Before Year Zero
In February 2007 the Liverpool board, led by the chairman David Moores, decided to sell Liverpool Football Club to the American business tycoons George Gilett and Tom Hicks. The pair both owned NHL ice hockey teams at the time, and they beat off late interest from Dubai International Capital to buy the club for a value of £5000 per share.
They claimed that they had purchased the club with “no debt” and said that they “intend to respect [Liverpool’s] heritage in the future”. Rick Parry, Liverpool’s then chief executive, said, “This is great for Liverpool, our supporters and the shareholders – it is the beginning of a new era for the club”.
Everything seemed to be set to erect the arch of victory over Anfield, with Hicks and Gillett leading the way. They promised to build a new ground, saying “The spade has to be in the ground within 60 days”. They told fans that there would be plenty of money for new signings and that they would support the manager, Rafa Benitez, in his attempts to take Liverpool back to the top of the game.
Indeed, to begin with it seemed like that may well be true. In July 2007 Liverpool broke their transfer record by signing Fernando Torres from Atletico Madrid for £26.5 million. Similarly in November of the same year Liverpool City Council approved their new stadium design. The initial signs of their reign were good.
Yet Rafa Benitez soon fell out with them over their transfer plans, leading to Hicks and Gillett making enquiries as to the availability of Jurgen Klinsmann. Cracks started to show in the Liverpool hierarchy and it wasn’t long before a virtual civil war broke out. In fact, in January of 2008 it emerged that the two owners themselves weren’t even on speaking terms. Liverpool fans started to demand that that owners sell up to the company that they had beaten in the purchase of the club, Dubai International Capital.
In May 2008 the new stadium’s construction, which hadn’t even begun to get off the ground, was halted owing to the fact that the owners couldn’t get the necessary finance to get it all started. By April of 2010 they announced that they were putting the club up for sale, having needed to refinance a £237 million loan with RBS, during which it was revealed that they were incurring £2.5 million penalties each week that they didn’t pay back the loan.
In June of 2010 Hicks and Gillett, perhaps in an attempt to make the club more appealing to potential buyers, but probably just because he had been such a constant thorn in their side, chose to sack Rafa Benitez and replace him with the ‘safe pair of hands’ that was Roy Hodgson. By September RBS place the club’s loans in its ‘toxic-assets’ division. According to Wikipedia, a toxic asset is “a popular term for certain financial assets whose value has fallen significantly and for which there is no longer a functioning market, so that such assets cannot be sold at a price satisfactory to the holder”.
Under their reign, Liverpool FC had gone from being worth £5000 a share to “no longer having a functioning market”. In October of 2010 there was a coup in the boardroom during which a decision was made to sell the club to New England Sports Venture, led by John W Henry, owner of the Boston Red Sox. The decision was made against the wishes of Hicks and Gillett who felt that they weren’t getting a good deal and wanted more money for the club they’d bought. In the end things had to be settled in the high court.
Make no mistake, Liverpool Football Club was extraordinarily close to going into administration at the end of the reign of Hicks and Gillett, the owners that journalist and author Brian Reade described as “a pair of cowboys”. They came close, far too close for comfort, to completely destroying the soul of the club that millions of people around the world love and adore.
So when John W Henry and NESV came in and took over from them, there was a palpable sense of relief – laced with a healthy amount of distrust of yet more Americans. They came in singing a similar tune to Hicks and Gillett when John W Henry said, “we’re here to win” and chairman Tom Werner said they would “under promise and over-deliver”.But the truth is that they removed the acquisition debt that had been dragging the club down, like the albatross round the neck of the ancient mariner. So it’s fair to say that they earned themselves a degree of goodwill when they came into the club.
John W Henry said, after the purchase of the club, that NESV were “committed first and foremost to winning. We have a history of winning, and we want Liverpool supporters to know that this approach is what we intend to bring to this great club”. A fact that was backed up when they finally decided to sack Roy Hodgson and return Kenny Dalglish to the manager’s seat.
The sacking of Hodgson also earned the Americans a touch more goodwill, given that the now England manager looked set to take the club towards relegation if nothing was done to halt the incredible slide it had been on since he took over the manager’s reigns.
The Seasons of Goodwill
NESV took over from Hicks and Gillett in October of 2010. Since then they have seen Liverpool reach the final of the Capital One Cup – beating Cardiff on penalties – and the FA Cup final – losing to Chelsea. They have also overseen Liverpool’s best charge on the title of the Premier League era, missing out to Manchester City by just two points.
On a commercial front they have developed the club to the extent that, by March of 2014, the commercial side of the business was responsible for 47% of the club’s overall income. The matchday income of the club remains disappointing, especially in relation to rival clubs such as Manchester United and Arsenal, but Henry would point to the fact that Anfield is currently undergoing redevelopment to add more seats to the capacity which would, in turn, add to the club’s matchday income.
Yet during their reign the club has finished 6th, 8th, 7th, 2nd and 6th. They’ve spent money on signings – such as the £35 million purchase of Andy Carroll – but there net spend is significantly less that their rivals. Here’s a table to explain as much:
Club Bought Sold Net Spend Per Season
£328, 050, 000 £65, 610, 000
|Club||Money Spent||Money Received||Net Spend||Spend Per Season|
|LFC||£351,950,000||£221, 770, 000||£130, 180, 000||£26, 036, 000|
|MUFC||£356, 300, 000||£82, 600, 000||£273, 700, 000||£54, 740, 000|
|Chelsea||£498, 609, 000||£226, 400, 000||£272, 209, 000||£54, 441, 800|
|MCFC||£475, 450, 000||£147, 400, 000||£328, 050, 000||£65, 610, 000|
LFC’s net spend under Fenway Sports Group is £130 million, nearly a third of that spent by Manchester City – the team that beat them to the title in 2014. Their spend per season is half of the same club’s per season spend, and nearly half of nearly all of their other rivals.
