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THE GREAT NET SPEND ROPE TRICK (AND MORE MONEYBALLS)

by Rob Gutmann // 28 August 2011 // 62 Comments

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BACK in the dark days, when a Texan tyrant roamed free in the 2nd city of Empire, debt was the new black, and Liverpool football club was hurtling towards a never imagined abyss, its chief financier and ultimate unlikely knight in shining armour, the Royal Bank of Scotland, imposed upon the club the first in a series of double agents.

Christian ‘Cecil’ Purslow was the initial appointment the bank charged with unofficially watching their backs, as they, like Liverpool’s by then bereft supporters, began to have more than serious concerns about the errant decision making of evil capitalist caricatures, Tom Hicks and George Gilette.

To cut a confused and long story short, ‘Cecil’ Purslow came, saw, and tried vainly to financially restructure the club to the bank’s order. He shed his pinstripes for a tracksuit, deluded himself he was as much director of football as hired gun accountant, and made himself Gary Neville level popular on the Kop, before ultimately allying himself to the small band of corporate assassins who contrived the legendary ‘epic swindle’ that finally rid Liverpool football club of the two headed behemoth from across the Atlantic.

Cecil slayed the dragon(s), his epitaph will read. When he gets round to writing it.

Christian Purslow finally, and quietly, exited the scene of his crimes, misdemeanours, and perhaps grudging redemption, last winter. Gone from a club and a community that would forever associate him with their darkest hours rather than the glory of their resurrection.

Tough luck Cecil. You came, you saw. You merited a banner depicting a big cock with your name on it, courtesy of the Kop. You got very well paid , and you got to pump your fist outside the big court house in that London. The end. The people, have now retired your memory.

So why bring Purslow back out of his box again ? Simply, because of something the man once said. Something, one of many things, he got it in the neck for. It seemed rightly so at the time, and thus far it’s been cast into the dustbin of Hicks/Gillett era soundbite history (along with ‘a spade in the ground in 60 days’ and ‘blow me fuck face’). Consigned to dust, until  now. Watch out. Here comes the revival of Cecil Purslow’s much derided ‘player account’ world view.

Before the summer of 2009 we, as humble football folk, had satisfied ourselves with the neat lay accountancy analysis that concluded that seeking to improve your team by investing in it, meant that you had to be spending more in transfer fees for new players than you were recouping from the proceeds of the sales of those players no longer required.

When pressed by fans and journalists to account for Liverpool FC’s nil net transfer fee spend in the summer of ’09, Purslow directed inquisitors in the direction of that maligned ‘player account’section of the club’s published accounts. He argued that although the club had spent ‘fanny all’ (I’m paraphrasing) on transfer fees that close season it had heavily invested in new contracts for star players, including Gerard, Alonso, Kuyt and Torres.

As ever more weary and cynical fans, we were having none of it. Wages are wages, and transfer spend is quite another thing. Equating the two, seemed on the surface, to be quite frankly a piss take. You judged a club’s commitment to its manager, its team and its future by how much it was prepared to fork out for fees on new players.

The problem is, that that simple and neat correlation has become ever increasingly obsolete as top level wages have begun, in relative terms, to outstrip transfer fees.

Now, it is becoming apparent in a changing economic climate in professional football, that as supporters and judges of managers and players, We’ve got to get our heads around what ‘net spend’ truly means. It has become clear that, as a quick label,  this traditional short hand measure is increasingly irrelevant, without regard to wages.

The most obvious recent example of the folly of looking only to the net fees yardstick has been in the cases of the Andy Carroll and Kun Aguero headline making transfers. Much of the media and many fans noted the parity in the respective £35m prices on these players heads, and rushed to the judgement that Aguero, as the proven world star, was clearly the better buy.

It was implicit that Liverpool (Dalglish/Comolli/FSG) had ‘dropped one’ in spending so much on the relatively raw potential of Carroll when for the same price they could have had the likes of the proven Aguero. The truth is, though, that whilst the fees for these two strikers were the same, the Argentinian Kun picks up around £10m a year in salary, whilst our Geordie Andy sees something closer to a much more modest £3m per annum.

