incredible 31 league goals in just the 2013/14 season alone, with the club narrowly missing out on their maiden Premier League title during the process. Despite being suspended for a third(!) biting incident at the 2014 World Cup, Liverpool were still able to sell their star man for over £70 million to Barcelona, almost trebling what they had paid for him just over 3 years previous.

(Luis Suarez, Raheem Sterling and Philippe Coutinho were all sold for significant transfer fees)

This became a running trend for Liverpool:

- Dominic Solanke cost: £0, sold for: £20 million.

- Jordon Ibe cost: £0, sold for £15 million.

- Raheem Sterling cost: £0, sold for £50 million.

- Philippe Coutinho cost: £8 million, sold for £140 million.

Their financial statements clearly reflect this selling ability, having earnt over £330 million* from profit on disposal of player registrations since the 2014/15 season (see Figure 1). This was only trumped by Chelsea (out of the rest of the ‘big’ 6), who may even be worth considering as an outlier - since their business model is founded on investing significant amounts to bring young players to their youth academy, providing them with first team experience by way of several loan transfers, and then selling them on for significant transfer fees.

(Figure 1: Total Profit on disposal of player's registrations from 2014/15 to 2019/20)

*Of course this figure does not directly translate to the amount earned from player sales, as this is the method used in accounting to calculate total profit (after taking into account player amortisation – for more on this, check this article out) – which ultimately is all that matters, given it is this accounting method which contributes to the club’s ability to abide by financial regulations.

Arrival of success on the pitch

Another turning point during the FSG era came in October 2015, when Jurgen Klopp replaced Brendan Rodgers as manager of Liverpool Football Club. The enigmatic German came armed with a desire to change the mindset from doubters to believers – a change in mindset benefitted further when Michael Edwards, who previously shared a fractious relationship with Rodgers, was promoted from Head of Performance to Sporting Director.

With extensive data analysis, to a level that was fairly unheard of by Premier League clubs, Edwards was able to identify a number of unearthed gems in the transfer market that could be moulded and perfected by Klopp’s incredible tactical nous and motivational capabilities. It was a match made in heaven.

Andy Robertson, Georginio Wijnaldum, Joe Gomez, Sadio Mane and Mohammed Salah all played a crucial role in Liverpool’s success during this period – and were purchased for less than £100 million. Comparing this spend to the squad value of Manchester City, Manchester United, Chelsea and other European rivals only further proves what an incredible job both the recruitment and the coaching staff did for the club. Following the sale of Philippe Coutinho for £140 million, the club were even able to break transfer records in a number of key positions. Virgil Van Dijk and Alisson were added– to help secure the Champions League in 2017/18 and the Premier League the year after, turning the club from believers into achievers.

So, they brought in quality players and won major trophies with them. The next step was to realise their commercial potential – which is exactly what they did. During their barren, trophy-less spell between 2010 and 2016, the club’s commercial revenue increased by a mere 49%. For comparison, during this time, Manchester United’s increased by 160%, Arsenal’s by 187%, Tottenham Hotspur’s by 84% and Chelsea by 94%.

From 2016 however, this figure increased by 88% for Liverpool – jumping from £116 million to £217 million. Manchester United and Chelsea’s only increased by 4% and 46% respectively in that period. To further contextualise this increase in commercial revenue, in 2016 Manchester United’s commercial revenue was £268 million – 132% greater than Liverpool’s. By 2020, this same income stream brought in £279 million for Manchester United – which was only 28% greater than Liverpool’s, only going to show how much Liverpool had closed the gap.

This improvement is not only down to the trophies won by the club, but also due to smart financial decisions made by management. Instead of extending their kit deal with New Balance for £45 million per year, the club opted to pursue a deal with Nike for just £30 million. This deal was considerably less than the kit deals earned by their rivals, with Manchester United earning over £75 million each year with Adidas and Chelsea’s deal with Nike bringing in over £60 million each year. However, whilst the initial sum was far less – what Liverpool did was negotiate a royalty percentage of 20%, meaning they got (and continue to get) 20% from each sale of the club’s jersey along with other merchandise produced by Nike. The majority of other clubs only receive between 5-10% from each sale – meaning Liverpool are perhaps in the best position of achieving that old myth of new signings “paying for themselves” through shirt sales. The deal with Nike also allowed the club to exploit the manufacturers great connections in the US and China – with several high-profile celebrities, such as Drake, Lebron James and Serena Williams, sporting the red jersey to bolster sales.