When they lost Luis Suarez to Barcelona Liverpool initially chased Alexis Sanchez, but they let it be known to the local press that the Chilean preferred the bright lights of London to the twinkling lights that glint off the river Mersey. The truth, though, is more that Liverpool didn’t want to overpay for him. They didn’t want to be held to ransom, having been done so over the purchase of Andy Carroll not long after they’d taken over the club.
It’s widely accepted that John Henry and FSG are determined to extract “value” from every transfer they make with Liverpool. By deciding to concentrate on youth moving forward, they seem to be employing a transfer strategy that is based more on resale value than on the importance of the player to the club right now.
The signings of James Milner, Danny Ings and Adam Bogdan are all fine, and they are players that may well offer a lot to the club next season – Milner especially. But if they are the height of Liverpool’s transfer ambition this summer then the club is going to be in real trouble. They’ve had 5 seasons when the fans have given them a break, so it’s time to pay that back.
Questions Must Be Asked
Sooner or later questions must be asked of FSG’s ambitions for Liverpool Football Cub. Since their takeover John W Henry made it clear that without Financial Fair Play in place they probably wouldn’t have taken over the club in the first place.
That’s fair enough. Financial Fair Play was supposed to level the playing field, stopping clubs with extremely rich owners from pricing smaller clubs out of the market or from building up a stockpile of players. Yet UEFA have confirmed that they are relaxing the restrictions imposed by the FFP rules, meaning clubs can go back to spending silly money on players whenever they feel like it.
That’s bad news for Liverpool and bad news for FSG. It means the owners can no longer hide behind the notion of needing to keep their spending in check in order to avoid FFP punishments. It also needs they’ll need to seriously loosen the purse strings if they want Liverpool to compete at the top end of the table. The big question that needs answering is, do they want Liverpool to compete at the top end of the table?
A Change Needs To Come
Right now Liverpool simply can’t compete with the teams above them, so perhaps it’s fair to suggest that they need to try to find a different way to beat them. When Muhammad Ali fought George Foreman for the first time, he tried to go up against him thinking that his speed and agility would be enough to beat him, but it wasn’t. When they came up against each other in the Rumble In The Jungle, Ali allowed Foreman to punch himself tired before Ali knocked him out.
Ali changed his tactic and tried something different, something unexpected, in order to beat the best boxer in the world. Foreman didn’t see it coming and couldn’t do anything to counter it. Ali had introduced the world to the tactic of rope-a-dope.
Liverpool are in a position were trying the same thing as everyone else isn’t going to pay off. If they go up against the likes of Chelsea, Manchester United and Manchester City in an arms race then they are going to lose. Liverpool don’t have the financial muscle to compete with those above them if it comes to trying to buy the best players. Subsequently, LFC need to try to do things differently from the teams above them. They need to come up with their own version of the rope-a-dope in order to compete.
That’s entirely fair. Any Liverpool supporter that argues with such logic would, frankly, be an idiot. As much as LFC fans might not want it to be true, the club can’t afford to be in the market for the likes of Lionel Messi or Sergio Aguero. They need, to use management speak, to think outside the box.
Those involved with the club would say they’ve been trying to do exactly that, removing the power over transfer decisions from Brendan Rodgers and giving it to a committee instead. Ian Ayre is apparently part of the committee and is responsible for the business side of things, getting players to sign off on contracts etc.
Yet time and time again in the transfer market the club seems to have been caught dragging its feet. From Willian and Konoplayanka, through to Diego Costa and Alexis Sanchez, Liverpool have missed out on any number of transfer targets seemingly due to a desire to “get value”. More often than not LFC have wanted to pay the player less than they wanted in wages, or pay the selling club less than they were hoping to receive. This has given other clubs, like Chelsea and Spurs, the opportunity to gazump Liverpool and get in ahead of them in their chase for the best players in the market.
Some might say that Brendan Rodgers isn’t a good enough manager to attract the top players, and there might be some truth in that. But the simple fact is that if Liverpool had really wanted to bring a player in then they could have upped the amount they were willing to pay in wages and persuaded them through financial means that Rodgers was a great boss. But the club won’t do it.
John W Henry and his FSG compatriots need to make a decision about what they want to get from LFC. Do they want to help the club return to the pinnacle of the English game? Are they willing to put their money where their mouths are and spend big in order to push the club on to the next level?
Or are they happy with the commercial development they’ve achieved so far at the club and just want to carry that on indefinitely? Are they not particularly bothered about the club being in the middle of the Premier League road, listing but making them money?
If it’s the former then they need to start flexing their financial muscle and showing they want the best for the club, that, as John W Henry said, they’re “here to win”. Of course it’s fair that they need to find a different way of doing things, but that should involve finding a philosophy and sticking to it, only buying players that fit with that playing philosophy. That doesn’t mean only buying kids or not spending any money. It doesn’t mean hiding behind the excuse of Financial Fair Play.
If they’re more likely to answer the latter, then it’s time to put the club on the market and let someone come in who wants to win no matter what the cost. Money needs to be spent. It needs to be done in the right way, sure, but it still needs to be sent. FSG either need to cough up or get out of the way.