Therefore, after the fees have been paid, Aguero will cost Manchester City around a further £50m over the life of his contract, compared to the c.£15m Carroll will cost Liverpool. No comparison then in the scale of the wage deals.

Successive managers at the likes of Liverpool, Arsenal and Man united may point to their modest net transfer spends in recent years, whilst studiously ignoring the growth in investment in their wage bills.

Home grown talent such as Steven Gerrard or Ryan Giggs may pleasingly show up as a nil net transfer fee cost, but the growth in the size of their pay packets down the years tells a different story. Let’s guestimate that Stevie G’s new 5 year contract of 2009 cost the club a further £60k a week, to bring him into line with his well paid England colleagues at clubs like Chelsea. The cost of that deal, then, is akin to LFC paying a transfer fee of £15m (£3m per year x 5 years) just to retain one of their own players.

Of course, the wage cost factor cuts in both directions, and we are seeing a clear manifestation of that at LFC this summer. When FSG took power at Anfield last autumn, John Henry and co. were at pains to make an observation that became somewhat lost in the clamour to ascertain ‘how much’ they were preparing to spend on a ‘transfer war chest’.

Henry noted that the club’s wages were far too high. Well, he qualified that, by noting that they were high (and this is the key bit) relative to value. This was a marker to a fundamental FSG (Moneyball influenced) maxim – it ain’t about what you pay, but that the value attained ultimately exceeds cost.

This approach has governed LFC transfer policy all summer long. It’s why there was a preparedness to apparently ‘overpay’ for the likes of Carroll, Henderson and Downing, why the likes of Wickham and Clichy appeared to price themselves out of moves to Anfield, and ultimately why LFC have been patient in waiting until the pricing is ‘just so’ before closing a deal on players like Adam and Enrique.

The FSG/Moneyball war cry appears to be that ‘it will not be the market that will tell us what a player’s worth, we will dictate to it!.Your average punter or media ‘expert’ will tell anyone and everyone that Stewart Downing was worth no more than £14-15m, tops. The Comolli computer, however, says ‘no’. In fact it says that the market, the fans and the media are all looking at players through distorted lenses and that only by looking to the correct performance statistics can true value be assessed.

So in FSG/LFC eyes, Downing may well be so effective a player that he’d be a good buy at, say, £25m. Therefore at £18-20m he’s a great buy. Get it ?

The critics of Liverpool’s transfer policy have indeed made a cause celebre of the Downing transfer and demanded to know ‘why buy Downing when rising Spanish star Juan Mata is available for similar money ?’.

Bargain?

Setting aside the obvious answer that those that truly matter and know best may well have concluded that Downing is simply the better player, or at least, the better ‘fit’ for LFC requirements, there is also the simple fact that the deals for the two players are highly unlikely to be financially comparable.

Downing wil cost LFC about £18m (plus add ons) and about £17m in wages over the life of his 5 year contract – a total package cost of £35m then. Mata is on the verge of joining Chelsea for about £25m we hear. If his wages attract the premium that big inter European deals seem to these days we could safely estimate that a 5 year wage deal for Mata could set Chelsea back about £25m. Therefore whilst Mata is costing a total of about £50m (transfer fee and wages added together), Downing looks a lot cheaper option at £35m all in.

Back at the old fashioned net-spend-ometer, fans and pressmen alike are looking at FSG’s gross spend of £105m since January, with about £58m recouped in sales, and concluding that they are entitled to heap big pressure on the Liverpool manager and team to deliver the improvement to match the boldness of that investment.

Yet, if we apply the correct measure of net investment that includes the wage factor, just how bold has this summer’s LFC transfer activity actually been ?

