Liverpool in Deep Hole with No Easy Way Out


There is probably no team in the EPL whose economics are more dependent on success on the pitch, and whose success on the pitch is more dependent on economics, than Liverpool.  Compared to Arsenal, ManU and Chelsea, Liverpool are pikers.  Their owners are the least wealthy.  Their gate revenues are the smallest.  Their shirt sponsorship is the least lucrative.   Their investment in major overseas markets like Asia is the slightest.  They rely on victory on the pitch, going deep in the FA Cup, and, especially, Champions League revenue more than any other team.

Since Liverpool signed Rafa Benitez as their manager before the 2004/2005 season, their net spending in the transfer market (purchases less sales) is £90.72 million.  Aside from Chelsea, where money has no meaning, that is an outrageous sum.  Over that same period, Manchester United has net spending of £4.3 million and Arsenal are at -£1.95 million.  This has left Liverpool with no margin for error, no rainy day fund and no way to finance any future success without remaining in the top four and playing in the Champions League.

 For those Liverpool fans who may quarrel with owners Tom Hicks and George Gillett, they may want to consider the degree to which those two have gambled everything on Liverpool’s football success.  If they were just a couple of cynical businessmen, they would have sold Steven Gerrard, never bought Fernando Torres and operated the business much more cautiously.  Instead like a fan without any skin in the game, they have given Benitez the freedom to spend their money as if they can simply print more of it down in the boiler-room at Anfield.

That is all well and good if Liverpool are wining.  And up until this season, the victories on the pitch have kept the ship afloat.  However, having already bounced out of the Champions League in group play, and looking up at the league table and seeing six teams ahead of them, Liverpool may soon be staring into the abyss.   Economically, there may be no way to keep this team together, let alone acquire new players, unless they are playing in the Champions League next year.

If they are not playing in the Champions league next year, all sorts of unthinkable issues begin to pop up.  Without that critical revenue stream, can they acquire new players, including desperately needed cover for Torres and a replacement for the creaking Jamie Carragher?  If they are not playing in Europe, will Torres want to move to a better positioned club?  Will Steven Gerrard decide that, if he ever wants to add an EPL Champions medal to his collection, he will have to do that in blue rather than red?  To avoid these very dark questions, finishing in the top four is mandatory.

Unfortunately for Liverpool, the winter and spring fixtures look more challenging than the fall has been.  In playing the six teams ahead of them on the table, they have gone 1-1-4 so far, even though four of those six games were at Anfield.  For the balance of the season, they will have to face those six teams again including trips to the Emirates, Old Trafford, Villa Park and City of Manchester Stadium.

With a thin squad that is an injury to Gerrard or Torres away from being simply feeble, a difficult run-in to the end of the season and rumors of dressing room discontent starting to surface, this is becoming the annus horribilis for Liverpool.  Unless the results begin to dramatically improve, it could be the beginning of an even worse decade.

14 thoughts on “Liverpool in Deep Hole with No Easy Way Out”

  1. Liverpool is in serious trouble. While they can still show flashes of brilliance on the pitch, they can’t sustain that against a quality side like Arsenal. Arsenal was luck to get the win, owing in large part to the Glen Johnson own-goal which drew them even, but a draw would have left Liverpool feeling almost as bad.

    I can see Benitez quitting and going to Spain, but I’m not sure who in their right mind would take the LIverpool job. No money to spend, tough fight to get back in the top four, European competition that you don’t care about, and dysfunctional owners. Who wants any part of that?

    1. Sure – it is a very useful website You can go to the transfer section and then select the team. It took about 10 minutes of calculating to add together all the transfer in’s and transfer out’s for the past six seasons for the three teams, but the data is there.

      1. Thanks =) It’s a good site, but the only problem is that it takes the full value of the transfers, not how much was actually paid. Liverpool only paid around 9 mil for Johnson because of money previously owed to them from Portsmouth. Roma are only getting around 5 mil now for Aquilani.

        The defense I offer against your claim of Rafa’s spending is that he had to completely rebuild a team when he came in, bringing in many notable first teamers whose value has only raised since signing. Unfortunately, he is unable to add notable depth because he has to sell to buy, rather then receive money from the owners. If you look at the net spend of the last couple of seasons, it is notably lower then his first seasons.

        At the point Rafa came in Sir Alex had already had more then a decade (nearly two) of teambuilding, where it’s gotten to the point that he only needs to make a few tweaks here or there. If you go back to when he was first signed to United, he was splashing cash everywhere.

        As for the owners, well .. they completely screwed the club by placing the loan they took to buy the club in Liverpool’s name. Which means all the debt and interest falls on us, and they pay no penalty if we fail. The money they have invested is minimal, shown no respect to the manager, and they have caused problems at other teams they own as well.

        With all that said however, I can not deny the disappointment this season has been so far. It’s come the point where I’m wondering if anything could possibly spark this team into action. Rafa has made some awkward decisions at times, but the blame can’t fall entirely on him because the players have also faltered. Moral and confidence are low, and with all the pressure coming from the off-field situation, it’s no surprise that the team has cracked.

        Doesn’t mean I’ll turn on the manager or the players, it only means I’ll cheer them harder, urge them forward, and pray a litte more.

      2. I think the number you cite is off base. I asked someone who would know better than myself, but he hasn’t responded to me yet. There are a lot of myths perpetrated about how much Rafa has spent, and most of them, like most myths, are just flat out false.

  2. There are two distinct issues here. One, performance on the pitch. I will concede, because it is simply stating the obvious, Liverpool are clearly in trouble of falling out of the top four and are in a desperate position as a club when it pertains to performance.