(Figure 2: Total revenue recorded by four of the biggest club's in England according to the Deloitte Money League)

This ultimately led to an increase in total revenue earnt by the Merseyside club (See Figure 2 above). From 2003 up until 2017, Liverpool comfortably sat below 3 of their other biggest rivals on the charts– despite Champions League final appearances in 2005 and 2007. Since 2017 however, the success that Liverpool begun to enjoy on the pitch led to the club being reinstated as one of the two biggest clubs in the country – both in terms of history and finances.

The problems with FSG

The biggest problems shared by Liverpool fans around their ownership is two-fold:

- They have been out of touch with the interests of their fanbase.

This kicked off back in March 2020 with the club’s horrific decision to to furlough all non-playing staff under the Government’s Coronavirus Job Retention Scheme, choosing which was ultimately funded by the taxpayer. It was only due to intense public criticism of the club’s owners and stakeholders that this decision was reversed – but it will not be forgotten.

As if this wasn’t enough controversy for the John W. Henry led consortium, in April 2021 the club decided to co-create the European Super League – an elitist division where the 12 founder clubs cherry-picked the league’s other participants, with no room for promotion, relegation and thus, meritocracy (for my full thoughts on the ESL, check out this article I posted). Again, it was only due to public criticism that this proposal fell through, and rightly so.

- Their lack of investment into the playing squad.

As highlighted earlier, the business model utilised by the club of buying low and selling high was extremely successful in taking the club to where it is now – and it was their high profile and value sales of Luis Suarez, Raheem Sterling and Philippe Coutinho that somewhat disguised the lack of investment made by the club’s owners. In recent years, particularly since the Champions League victory, Liverpool have not made any sales of a comparable magnitude to the three names mentioned above. And so, their fans have called on the owners to contribute a greater amount of their own funds to support Jurgen Klopp in his pursuit of another Premier League title – but these calls have been unanswered. Over the last 3 seasons, the club had a net spend of just £42 million – simply put, this is shillings compared to the amounts spent by their rivals.

Focus elsewhere

However, it is not like the owners completely neglected the club during that time. FSG loaned the club £110 million for Anfield’s new Main Stand (which increased the stadium’s capacity by almost 10,000). Their owners also spent £50 million in developing the club’s state-of-the-art training complex in Kirkby (pictured below) – replacing the Melwood Training Ground which had been used by the club for over 60 years.

In a market where the likes of Kylian Mbappe and Paul Pogba seem intent on leaving their current clubs on a free transfer following the end of the contract, the club has also done very well in renewing the number of contracts that they did this summer.

Virgil van Dijk (pictured below), Alisson Becker, Trent Alexander-Arnold, Jordan Henderson and Fabinho have all agreed new long-term deals with club, with negotiations also ongoing with the representatives of Andy Robertson and Mohammed Salah.

By ensuring that the power remains in the hands of the club rather than the player, which is rarer now than ever before, Liverpool have maintained the potential sell-on value of their biggest assets, should they ever look to move these players on. These are also significant financial obligations entered into by Liverpool, with the amount earned by these players over the course of their contract greater than the total transfer fee of bringing another player to the club.

No need to panic...

After 30 long years without a top-flight league title, Liverpool fans are worried – worried that the owners are willing to let their squad whittle away in a manner that will cause their title aspirations to slip away as their rivals spend freely on improving their squads. This feeling has only been exacerbated by the recent news that their transfer guru Michael Edwards may leave the club at the end of the season. Naturally their supporters will aim this discontent at the owners, but it is important to consider were they were before the takeover, and where they are now.

By returning back to Europe’s elite, the Fenway Sports Group have been largely overlooked for spearheading the most successful period enjoyed by the club since the 1980s, and should be given more credit for the role they have played in this. Throughout their ownership, there has always been a sound business plan in place at the club, and the renewal of key player contracts is simply just the next step of this. With these players on the pitch and a happy Jurgen Klopp in the dugout, the future of Liverpool Football Club remains in safe hands.