Here follows some broad brush stoke sums, and apologies to all implicated and to accountants everywhere for the crudeness of this analysis :

 

LFC players signed since Jan 2011

Andy Carroll, Luis Suarez, Doni, Charlie Adam, Jose Enrique, Jordan Henderson, Stewart Downing, Coates

Total Gross fees(approx): £112m

Estimated total annual wages for new signings : £23m per annum

If we assume each player contract is for 5 years, we can then amortise the cost of their transfer fees by dividing them by 5, to give us an annual gross cost for the new signings : –

Annual cost of transfer fees (£112m over 5 years) = £22m

Annual cost of new player wages               = £23m

Therefore gross total annual cost of this summer’s transfer activity = £45m

LFC players departed since Jan 2011 and likely to be gone by 31st August

Fernando Torres, Ryan Babel, Jovanovic, Alberto Aquilani, Paul Konchesky, David Ngog, Nabil El Zahr, Danny Pacheco, Ayala, Philip Degen, Joe Cole, Christian Poulsen, Brad Jones

Total estimated gross fees recouped :   £72m

Estimated annual wage savings :       £32m

Again, if we amortise the fees by the 5 year average contract length, the annual fee recouped figure   = c.£14m

Annual wages saved (as above) = £32m

Therefore gross total annual cost of monies recouped this summer = £46m

 

So, and here’s the big reveal, our true, as near-as-dammit, estimated crudely, yet probably not miles out, best approximation for net spend by LFC this summer is…….wait for it…….(drum roll) …. minus £1m.

One whole million pounds (give or take a million or two)in credit. That’s the real likely ‘price’ of what in actuality will have been a nigh-on revolutionary turning over of the Liverpool squad.

By August 31st, of the players we will have released, only one contributed to the first team squad in any significant way last season (Fernando Torres). The rest will not have amassed enough premiership starts between them to be equivakent to more than one more player’s worth of loss (Babel, Jovanovic, Konchesky, Ngog, Cole and Poulsen).

Yet on the other side of the assessment, we’ve added arguably 6 players, who are all very likely to fill first 11 positions. That’s half a dozen new first teamers in, with effectively two going the other way, and all for the princely sum of one million pounds.

A trick of the light ? Smoke and mirrors ? Sleight of hand ? Nope, just solid good old fashioned  smartness. It’s an astute business turn

Smoke & Mirrors?

around and needs to be seen as that in itself, regardless of the vagaries of the fickle hand of fate as yet to be revealed (like, all the new players may ‘turn out to be shit’).

Come next May, be we 1st, 4th or 14th , praise or criticism will be apportioned, but let no man deem that the measure against which judgement may fall, be measured against the context that Liverpool FC have been profligate ‘spenders’ this summer. They simply haven’t been.

John Henry vowed last year that his Liverpool would live within their means, and only spend the revenue the club self generated. Damaged by the absence of that valuable commodity ‘the truth’ during the Hicks/Gillett years, some LFC fans feared that Henry’s proclamation was a short hand for ‘we ain’t putting any of our own money in’. In fact, he’s been more faithful to his other oft quoted mantra of autumn 2010, ‘we will under promise and over deliver’.

Henry and FSG have clearly delivered this summer. Although it is reasonable to assert that they will have engineered an effective ‘nil’ net spend, in a book balancing sense, by the time the transfer window shuts, there is no doubt that they have also provided the short term cash required to allow LFC to move swiftly and decisively in securing the key new recruits.

This provision of necessary cash resources at a crucial phase in the club’s development is a key marker to the future. It demonstrates that the new ownership is well resourced and will be primed and able to make the big decisions in the next phase of ‘drafting’ in that will surely follow next summer.

LFC have astutely re-aligned and remodelled a defective squad using the guile and methodology of a financially sound approach – the ‘Financially fair’ way. There is a real sense that this is only the beginning. Something special is stirring at Anfield.

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62 Comments

  1. An awesome piece of writing analyzing the “true” spend by LFC this summer. sure to rub some Sky pundits the wrong way were they to read it.

  2. Excellent article, brilliant clear description of to cost of contracts and signs. It really does question how Man City will cope in the long term with so many players on new super contract, 3 times the size other top clubs are offering. FSG is undoubtedly the best thing to happen to Liverpool. The more I read of Henry n Co. the more impressive there business acumen becomes.

