The Verdict on FSG as Liverpool Owners

The Verdict on FSG as Liverpool Owners

So, it is finally over. The wait for Liverpool’s ‘first’ signing in the transfer season. The recruitment of Mohamed Salah has been announced. I say first given the underwhelming response to Dominic Solanke’s impending arrival from Chelsea for a fee that could be only £3 million.

In the latest annual report, the directors at the club stressed on the four key elements of the club’s strategy. The first one is to improve football performance through a positive playing style and strategic player investment. Both signings are steps taken towards achieving that, but it has been a case of “Meh Solanke, Moh Salah” with most fans. Everyone is dreaming about big money signings, and one gets the sense that anyone who comes in for less than £10 million pounds these days will be given the short shrift. Notwithstanding the fact that Liverpool’s best defenders last season, Joel Matip and James Milner, both came in on the free.

I believe that Fenway Sports Group (FSG), the American owners at Liverpool, have done a good job since taking over in 2010 from the previous owners, George Gillett and Tom Hicks. They’ve pulled the club back from the depths it had sunk to and stabilised the ship. In recent years, they have started showing more ambition in the transfer market.

The second key element in the club’s strategy is to improve the scouting and player recruitment process and this is where the owners and a lot of fans seem to differ. There is a perception that FSG run Liverpool more like a business and less as a football club desperate for success. The failure to go for the best players regardless of price and sticking to a policy that is about buying a player young, improving and developing him, and possibly selling him for a higher price isn’t something that has gone down too well at times.

However, the owners do have a point when they pursue that route. Liverpool’s financial position has been closer to break even in recent years and they even registered a loss of £19.8m in the accounts published recently for 2015-16. This was despite a profit of £42.1m on player sales, including the massive amount received for Raheem Sterling. Similarly, while a profit of £60m was announced for the year before, the sale of Luis Suarez helped the numbers look better than they were. Excluding player sales, the club was left with a £3.8m profit.

Despite these numbers, FSG have been investing in players. A comparison with the numbers at other top clubs in England help. It looks like it will be a Big Six as against a Big Four in coming years, and I have included Tottenham to reflect that changing reality.

Until a couple of seasons back, Liverpool’s wage bill used to be in line with revenue, i.e. they had the 5th highest wage bill, since they were 5th in terms of revenue. They also used to maintain wages as a percentage of revenue at around 56%, having done so both in 2013-14 and 2014-15. All the big clubs try and maintain it around this number, which is healthy from a financial standpoint. In fact, in United’s case this number has been below 50%. They have been able to do this given the massive revenues they generate. The only exception has been Chelsea whose wage bill in recent years has been mostly more than 60%, peaking at 82% in 2009-10.

In 2015-16, Liverpool still have only the fifth highest turnover among the big clubs, but the third highest wage bill, behind Manchester United and Chelsea and not by much. Wages as a percentage of revenue increased to 69%, the highest among the top six. Surely, that is an indicator of renewed ambition by FSG in the transfer market.

The third key element of the club’s strategy is to leverage its global following to deliver profitable revenue growth, and this is where they have struggled. The leading clubs have continued to grow their revenue at a faster rate over the last few years, and commercial income especially is where they have stolen a march on Liverpool. Over the last 5 years, Liverpool’s commercial income has grown only 50%, from £77m in 2011 to £116m in 2016, which is the slowest rate of growth of all six clubs. It isn’t any coincidence that Peter Moore has been brought in as the new CEO. He will be expected to use his decades of extensive business dealings around the world to drive commercial operations.

A few Liverpool watchers claim that they should be competing for players at the highest end of the market because they are ninth in the Deloitte Football Money League, but it is also the case that one will find most Premier League clubs in the Top 30. And that is because of the huge amounts of broadcasting income that the Premier League generates. Also, Liverpool still have four English clubs ahead of them in that list.

In this piece, I had argued that Jurgen Klopp has delivered on the football front by getting Liverpool a Champions League qualification spot, and this should see an increase in both match day and broadcasting income next season. FSG has done their bit by expanding seating in the Main Stand at Anfield, and this should reflect in the numbers.

