By Sam Jones
WHEN FSG, or NESV as they were at the time, took over Liverpool Football Club it was widely reported that having the funds to build a new stadium was a prerequisite for a new owner. A non negotiable, said Martin Broughton.
2 years later we seem no closer. Ever since Rick Parry said the club needed to build a new ground to compete with the likes of Manchester United, as we fell behind in matchday revenue, the prevailing narrative has been exactly that. We must get a new ground built, as soon as possible. We need it to be competitive. Without it we can’t bridge the gap. This has been repeated consistently for nigh on ten years now.
It is repeated so often that it is accepted as fact. Without a new ground Manchester United get an extra million pounds per home game, so we must build a new ground, or we’ll be left behind. There is a difference in matchday revenue, of course there is. About 41 million for Liverpool in 2010/11, compared to Manchester United’s 109 million. Quite a gap.
Such a gap, in fact, that you would have to wonder if it can actually be closed. They have the advantage of not just a bigger ground, but also a bigger city, more accessible through better transport links. More businesses, both big and small are based nearby. Whilst we could build a bigger ground, we can’t influence the latter factors, which must surely limit our ambitions, especially for the corporate market. Let’s be honest, Chelsea and Arsenal enjoy these advantages as well, as do Spurs and Manchester City. I know where I’d rather live, but that’s not the issue. The issue is the ground. Revenue.
FSG themselves have expressed concerns over the financing of a new stadium, with significant effort being put into a so far fruitless search for a naming rights partner, and cast doubt on the club’s ability to match the revenues enjoyed by other clubs using the “average revenue per seat” measure.
That being the case, you would have to wonder if recent developments have had an impact on the likelihood of anything happening with the stadium at all.
In June the Premier League renegotiated its TV deal. The value of that deal rose by 70%, to a massive 3 billion pounds over 3 years, for domestic rights alone. In 2010/11 Liverpool earned 65 million from TV. This without the champions league, which would add, conservatively another 20 million or so. It is likely that as a consequence of the TV deal we would earn an additional 25 or 30 million, without even an improved league performance.
Andy Heaton’s article https://www.theanfieldwrap.com/2012/07/dear-john/ posited a 65,000 seater stadium delivering an extra 38 million, at a cost, obviously. Sky have just given us that for free.
The upshot of this is that the need to increase our revenues is less pressing. The TV deal is returning all the benefits to the bottom line that a new ground would, and more. Also, the percentage increase a new stadium would bring is obviously smaller if the revenue has increased through a new TV deal. That 38 million from a ground would be a rise of 20% on our 2010/11 turnover, post new TV deal it’s more like 16%, get back in the champions league and we’re down to 14% or so.
Let’s be clear, this increase in TV money is massive. To put it in perspective, Spain’s third richest club, Valencia, turned over 116 million Euros in total in 2010/11. One hundred million pounds, give or take. After the new TV deal, the bottom club in the Premiership can expect to bring in almost 60 million pounds in TV money alone. This will make even mid table English clubs serious players on the European stage, financially at least.
There may be a point at which FSG decide it simply isn’t worth it, and that the ongoing debt burden of funding a new stadium isn’t the way to go. This is especially so given that 38 million of turnover a stadium may bring has an annual cost attached, so is by no means extra money in the kitty. It’s something for the long term. When the mortgage is paid the money is ours, not before. Faced with the jump in TV revenue the returns on further increases in revenue will diminish.
This wouldn’t be the first time that an increase in TV revenue had a big impact on our owners. The last rise was amongst the things that attracted Hicks and Gillett, and probably also kept them here by providing the means to pay the interest on their loans.
The last American owners were helped out of a hole by a TV windfall, maybe it’s now the turn of the new ones.
All of this depends, of course, on their long terms plans. If, in fact, they don’t actually have any long term plans then a club with healthy revenues, a sensible wage bill and reasonable performance may suit them fine. If they’re here for the short term don’t be surprised if the current indecision about what is happening with the ground continues, and is actually the bait for the next owners – the one area left where there is scope to move forward. Build a new ground and grow revenues. Not now, but for the next twenty or thirty years.
If you can fund it, that is. That should probably be a non negotiable.
But as every other club is getting the tv money boost it’ll only serve to cause wage inflation across the entire league. We need the edge over other teams that a bigger stadium would provide.
It is a realistic concern about the stadium, the only thing the new owners haven’t done is promise a spade in the ground. We have become a more solid club and we’re been run better but FSG I hope realize that this is only the start of it, as a club we have never lacked ambition and we need owners with ambition. It does remain to be seen if FSG have the motivation to Upgrade Anfield or build an new stadium.