  3. Superb article, if only the sky sports news team could get to grips with this concept

  4. Fantastic article that!! Shows just how astute FSG are.

  5. Great read that.

    The thing that irritates me is that if you try to counter the usual “Liverpool have spent £100M and what have they gotten for it?” shit with arguments such as this, you only get blank stares in return. I feel most of our supporters have, beacuse of our recent ownership troubles, become quite good at seeing behind the numbers and figures.
    Other fans who haven’t had to deal with these issues have become accustomed to accept the “thruths” of the mainstream media.

    I had a conversation the other day with a fellow red who was quite dissapointed with the new owners because we were linked with Craig Bellamy. “I thought we had money to spend now, apparently not” he said. Don’t know how to begin arguing with that.

    • Squad vastly improved no debt and owners working on improving ground and also have Re structured the club and management from top to bottom so we can deliver on and off the pitch to breach the gulf between us and the scum up the M62. So cut the we aint spent wisely etc and show respect to JWH & TW and FSG for returning are team and fans to the edge of the promised land and not the hell of hicks and tubs lardy

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  7. Quality journalism. The contrast in the owners is reassuringly striking.

  8. Fabulous article. However, whilst the principles here are spot on, I don’t believe for a second that NET spend is that low. You have not accounted for (relatively significant) pay-offs, golden handshakes etc to Jova/Cole/Aqua etc, or agent fees (these alone are likely to total in excess of 10M).

    Additionally, don’t put too much stock in the importance of ‘Comolli’s Computer’ regarding, for example, what is value for Downing. In some cases, I believe it is as simple as Dalglish saying he wants a player, and we must pay what it takes to obtain him.

    • Rightly said. Even I was wondering about the pay-offs made to these players we let go off. But even considering all the things you’ve said – it is still a good piece of business. Now we don’t have overpaid players in the payroll, and I think it is good as it would bring out a culture of not overpaying the players.

  9. Quite simply, an outstanding assessment of the current situation at Anfield, cuts through all the crap and shows FSG and John Henry for what they really are (The best thing to happen to Liverpool in the last 30 years)

  10. Superb. Really superb.

  11. Great article, but should be pointed out that some of those listed as bring removed from the wage bill were also out on loan last season. Also, will we not be paying a proportion of some of their wages still? Probably not a profit being made then but still good business none the less.

  12. hi there, great read. however your reasoning carries one obvious flaw, most of the players that have left or are about to leave were not on the five year contract you assume them to be. good analysis all the same

  13. Great article. Even I understand the numbers. Thanks

  14. Great article!

  15. All the comments are greatly appreciated and those making constructively critical observations are correct to address the areas they have. The information in the public arena is limited, to say the least, so best guessing is the name of the game. I did try and take account of part paid off contracts (particularly in case of Cole and Jovanovic) and agents fees. The assumption on 5 year deals was for simplicity’s sake, and although clearly not all contracts are on this basis, there are swings and roundabouts in looking at shorter periods.

    For instance, with Torres if we amortise his sale over remaining 3 years of his deal the annual net reduction in costs is £50m/3= £16.7m per annum rather than the £10m pa if one amortises over 5 years (which is what I did).

    Obviously the saving on his contract costs are concurrently less on the 3 year presumption as opposed to the 5.

    As I’ve confessed, this is an inexact science, but I was trying to demonstrate that transfer fee net spend is the most superficial measure of them all.

  16. Really enjoyed that. You break everything down so neatly and concisely. I was arguing these very points to a friend (Arsenal supporter), only for him to first say how much we ‘overspent’ on Carroll and how he’s not even close to worth that much. Then he proceeds to tell me that for the huge sum of £100m + this summer, we should have bought ‘better’ players.

    I have sent him this piece in hopes that he reads it and understands that those numbers don’t mean anything unless looked at in context and with everything else (wages, net spend, etc.) taken into account.

  17. I’d love to see a comparison against other club’s “real” net spend.

  18. Reading this at 4..30am in the morning, it’s clear to me, you don’t know what you’re talking about.
    I prefer Harry Redknapp’s school of thinking. And this don’t fit, innit.

  19. a really good read!! Shows brilliantly how the mess around our club has been sorted till now. But in this article, we are talking about long and hence what we do in the coming transfer windows would be really important!! Might lead to some not so popular and bold decisions like selling Big money signings or star players

  20. good article.