The last key element in the owners’ strategy is to improve the fan experience and interaction with the club. The redevelopment at Anfield and the appointment earlier this year of a Club and Supporter Liaison Head have been steps in the right direction. There was some furore caused by fans at the proposed hike in ticket prices early last year, but the owners backed down quickly, and that plan has been shelved for now.

Overall, FSG have been good for Liverpool Football Club and will hopefully continue to be solid owners. Unlike a lot of other American owners, they have put their own money into the club and have tried to balance the need for a business model and a winning model. It is a delicate balance and so far, they have got it right.

There are those who pine for the crazy money that the Arabs or Chinese might offer as owners, but there is a huge risk associated with courting them, and recent events in Qatar are just a reflection of the volatility that could accompany a change in ownership. Being an indulgent owner’s pet project can go either way, and there are enough examples of how things can go wrong, or right, in football.

For now, FSG and Jurgen Klopp are providing Liverpool with a lot to look forward to. There are genuine signs that the club are about to turn a corner, with the signing of Salah the latest in a string of moves the owners have gotten right. In my next piece, I shall look at Liverpool’s finances more closely and try to understand the rationale behind signings in recent seasons and what they could translate into this year. Until then, here’s to more glorious speculation in this silly season.

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Comments

12 responses to “The Verdict on FSG as Liverpool Owners”

  1. Tom says:

    Total and utter GARBAGE. they have failed to deliver almost TOTALLY on the field i their decade in charge, and despite talk of 200 mill to spend will not be anything close to that even with 100 mill in sales and CL money of 60 mil.. they are as bad for Liverpool as Hicks and Gillet were from a footballing perspective. the only one fans should care about, not how many sponsors or corporate boxes we have. its been the worst decade of my life watching Liverpool under their ownership. expectations lowered to horrific levels. failure after failure on the field and embarrassing PR disaster after embarrassing PR disaster off it, done for tapping up 3 times in 8 years and now banned from signing youth players, its nothing short of ridiculous

  2. Finchy says:

    Abdul,

    Don’t mind Tommy, he’s a raving lunatic you will find commenting the same way on multiple websites. Every time I click on an article, there he is; The Echo, This is Anfield, and so on.

    Very decent article with your take backed by numbers. Some LFC supporters just have a gross over-familiarity with the club and have tied that to their self worth. Quite honestly, it’s an embarrassment to the fan base.

    Finchy

  3. John says:

    Well said finchy…….. the man has no clue.

  4. Phat says:

    Disagree. Your article is missing some key points. Did you compare player wages, or overall wages? LFC have an inordinate number of ‘non playing staff’ who seem to soak up quite a bit of the overall wage bill, so we actually don’t compete that well with the others. Who are all these other staff? What do they do? Why do we have 1-200 more non playing staff than Chelsea, Man City, arsenal, spurs?

    Sure, FSG hank everyone stabilised the club compared to previous stewardship, but unless there is further serious investment in proven quality players, we will continue to lag behind the ‘top four’. Klopp is indeed our greatest asset, but we can’t stop dancing at the signing of Salah. He must be the start of our investment, not the end. We are in an era where we receive unprecedented amounts from TV rights and your article fails to properly illuminate just how much FSG is pocketing from player sales and TV revenue.

    What do our scouting team do for their wages? Sit and watch Southampton players train? Our ability to pick out a bargain, coutinho and sturridge aside, is non existent, and our inability to push things over the line even more frustrating eg Salah from Basel, Texeira, Dele Alli. And Andy Carroll?

    I’m running out of patience with the FSG model. Yes, I agree, it’s important to run a stable ship financially, but they simply run a money ball system bent on financial gain, not prioritising success on the pitch. They need to make a point this season and prove to us, the fans, that they are in it for the right reasons this year, otherwise this simmering concern that I’ve started to hear, will only get louder.