I feel they may be using the situation around Anfield with the locals to lengthen out the process. You make some excellent points about are they tidying up the club and making it viable to buy and to leave the stadium to actual owners willing to put their money where their mouth is. A topic well worth a discussion on the Podcast. Excellent piece.
Decent article but way off in terms of how TV money is doing the job for us that a stadium would. With all teams receiving increased TV how are we to bridge the gap?
A new stadium or renovated Anfield would increase OUR revenue.
My first thought after reading the article is just what Mark said in the first comment. When the competition gets the same boost it’s hardly going to make us more competitive. Maybe compared to foreign clubs, but that only really matters if we can get into the Champions League in the first place.
A new stadium will make us more competitive in the Premier League, unlike the new TV deal which just keeps the status quo domestically.
I would also caution against thinking too small. I hear the worry is the financial sense of “just 15 000 extra seats”. Well, then why limit it to a 60k seater. Build a 76k seater (just to make it slightly bigger than OT), like the plan was a few years ago. Why go all the way back to the 60k Parry bowl? Aren’t we supposed to have this huge season ticket waiting list, or did the recent clean-up of that list prove otherwise?
For the big games we can fill 76k seats now. If we can’t fill a 76k seater on a regular basis now, we surely can when we become successful again, like that other lot do now. That is when this investment will start to pay off. Long-term.
In the meantime I’m sure the architects can come up with some modular design that allows a section to be converted to something else in games that don’t sell out, if seeing empty seats is such a worry. Creativity is allowed.
As for financing it, a naming rights partner may still be found to cover a large share. I also believed it was understood when FSG got this club for a good price that they would have known they had to cover a significant part of the cost for a new stadium and strengthening the squad to get us back in the CL. I really hope they don’t think they are going to get us back to the top by not spending significantly (net) on players and not spending on a stadium. That is doomed to fail. They read Paul Tomkins’ “Pay as You Play” before they bought the club, so surely they know that.
Yes, we all want to be self-sufficient, but we need the fundamentals in place to be able to be that while competing for the top spots. These fundamentals include income from a new stadium and CL income. To achieve that they will need to spend first. We will not get there otherwise.
Mark – it likely will create wage inflation, but not in the simplistic terms of “the existing players will get more money”, but in terms of better players will be attracted to the league. A bigger TV deal won’t mean Charlie Adam gets a payrise, but that Nuri Sahin replaces him, for example. The league doesn’t exist in a bubble, the deal will give English clubs more power in the wider market, so in terms of top players it will likely not cause massive wage inflation globally, just condense more, better players in the English league. Wages will be higher, yes, but so will the standard.
Dave – I’m not saying the TV deal does the job of a new stadium – I’m saying it does more than that, in the here and now. The stadium is a long term proposition, that when commercial revenues, including TV money, are increased so much becomes a less pressing concern. New stadium increases revenue, yes, but that isn’t cash for players. You may increase revenue by 16% or so, but you can’t pay for players with a percentage, you need cash for that.
The stadium will only help us at the point at which it is paid off, and it doesn’t necessarily give a great return on investment unless we can really capitalise on the corporate market, about which I’m not convinced.
Good article.
What most peoplemdont seem to realise is that a new stadium wouldnt benefit the club financially – in terms of increased resources to buy players – until the stadium debt is paid off which woukd probably take from 15-30 years depending on the mortgage arrangement of course. A new stadium doesnt help short or medium term success on the pitch (unless its financed with public money) Ask Arsenal fans. What have they won since moving into the Emirates?
Extra tv momey helps us to compete better with clubs in Spain, Italy, Germany, France etc etc.
If we want to compete with the tops sides in the PL in the short-medium term (1-3 years) we have to generate more commercial revenue, be more efficient in the transfer market and scrape our way back into the CL. Hopefully by then the PL would have implimented its own FFP.
That don’t work out where have we bridged the gap?as everyone else gets more tv money so it’s still the same
Great article, I think I get the point, for a club like Lfc this is a big deal. The sugar daddy clubs Will spend the same but they Will use less owners Money. Instread of a 100 mil loss, 50 mil. LFC have a transfer budget of about 20-25 mil each Year, this Will now increase to 60 mil. It Will be same for Spurs and Newcastle etc, but european clubs Will have less than premier league
Sam, you have got to be taking the piss with this article. REally!! I love your grasp of economics
I think you’ve hit the nail on the head here! Why splash out on a new stadium?
Any guarantee that all the seats will be sold?It might sound like a sound prospect today;but think about what’s likely to happen over the next few years.