    Just a quick question: do these numbers account for the payoff of loyalty bonuses etc that players frequently get. rumour had it that aquilani was paid between 1-2m euros to ‘sweeten the blow’ of his transfer.

    Hard to imagine that the transfers of cole, poulsen, konchesky etc
    haven’t/won’t necessitate similarly expensive sweeteners. They haven’t asked for transfers and are due loyalty bonuses of some sort.

    will these payments not skew these figures to quite an extent? Hard to imagine that moving cole on won’t cost us a fortune.

  21. A SUPERB ARTICLE – MANY THANKS FOR YOUR CONSIDERED OBSERVATIONS AND PRECISE EXPLANATION – AN INSPIRING READ AT SUCH LOW TIMES FOR A GOONER.

  22. We are 3rd in the league, playing some great football & the smiles are on everyone faces again!! & I think KK, J Henry & FSG are doing an exceptional job.That’s the most important to me..How they do it I don’t really care..YNWA…:-)

  23. Thanks for a great article. If I understand it correctly, clubs are paid a premium for players but that premium is recouped by offering players lower wages. Will this not cause issues down the road when players look over the fence at what Chelsea and City players are earning and pull a Torres move on us?

  24. This article is total nonsense, players should be evaluated on their contribution versus their cost. Not on their cost versus some other players cost.

    • How do you quantify contribution?

      There are many variables to this – some of which are quantifiable by statistics (such as goals and assists), others which are softer and determined by subjectivity and personal opinion. If you look at the statistical basis n which FSG have made some of these purchases this year, then they are based on the quantifiable and the subjective. Downing, Henderson and Adam: all in the top 8 of chance creators in the EPL last year; all high on the assist chart – quantifiable; all players of the year for their previous clubs – subjective.

      The board (Kenny, Comolli and FSG) have identified what statistically we were lacking last year (goals and chances created) and tackled that weakness. At the same time they’ve shifted players who didn’t deliver on those aspects, and were costing a fortune. So to support your argument – those players that were costing a lot and contributing little were shipped out…

  25. Sound basis which should prove its merit. However what isn’t mentioned is commercial value of the signings. How many shirt sales are raised by carrol compared with Torres or auguero?

    This is massive consideration!

  26. Great read. The figures are almost bound to be off but the principle is sound. In fact, there are probably swathes of younger footy fans who can see the sense of this from playing football manager and the like.

    Do you think the generally ignorant Sky sports/press way of reporting is because they don’t understand these principles or is it rather out of a combination of laziness and contempt for the public that they dumb down rather than elevate the discussion?

  27. Great article, and very well explained. Yes there are some general assumptions, but that is to be expected given the limited exposure of the finer details of individual player deals.

    In response to Steven’s comments of players heads turning in lure of higher wages being offered by the likes of Chelsea and Man City, I would say this: if the players are performing well and contributing highly to the team, then I have no doubt that they will be offered better wages. It won’t be long before the likes of Suarez will have an improved conact coming his way. The prudent thing with the current policy is that you don’t offer silly wages before the player has even kicked a ball for the Reds. You offer a modest/reasonable salary which can always be improved. By doing things this way, we hope that there will not be a repeat of the cole scenario whereby a player who had been injured for a while, wrong side of 25, and couldn’t even get into the Chelsea side ends up at Liverpool with obscene amounts in wages which has miserably backfired. Yes there will always be players that will be mercenaries and if wqe are really honest do we want those sort of players at Anfield? My answer is a definitive NO!

  28. In response to Igors comments, yes I agree that the likes of Torres and Augero will generate far more revenue in shirt sales on a global level for their respected clubs then Liverpool would from the sale of Caroll shirts. Each player comes with a past reputation, and only the die hard local fans will see beyond this. However, let me pose this scenario, if at the end of this season Torres still hasn’t found his form while Carol comes good, then would you not expect to see a rise in carols stock? At this moment in time, Caroll is probably where Torres was 5-6 years and therefore there is still time fir the lad to come good. It all depends on the player himself and this is something which you cannot factor into the calculation as the situation can change from one season to another with trulying really knowing which way it’s going to go. 6 months agao, who would have thought that Saurez would become an instant hit? I have no doubt that this will then be reflected in sales of the player merchandise also.