    • Abdul Rahim says:

      Hi,

      These are the numbers of non-footballing staff at the top 6 clubs. Liverpool have 561, Manchester United have 631, Chelsea have 648 and Tottenham have 213 employees. Manchester City have 170 people in these roles, and this lower number is because the City Football Group have pooled resources with the other football teams they own around the world. These are all numbers reported in the most recent annual reports of these clubs. Arsenal have not mentioned a specific number, but from press accounts the number seems to be around 600.

      In addition, on match days, all these clubs employ people in casual roles, i.e. in the kitchen, catering, retail, safety, hospitality, etc. Liverpool did run a recruitment drive last year for these roles in preparation for the opening of the upgraded Main Stand, like all clubs would.

      I agree that the scouting team could do better. Liverpool have not unearthed too many undervalued gems in recent years.

      Regards,
      Rahim

  5. John Rainey says:

    Tell me exactly where FSG have put their own money in as referenced in the third last paragraph and where they have balanced business and winning because it is definitely skewed way more in favour of the business side of things.

    They have wasted money on players who are not up to the standard of Liverpool Football Club because of their insistence to force their unsuccessful transfer policy on the club. This has been a complete failure for the last five years and is still in place at the club as Peter Moore alluded to in his first interview as CEO. Their transfer policy makes sure that we buy players with a view to getting a profit from their sale rather than whether they can have an instant impact on the team.

    The so called “strategic player investment” is heavily weighted towards being more like buying stock that buying an actual football player and it’s evident in their hard stance on the price of any players that we sell. Yet they are willing to try to low ball other teams when it comes to the transfer of their players and if we are successful, more often than not, we will do the same to the player when it comes to negotiating wages.

    It’s early in the transfer window yet and it’s one that I have been looking forward to as the sounds coming from Anfield have been promising but it is starting to turn the way of previous windows as we are linked with big names only to see then disappear and lower level ones are settled for. That’s now the Liverpool I have supported for 38 years.

    FSG are an embarrassment and I support a football club, not a balance sheet.

    • Abdul Rahim says:

      Hi,

      To date, FSG have paid off an RBS loan of £230mn on acquisition and have converted another loan of £69mn into equity in 2015. They also facilitated an inter-company loan of £110mn for the stadium expansion project. They haven’t taken any money out of the club in all these years and have reduced the debt at the club substantially. And once the financial situation was more manageable, they started putting in more money into player acquisition which has slowly started bearing fruit. This is what I meant when I said that they try to balance business and winning.

      Regards,
      Rahim

  6. James says:

    Biggest load of misleading crap I’ve read. Too stale and myopic to even deserve a rebuttal.

  7. samuel says:

    nice article I enjoy it

  8. Danny says:

    That is a load of horse shite and rubbish FSG are nothing but money grabbing bastards that is milking the club out of money who the fuck loans money to a club they own to build a new stand FSG has NOT invested money into LFC we sell our players to buy new players mostly avavarge players because they are young and cheap hoping to find a diamond to sell on for 20 times we got them for there’s a lot off delusional fans out there that think FSG saved the club and feel they have to be loyal to the scum owners it’s been 7 years and one league cup win to show for it on penalties against the mighty Cardiff and then they sack the greatest player in the club history at the end of the season.
    Time to take the blinkers off FSG are holding the the club back from winning leagues and throphies time to get these vampires out off LFC.
    FSGOUT

  9. Red or Dead says:

    FSG have no ambition in winning trophies whatsoever. They know or care nothing about the history and expectations of this club. They have a rigid business model which they stick to to make money. They demand no more than a top 4 finish in order to secure revenue, trophies are immaterial. In the 6 years they have been in charge they have spent approximately £500m. In return they have sold players to the value of £260m. Had they sold Coutinho for £140m they would have practically balanced the books on transfers alone. The net transfer spend equates to no more than £40m per season ( or effectively just two average players per season). This demonstrates an interest in money but no ambition to win anything whatsoever. The new stand is a further illustration. This is intended to do nothing more than boost FSG’s match day revenue. They are no more than a money machine who simply want to invest in bargain players to sell on at a profit.

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Published by EPL Index
Updated: 2017-06-26 07:48:48
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