Today you can stand in your front room and play tennis,squash and badminton.Tomorrow you’ll probably be able to run a marathon or practice weight-lifting.And the screen will tell you how much weight you’ve lost and what you should have for breakfast tomorrow to improve your performance.
As things move on it’s only a matter of a very short time before you can buy high quality live streaming of any game you want for a couple of quid and watch it on your laptop.
Worldwide;a million people give you 2 quid to watch your game in the comfort of their arm-chair?And you pull in £2Million a game?This ain’t no pipe dream.This is the way the world is going.
Ever wanted to buy something and gone on line to check out where to go or how to make a couple of clicks and have whatever you want delivered to your door next day?
The days of flat caps working Saturday morning then calling into the pub for a pie and a pint before cramming into a filthy cold stadium are long gone.Even today the facilities at the most modern football grounds are a throw back to the 1920’s compared to theatres and cinemas.
It’s really only the corporates who enjoy what you would reasonably expect from the prices;and they don’t really pay those prices themselves.
So,as a business model,you would have to say that it’s highly unlikely that the modern fan will continue to put up with being herded in and out of grounds when he can pay a fraction of the price and watch a good quality live show on his computer.
Of course you’ll have to have a successful team to capitalise these opportunities but whoever gets in first will clean up.At the moment ManU appear to be streets ahead but the problem they have is that they seem to sell most shirts and therefore must be generating the most income.The reality is that most of the ManU shirts sold are cheap black-market copies for which they receive no revenue whatsoever.But it still perpetuates the myth.
Anyway this is an old flat-cap talking;but I can see the way this is heading!
What a lot of you are forgetting is that, regardless of the stadium, Liverpool are ‘bridging the gap’ from commercial revenue. How many other clubs have a minimum £25m a year kit deal? How many get £20m a year from their sponsors? How many clubs do big companies like Chevrolet want to put their name to? Liverpool is still a global brand and it’s this aspect that Fenway are exploiting. That’s how Liverpool are going to get ahead of the pack. Exactly like Utd have done. The other way is by getting into the Champions League. If we can return to getting in every year at the expense of Tottenham & Arsenal then we’ll more than close the gap. The squad is being geared towards that goal. Maybe we should pretend this aspect isn’t happening though and look at the stadium issue on its own. Then we can still have plenty to moan about and would still have ammunition to criticise Fenway. In fact, if we take away all the positives Fenway have brought (mentioned in the above article) then we can truly wallow in self pity, genuinely feel miserable and think that everything to do with the club is shit. It’d be perfect. Unfortunately, the signs are there that Fenway are trying to make us into a strong, competitive club again.
I’ve never bought into this ‘here for the short term’ theory. My interpretation is that Fenway aim to make their money in 10 – 15 years because they’ve turned a sleeping lame giant into a global leader. It’s a mutually beneficial relationship.
Regarding the stadium. I think they realised that if the club pay for the stadium then the increase in profit would be minimal over the next 10 – 15 years due to loan repayment and interest. Henry hinted from day one that a new stadium would need a loan. I’m not prepared to wait 15 years before we start seeing the fruits of a new stadium. I think they realised that the quickest way to increase match day revenue was to redevelop Anfield. That decision is fraught with obstacles though, but I do believe these are being addressed. This would bring in extra revenue without much of a cost.
Personally, I think a lot of Lfc fans have spent the last 20 years moaning and it’s now ingrained in their personality. I think they’ve become glass half empty people when it comes to the club. I think if you feel the club is moving in a positive direction then you should become vocal and help fuck these negative twats off. They’re not helping us.
It’s perfectly true that a new stadium is not the panacea some have suggested it is, but equally it remains an important issue and like it or not FSG were keen to put resolution on the stadium issue front and centre of their vision for the club when they came calling. It’s not unreasonable or inherently negative to insist they walk the walk. And the fact that it will take a dozen or so years before the club starts to derive real benefit from having 65,000 at every home game is a pretty good reason for bringing closure as soon as possible.
Unfortunately, it’s looking increasingly obvious that the money/backing for new stadium just isn’t there, at least not in the current and near-term economic climate. Redevelopment is clearly the preferred option for FSG but we all know the problems faced there. Given all this, isn’t it about time they and all connected with LFC finally grappled with the elephant in the room that is stadium share? Any such stadium would be bigger and better than anything we could afford on our own, and such a move would dramatically shorten the time to return on investment.
As a lifelong fan, I’m acutely aware of the psychological impediments to stadium share, but ultimately we need to decide what our priorities are. I’ll you what mine is: the future stability and success of a LFC equipped to mix it with Europe’s elite. A new stadium won’t secure this on its own, but equally I think we’re delusional if we believe we’re going to get there without one.