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The Liverpool take-over has long been one of football’s most curious soap operas but the latest twist with the Chinese Government, albeit through its investment arm China Investment Capital, seeking to buy the club, has something of a touch of Dallas combined with that of the East Enders.
Like the best of these soap operas it spins story lines which then turn out to be just that, nice tales that do not reflect reality.
So consider what we have already heard.
That the take-over would not only mean Fernando Torres staying at Anfield but also signing the sort of high profile players the clubs needs if it is once again became a heavyweight force in English and world football. That the new owners would take steps to finally build the long promised new stadium, a promise the current owners Messers George Gillett and Tom Hicks much dwelled on when they took over the club in 2007. The attraction for the new owner is that Liverpool is a “sleeping giant” which is waiting to be woken up and exploited.
Or as Nigel Currie of brandRapport put it, “Liverpool is the second most valuable brand in the Premier League whatever Chelsea and Arsenal might say. Manchester United saw its own value much earlier on, though, and Liverpool got left behind.”
Yet examine the facts and it turns out the sleeping giant has not been sleeping that long in terms of money to be made. Indeed for all the opprobrium Messers Gillett and Hicks have attracted for the way they have run the club, and fully deserved may I say it is, the fact is when it comes to exploiting the Liverpool brand they have definitely not been sleeping.
To understand that we need to appreciate that Premier League clubs have a fairly narrow window of exploitation of their commercial income. The biggest source of money is television and this has grown testifying to the success of the League. The £191 million that Sky paid for a five year deal back in 1992, the first year of the league, has now grown to £1.7 billion but covering much shorter period, 2007-2010.
And if this market has all but matured in the domestic sphere, and there is not much scope for expansion, the popularity of the league abroad, particularly in Asia, means more money is to be made. The overseas deal is now worth £1.2 billion over three seasons and, come the next deal, overseas television rights may fetch more than the domestic one.
But the problem is this is a collective deal and for all the talk of clubs able to do something on their own there is no sign of the Premier League going down the Spanish route where Real Madrid and Barcelona do their own televise deals and earn pots of money as a result.
So Liverpool’s scope for expansion is on sponsorship and shirt sales. Having brought in Ian Ayre as commercial director Gillett and Hicks have tried to exploit the club’s name and on sponsorship the present owners have done a good deal with Standard Chartered. This now brings in £20 million a year, compared to the previous £9 million with Carlsberg. The Standard Chartered deal was done quickly and on the basis of Liverpool’s appeal particularly in Asia where Standard Chartered is strong. Where is the scope for any further increase here for any new owner?
A new shirt deal with Adidas has also been done for more money than the previous Reebok deal which was one of the highest in Europe. Liverpool have not disclosed the figure but unlike selling shirts yourself, where a club could expect to receive a mark up of 100 per cent on each shirt sold, the normal percentage on the retail business, Liverpool will be getting a percentage from Adidas. This is unlikely to be more than a 20 per cent return given Adidas will have to recoup the advance they have already paid Liverpool.
Now let us look at the debit side of what a new owner, Chinese or not, needs to consider. For a start they have to agree a price with Gillett and Hicks. The Americans want north of £600 million. Let us assume the price settled is around £400 million.Then there is the question of the RBS debt. That is around £351 million. A deal will surely involve the new owners paying it off.
In addition to this there is the cost of the new stadium. That is likely to be £400 million. So the total cost of owning Liverpool for a new owner is well over £1 billion and that is before any investment in the team.
Yes, once the new stadium is up and running then, as Manchester United and Arsenal do, Liverpool can hope to make money. But, even if on day one of ownership a spade is plonked on the site of the new ground, the new stadium is unlikely to be ready before 2013.
And what it may earn will depend on how anything outside London does. In contrast to many other countries, Britain is country where over the decades regional cities have not flourished, while London has grown in importance. For the new Liverpool stadium to do an Emirates it will have to sell boxes and will that be easy in an economy which may or may not emerging from recession?
Interestingly, the present Liverpool owners in their desire to earn money have pretended there is no recession. So in recent years there has been a substantial increase in season ticket prices and this season match day ticket prices have been increased by eight per cent, much more than the rate of inflation at a time when other clubs have frozen their prices.
A new owner will also look at how previous owners have done and reflect that Liverpool do not have a great tradition of owners putting their hands in their own pockets. Forget the disastrous Gillette and Hicks regime. Look at David Moores. He invested £12m in the club but that was to buy shares and after the sale to Gillett and Hicks, Moores pocked nearly £90 milion, not a bad investment. He did lend the club money to buy Dirk Kuyt but charged six per cent interest.
So if this new Liverpool owner is going to usher in a new dawn then he must be like no other previous Liverpool owner. He will have to be more like Jack Walker, Roman Abramovich or Sheikh Mansour, deep pockets willing to invest in the long term over many years and be patient as the investment finally provides dividends both for the club and the owner personally.
Are the Chinese or any of the prospective owners of that ilk?
I shall believe it when I see it. But not on the basis of some hyped pre-publicity of their intentions.
Mihir Bose is one of the world’s most astute observers on politics in sport and, particularly, football. He formerly wrote for The Sunday Times and The Daily Telegraph and until recently was the BBC’s head sports editor. His latest book, “World Cup 2010 South Africa: the Teams, the Players, the Venues”, is available now.