Three decades of anguish has surrounded Liverpool Football Club, with their attempts coming up short in the Premier League era. Now the champions of Europe are also the champions of England, with their on-field success being matched behind-the-scenes. We took a look at some of the major factors that have attributed to Liverpool's re-birth.
Fenway Sports Group
In 2010, the club was a whisker away from becoming bankrupt and one of Europe’s elite was deteriorating commercially. Multiple variables have been the cause of change over the past decade with the first significant development occurring when Fenway Sports Group (FSG) purchased the club for £300 million back in October 2010.
At the time, the reds were paying interest payments on loans of up to £340,000 per week. After assessing Liverpool’s accounts, John W. Henry took the plunge to take over the reds in an attempt to reform the club.
When Jurgen Klopp was appointed manager five years ago, the club was is an unrecognisable position. After finishing sixth in the 2014/15 season, the reds were hardly challenging for the league. It was fair to say the connection between the team, manager, fans and owners wasn’t as distinct and powerful as it can be considered today.
Liverpool had tirelessly searched for the correct solution, with the appointments of young managers, experienced managers and club legends, nothing seemed to work. Star players would run down contracts using the club as a steppingstone to go on to achieve bigger and better things, while the club was deteriorating in the shadow of its own history.
Following a second place finish to Manchester City in the 2013/14 season and weak performances in the following season, FSG decided to hunt for a new manager. The charismatic German, Jurgen Klopp, whose outstanding performances at Mainz and Borussia Dortmund stood out to FSG, was appointed. Jurgen, who arrived at Anfield in 2015, suited the vision and identity of the club, which has heavily influenced the success the reds have experienced in the last two seasons.
Commercially, Liverpool FC is one of the world's most successful and best-known clubs, as well as one of the most successful revenue generators. While the club has made massive strides on the pitch, culminating in last season's Champions League title and their first ever English Premier League title this season, it is up to executives such as Chief Commercial Officer Billy Hogan to ensure the team remains relevant, resonant and as profitable as possible off the pitch.
The newly crowned Premier League champions commercial performance is a stark contrast from when Klopp took charge over the club in 2015. In the 2014-15 season, before Klopp arrived, the club turned over £298 million from broadcasting, commercial and match-day revenue. This has increased by 79 per cent to £533 million in 2019.
Developments at Anfield are one of many changes geared to transform the reds. Prior to Klopp's arrival in late 2014, work to increase the capacity of the main stand at Anfield adding an additional 8,500 seats to the stadium capacity had already begun. The expansion has contributed to an increase of 43 per cent in match-day revenue from £59 million in 2015 to £84 million in 2019.
The expansion not only allows Liverpool to welcome more fans on matchday but creates more avenues to generate revenue through an increase in corporate and media facilities, such as the ability to host major music concerts and events in the off-season. This ultimately enables Liverpool to attract increased sponsorship opportunities, whilst altering the image and appeal of the club on a global scale.
Furthermore, Liverpool have used the association of its star players to enter markets which they have not normally have associated itself with. Following Mohamed Salah’s individual success, the club have partnered with Egyptian real estate company, Tatweer Misr and one of the country’s largest banks, Alexbank. Thus, enabling greater penetration of global markets by creating a connection between the business, players and fans.
This year, Billy Hogan signed off on a high-profile kit deal with Nike, which promises increased revenue and more branding opportunities than their current deal with New Balance. The deal with Nike is estimated to be around £30 million a season, slightly less than their deal with current kit supplier, New Balance. However, Liverpool will receive 20 per cent of royalties on every unit of kit sold, estimating the deal to be worth between £80-£100 million a year. The most lucrative kit deal in English football history.
The strategy behind the new deal can be attributed to Nike's global distribution, which is significantly greater than that of New Balance. Nike have over 6000 stores worldwide, presenting the opportunity to increase sales of merchandise, which saw an 88 per cent increase from 2018. As current champions of England, Europe and the World, Liverpool will have icons such as Drake, Serena Williams and Lebron James, who currently has a two percent stake in the reds, at their disposal.
On the football side of things, the incorporation of data analysis, statisticians and staff, such as sporting director Michael Edwards and goalkeeping coach John Achterberg, have had an impact on the recruitment of players. On-field success triggers commercial appeal and global attraction, something which brands and companies seek to associate with.
In parallel to strategic recruitment, Liverpool have been able to attract elite-level talent from across the football world. Logical decisions in regard to recruitment have equipped Liverpool with the ability to compete for trophies in recent years.
In January of 2018, Philippe Coutinho, one of Liverpool’s key players, was sold for a record fee of £146 million. The sale of the Brazilian facilitated the transfer of centre-back Virgil Van Dijk for £75 million and goalkeeper Alison Becker for a fee of £66.8 million. Key positions in which Liverpool were lacking and ultimately seen to be the last two pieces of the puzzle.
The increase in revenue from broadcasting, commercial activities and match-day, along with the selling of players, has enabled Liverpool to increase their wage bill from £166 million to £310 million over the four-year period. Consequently, enabling Liverpool to attract talent as it allows the reds to negotiate a cheaper transfer fee.
The club is an influential stakeholder for the city, with Deliotte reporting that in the 2017/18 season the club generated £454 million of the city’s £11.3 billion total economy. The city prides itself on culture, tourism and professional services and if the 19-time league champions can remain on their perch, it can only be exciting and beneficial for the city of Liverpool.
Under the ownership of FSG, Liverpool have been able to master the virtuous cycle of on-pitch success and financial performance. One which is to be admired in modern day football.
Author: James Parker