  29. The entire second half of this article is based on a conclusion that LFC transfer activity led to actual profits, that is in turn based on a result of adding and subtraction of four figures.

    And if they were different – let’s say, 23M of outgoing wages and 32M of incoming – the entire conclusion would have been different as well. An endless field for a mistake – or cherry-picking.

    So what was the basis of the estimation of the players’ wages? The sources, the detailed calculation, etc? Without it, everything below the words “Yet, if we apply the correct measure of net investment that includes the wage factor, just how bold has this summer’s LFC transfer activity actually been ?” is absolutely worthless.

  30. Way too much time on your hands mate.

  31. A great explanation of the not-so-common-sense appreciation of transfer spend.

    It all bodes well for LFC via FSG so far. Lets give them a few more months ;)

  32. Another important parameter that should be considered in the financial equation is the Resale value of the players brought in. Most of them are fairly young and in case they want/need to be moved out of the club in future, we can still recoup some of the transfer fees if not all and in the case of some of the younger ones, maybe even turn in a nice little profit.

  33. Great article, doesn’t really matter if the figures are wrong it’s the way of doing business that’s important if we’re down £10m-£15m instead of £1m profit it’s a good outlay for te massive changes.

    Shirts will sell themselves when the team is doing well.

    We can now add Meireles transfer fee, wages will probably match Bellamy.

  34. Hmm.. have you only just learnt what amortisation means? I wouldn’t praise the owners too much, it is basic – and most clubs that aren’t bank rolled by wealthy owners will follow the same principle.

    Every club, business, model predicate themselves on cashflow, so what is your point here? That you have brought in a load of players to replace the previous ones at minimal cost. Big deal. If they were so ‘astute’, the signings would be quality players, not premiership mediocrity.

    Special times ahead, if you work as their accountant.

  35. Agree that the numbers do not really matter at this stage. The principal that FSG have applied, taking into account the new FIFA financial regulations that have now kicked in, is far more important when looking at long term strategy.

  36. The pedantic pundits and press demagogues will not refer to the inconvenient truth of your well written piece when they are seeking to promote their punditry credentials and/or sell newspapers. However, at last I feel the old Liverpool is perhaps returning and we will do as we did in the 70s and 80s; namely ignore them and go collecting cups in May.

  37. An excellent summary; very well written.

    #YNWA

  38. Brilliant read and well worth another look at again when we arent going after Messi

  39. What a great piece of writing, Its my first time on this site (thanks Twitter). I know you can manipulate figures to say whatever you want them to say, but FSG seem to be leading the pack with this moneyball stuff. This kind of streamlining can mean only one thing… more money to spend in the future.. on decent players. I was honestly well dubious when they took over, but they way they operate is almost risk free. The future look bright in their hands.

  40. a superb read. alot depends on the estimates but u are onto something here

  41. This article becomes even more interesting since the last day of the transfer window with Merieles out and Bellamy in. If we assume they are on similar levels of wages, but one brought in 12m, then is the net spend for FSG in their time here now closer to -£13m? In which case is this how we want our transfer policy to be operating?

  42. Yep, Aguero is nowhere near as good a signing as Carroll. Sell on value means fuck all if your team is as rubbish as Liverpool’s.

  43. Brilliant piece of writing Rob. Definitely an alternative and more accurate way to view it. Keep up the good work fella….

  44. A good attempt to mask errors made in the transfer market.

    Downing’s fee was 20million, his wages are 80k a week. That’s 40million over his deal.

    Mata’s fee was 23million, his wages are 80k a week, that’s 43million over his deal.

    Aguero and Carroll numbers you have correct.

    There’s a disparity of 36million between signing Kun and Mata, and signing a donkey and cart. Kun and Mata, combined with Suarez and Gerrard, would have had us challenging for the title and in the CL next season. Downing and Carroll will have us battling for 5th with no CL. Two seasons of CL football more than makes back the 36million and a Premier League title is worth about 15million more to the club than finishing 6th.

