Liverpool FC appeals to lots of fans globally although the club is not where it was years ago, i.e. at the very top of English and European football. The club has a legacy and traditions envied by many competitors, winning 18 league titles (no. 2 after Manchester United) and more European titles (5 European Cups*, 3 UEFA Cups**, and 3 UEFA Super Cups) than any of its English competitors. Though, the latest league title came more than 20 years ago and the latest European title came when the club won the UEFA Champions League in 2005 when they launched a fantastic comeback and beat AC Milan in the epic and famous ‘Miracle Match’ in Istanbul. Especially, the past couple of years have been drought for Liverpool FC. Despite a position as runners-up for the league title in the 2008/2009 season, Liverpool FC has not performed well in competing for the league title and the attractive (financially but also for sporting reasons***) UEFA Champions League spot in the past 4-5 years.
So what has happened to Liverpool FC? I think that it is attention-grabbing to look at how the former owners Hicks and Gillett managed the club. A problem area in their management era was the fact that they burdened the club with debt and hence restricted the club’s freedom to act on the market. Liverpool FC still plays at Anfield Road, a stadium with a great atmosphere and proud rituals centered on the Kop. From a business position, investing in a new and modern stadium with higher capacity proves to direct clubs capable of filling the stadium with imperative revenue sources. Without this development and combined with missing results at all levels, Liverpool FC’s debt obligations came as a very negative element. Staying in this position for consecutive seasons leads to a vicious circle affecting several levels of the club. Suddenly, it became difficult for Liverpool FC to compete with Manchester United, Chelsea or Manchester City in terms of recruiting the best star players. These players are expensive in terms of transfer fees and also require a salary, which puts pressure on operations. In genral, Hicks and Gillett did not succeed in their ownership of the club, did not win football games consecutively and failed to connect with the heart of the club, i.e. its loyal fans.
A new ownership structure under New England Sports Ventures/Fenway Sports Group has seen more popularity among fans although it has not been the future-proof solution, which many Liverpool FC supporters look for with titles in mind. Debt burdens, internal and external pressures due to opposition against Hicks and Gillett led to this new ownership structure. So far, the club has not been taken back to previous levels of performance but at least Fenway Sports Group has thoughts and experiences from the sports world from their ownership of baseball’s Boston Red Sox and other sports related business units. Still, the new owners need to prove they can secure a balanced turnaround where increased financial power leads to better results on the pitch. This trade-off is crucial in their attempt to guarantee a long-term solid financial foundation for Liverpool FC, which distances the large debt burdens linked to the previous ownership. Moreover, ownership must keep in mind that it is not only about money. I visited Liverpool FC a couple of years ago and felt high degrees of discontent towards Hicks and Gillett, not only among the core of Liverpool FC but also among people in the city. The new owners have sent several signals towards the club’s stakeholders and have tried hard to engage in dialogue with these stakeholders. In 2012, one of the owners John Henry even reached out to the club’s fans in an open letter explaining his disappointment with the club’s situation and displaying explanations behind this and thoughts regarding the club’s transfer policy and strategic development. Strategically, the club works on improving things but the final impact of the new ownership has not yet led to any (positive) remarkable results. John Henry and Tom Werner have showed results in Boston and are capable of introducing synergetic effects between different sport platforms but their experiences from investing in competitive environments need to pay off in Liverpool FC. That’s a complicated matter but these owners need to bring their experiences from working with sport investments such as improved hospitality solutions, luxury suites and the qualitative improvement of fan experiences into play in Liverpool FC in a way where this is mixed with wins on the pitch. If they succeed in that, their ownership may be a powerful cocktail since the passion of investors is vital when running the club as a brand characterized by fans’ love and loyalty; that label will enhance operations in the long run. With high levels of love and loyalty from stakeholders, the better basis for capitalizing on commercial activities! Managing costs is a different story, which they must take into consideration. All in all, it is time for Liverpool to rise from the ashes. The club has a legacy and a core identity, with which stakeholders identify and in that equation it was dangerous for the club that Hicks and Gillett did not possess an equivalent amount of love and passion for what reason the club’s development was polarized from its traditional values. Turning a top club into a ‘commercial circus’ is part of commercialization in top football but as seen elsewhere it does not mean destruction of a club’s identity. For instance, FC Barcelona has sold the naming rights to their jersey for financial reasons but the spirit of the club and the members are still central in the way the club’s brand has been built over the years.
Liverpool FC holds a spot in top 20 in European football**** measured on revenues thanks to a jersey deal with Warrior, a shirt sponsorship deal with Standard Chartered Bank and other commercial revenues but to move up in that competition it is necessary to participate in UEFA Champions League to drive revenues to a higher level. Ergo, the club must work at getting to that stage again. So far, the new strategies of the club have not paid off in that regard.
* Now the UEFA Champions League.
** Now the Europa League.
*** It is easier to attract top talents and players if the clubs exposes itself at the finest stage in European football, i.e. the UEFA CHL.
**** Measured by Deloitte.
GIVEMEFOOTBALL on the current situation of Liverpool FC.