    Over the course of their contracts, Mata and Kun would have MADE the club money. Downing and Carroll will not.

    Saving money is never an excuse for buying lesser players.

  45. Very interesting and enlightening piece of writing, makes me feel like we actually have some owners who know what they are doing at last….

  46. Attractive portion of content. I simply stumbled upon your website and in accession capital to assert that I get in fact enjoyed account your blog posts. Any way I’ll be subscribing on your augment or even I achievement you get right of entry to consistently rapidly.

  47. thanks for the great investigation. I had the same suspicion on the wage issue thats masking the whole spending intentions. was shot down and outcast in RAWK just like you but for other reasons. I hope that kenny doesn’t take the heat for this dubious soccernomics and come to their sense that you need to at least spend reasonably closer to the top spenders in order to compete.

    If not this end game is just that to keep us debt free but in mid table mediocre. like a potential shop window item at ebay starting at 99cents until another frenzy bidding from the likes of rich shieks or before we fans start the “questions” again.

  48. With the disaster of a season we’ve had, I hope the owners begin to recognise the difficulties football has over the moneyball system they use in baseball. Last season we had the benefit of surplus of players to get rid of, particularly the Torres deal, which provided funding for the 9 players and their wages, something we wont have in such abundance this summer. With at least another 4 players needed this year, with a quality that will cost at least 15-20 a piece, that means we need to raise up to £80m plus wages for whichever manager will be at the helm to spend. This will be the summer when we see their real intentions and attitude about their desire to put us back on top of the tree. We wont have that kind of funding from within the coffers of the club, and FFP rules do allow them invest their own money, up to limits. If we are to ever get back into competing for top 4 again FSG will need to ‘overspend’ on quality, for at least one transfer summer window, if not two. It will be interesting to see if they have the stomach for it.

  49. Great article with very interesting analysis. This article approximately proofs that the FSG strategy in the market is sound. But IMO, claiming that players which acquired last summer are the best ones that we could acquire in those circumstances is debatable. IMO the transfer strategy was successful(with acceptable net spend we turn around our squad) but it was not the most effective one.

  50. Good explanation of fsg’s dealings. Even if out by 10m a good achievement to make what looks like a solid basis for the future squad wise and finance wise. Okay the first full season hasn’t been a brilliant league position, but a cup in the bag and a second cup final are a lot more than most teams in the prem will get. Next season will be a true barometer of the clubs progression since the turmoil of previous seasons. Hopefully the a quality signing or two pre’season might complete the puzzle. YNWA.

  51. so, its been a while since this was published, and here we are…we ship out 8 players off the wage bill, and sign three people. we refuse £1 mill extra for dempsey, and now we have one striker in suarez and fingers crossed another in borini(time will tell). in all seriousness, back in the day when rbs got nasty with hicks and gillet…

    If they’d payed all the money to rbs as they claimed they could(admittedley dobtful), and still owned the club now, would we actually be any worse off?

    cos im struggling to understand what fsg are thinking unless they’re screwed financially and are planning to sell us. so many loans going out makes it appear as if their getting the wage bill to appear lower to potential buyers. i heard the red sox have done a simmilar thing of removing high wages then not replacing the talent. there may be trouble i boston, and i fear anfield.

  52. I’m not following this at all.

    In football, success is defined by what happens on the pitch, not on the balance sheet.

    What use is a 1m profit when you’re 18th in the league?

    Franchises and businesses? No, football clubs.

  53. That pie in the sky “£1M credit” was never going to see the light of day. What is the amortised annual cost for messrs Carroll and Downing looking like coming to now?

    In which universe were Carroll & Downing at £90M vs Kun & Mata £130M projected cost for 5 years (even generously ignoring sell on value and opportunity cost) ever going to represent good value?

    What must fans of other clubs have thought reading this kind of one eyed drivel? They must be laughing themselves to sleep!

    • “In which universe were Carroll & Downing at £90M vs Kun & Mata £130M projected cost for 5 years (even generously ignoring sell on value and opportunity cost) ever going to represent good value?”

      I phrased this wrong; I meant to say generously projecting over 5 years, not ignoring sell on value and opportunity cost, which are of course the exact reasons they wont be good value…

      In fact, just to close the book on this sorry chapter, lets work out the actual economics of the respective players. I will assume (I would think quite reasonably) the following; Ageuro & Mata are sold on 4 years for the price they were bought. Carroll & Downing 2 years on at half their initial price. Net amortised annual cost Carroll £12M, Downing £9M, Ageuro £9M, Mata £4.5M.

      Then of course we have the additional opportunity cost per annum that comes with the reduced revenue generated by a 1st team with 2 top 10 quality players vs a team with 2 top 2 quality players, which could have been anything from £2M-£40M.

      This my friends, is the harsh economic consequence of what happens when you cant get a stallion and decide to buy a donkey in its place.

  54. Johnny, thank you for your kind words. Hindsight is a wonderful thing isn’t it ? Ultimately all points are rendered nul and void if one set of players turn out to be garbage and the other lot geniuses.

    Even saying this, my point was simply that equating transfer fees with the total cost of the package of owning a player is outdated to put it mildly. We could have replaced the players names with x, y, z etc.

    My point was that comparing the likes of Carroll and Aguero as equivalent signings just because of a £35m transfer fee was folly. City were committing to a much bigger package. Who was to say 18 months ago who would turn out to be the better long term bet (pound for pound invested) ?

    The history of the transfer market will show as many sure fire big money bets flopping as riskier signings paying dividends. I’m surprised you could type your criticism, with the benefit of 18 months worth hindsight and keep a metaphorical straight face.

    • Hi Rob,

      Thanks for the swift reply.

      I understand the frustration at superficial comparisions to the transfer dealings of clubs of greater means, but ultimately the counterargument that Downing and Carroll were in fact good value by comparing wages over a 5 year old period, is equally flawed and misleading if not more so.

      To say I’m using the benefit of hindsight to fuel my criticism might be accurate if I were performing a post mortem on a relative unknown like Coates or a Doni, but I’m not. These transfers were fundamentally flawed from the get go, and most us knew it. I remember cringing at the beatific justification of naive club policy displayed in articles such as this even at the time.

      Lets look at the CHAD quartet (fair to pick out as all were brought in as important 1st teamers) as a whole (even conceding that Henderson may yet become a good player).
      Average age: 24
      Average previous experience: 2 years bottom half premiership, 2 years championship
      Average number of international caps: 8
      Average wages increase from previous club: 250%

      This at no point was likely to represent shrewd business, with or without the destabilising regime change that followed and the detrimental effect it has had on the players.

      We righted one wrong, shipping out overpaid mercenaries, and replaced it with another, buying needlessly overpriced (transfers AND wages) domestic players, due to a rigid adherence to limited range of targets (as opposed to a fluid scouting based approach to main targets).

      What is the net result of this? Club with 4th highest wages and 7th and 6th placed finishes vs 5th highest wages and 8th and halfway point of 10th. Even acknowledging the league cup win, this does not represent improvement.

      I would add that Rodgers now has a much more difficult task of improving wage to performance ratio-for the immediate future-than Kenny and Commolli did, as the high earners that left during his window-over which he had no real control-were actually valuable squad commodities-namely Bellamy, Maxi and Kuyt.

      Whats my ultimate point? That we made 2 wrongs, under 2 different managerial regimes, and tried to package it as a right, which has caused further stagnation for the club. I think the owners deserve a pass for this.

      However 6 senior players have left and only 4 come in under Rodgers which represents unnatural stripping of the squad and for which we are now suffering.

      If the owners dont show support from January on to allow our young manager to rectify this-and they almost certainly will-then they should start to be held accountable for future underperformance from this point on.

      To end on a more positive note, looking at the comparatively modest wages Rodgers holds successful new recruits to (including youth products), and the fact that the next wave of players terminating contracts will likely be among the higher remaining earners, while only being squad level players, I would be optimistic for a far tighter run ship in the not so distant future (barring additional farces like a premature panic sacking of the manager)…

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