    The second issue simply confuses me. I keep hearing individuals claim that the financial position is teetering on the brink of “leeds-esque” breakdown. I have no idea where any journalist or blogger claims to have come up with these facts and figures but they simply, and quite honestly, have zero credibility or inside information basis with which to make this claim. First, all of these financial matters and the machinations of fortune 500 businessman are closely guarded and confidential and most of the speculation arises from meetings with potential suitors etc… But if people would simply look at other headlines, it would give some insight into the stability of both Hicks and Gillett.

    Gillett just sold the Montreal Canadiens and reaped a NET $300 million dollar profit. Hicks, who owns both the Dallas Stars and the Texas Rangers is on the verge of being just as flush. He’s in negotiations to sell a large portion of the Rangers and again, in position to reap a huge NET profit. Those two transactions alone could wipe out the debt at Liverpool FC in one fell swoop. The reason it is not, is because they are saavy businessman waiting to see how certain situations play out, both on the field and off of it. The club would really be better off if they sold it, but I’m not sure they are interested at this point in ploughing large sums of cash immediately if they can make a tidy profit by selling up relatively soon. The rubber will meet the road at some point however and they’ll be forced to make a decision. Until then, forecasts of financial doom at LFC are simply sensationalist and misguided.

    1. Hi M Garcia,

      My only problem with your otherwise pretty thorough response is that you seem to equate Gillett and Hick’ s personal financial situation with that of Liverpool FC. Great that Gillett just sold the Canadiens for a huge net profit. So what? Liverpool are not entitled to one cent of that money unless Gillett invests it in the Club, in the form of either:

      1) An interest free loan (the Abramovich method);
      2) A new LFC equity share issuance in his name (the Alister Ushmanov method); or
      3) A gift.

      I think it is fairly obvious that any business owner worth his/her salt won’t go for 3), since there is no guarantee that the money will come back and not be wasted, especially when options like 1) exist which have the same effect except a guaranteed return. Option 2) is unlikely as well, since Hicks and Gillett are complete owners of the club. Equity share issuance of shares to raise capital will only work if they want to bring in another owner. If they are just doing it to raise the club’s capital then it is the same as a gift, which is pointless. The last one is possible, except it still burdens the club with debt, albeit the “friendly” kind in the sense that there is no interest. Of course, it makes the club harder to sell. No one will want to buy Chelsea if Abramovich tires of the club, because the club owes him 700 million pounds which any new owner would have to front.

      Lastly, as you’ve clearly pointed out with your analysis, Hicks and Gillett pointedly use their sports franchises as business assets. They do not care about the performance of the teams so long as the net profitability of the asset rises. So the only real concern for Gillett and Hicks is that the performance of the team not dip so heavily that the value of the asset starts to shink because they get less from TV rights or merchandise. But as far as I can tell from the Forbes and Deloitte analyses, the club is actually worth more than when they bought it.

      So, if you are a Liverpool fan and want to see investment in the club, you really have to hope that either the value of LFC drops so that Hicks and Gillett will want out to preserve what profit they can, or someone comes along who can offer them more money than the club is worth just to get them to move on. The latter seems unlikely (though you never know with some business people like Abramovich or wealthy sheiks) and the former means that the club will have to suck for some time, which the die-hard fans will hate.

      That seems a pretty pessimistic outlook if you ask me. Which, I guess, you didn’t.



  3. Jose – First, money forgone in a transfer is the same exact thing as money spent. It makes no difference if part of the sale of Glen Johnson was a payment forgiven. Secondly, although Rafa’s early spending can be forgiven if it was truly ‘team building” the truth is that in the last three years he has spent £17 million compared to Arsenal’s -£12 million and ManU’s – £53 million (which is exaggerated because of the sale of Ronaldo). The question is whether he is “team building” or player purchasing, which is a different thing. If you look at some of those early big purchases, you will see a lot of players that no longer feature for Liverpool, including Luis Garcia, Fernando Morientes, Mark Gonzalez, Peter Crouch, Jermaine Pennant and others. Meanwhile, nobody is looking at the Liverpool reserve team and saying that is where the future is.

    Matthew N – I urge you to go to and look at the numbers yourself. The numbers are real.

    M Garcia – Let me be clear – I don’t think Liverpool are headed into a Leeds situation. I do think that once you fall out of the top four, it is very tough to get back into the top four unless you spend money beyond what the team is taking in. Unless Hicks and Gillett dip into their personal money (which, unless you have Abramovich-type money, nobody with an ounce of sense would do), it will be a real struggle to avoid being a mid-table team for spell.

  4. One of the things I like most about is the overall quality of the posts. Not so many idiots.

    The commentary here has been interesting and, in my case, educational. I now know at least twice as much as I did about the financial aspects of the league.

    Errr…..wait….2X0=……… :-(

  5. Eric: The problem for Hicks/Gillett is they’ve walked a tight-rope since buying the club. It’s hard for me to believe they’ve misunderstood the financing aspects of owning a European football club [i.e. tranfer policy] but it seems that their insistence on trying to adopt a Western professional sports ownership model cuts against my incredulity. The reality is that they indeed will have to dip into their business, not personal, money from other endeavors to preserve their position financially and retain the profitability of LFC when they sell up. The only thing I can’t figure out is the stubbornness of the two when it comes to their ultimate long-term plan. I am a self-avowed LFC supporter and I cringe everytime I hear either one of them wants to stay in for the long haul. I am frustrated and angry the club is where they are and I agree the long term ramifications of falling outside the top four would be disastrous. However, maybe not so much you, but certainly the UK press/media love to portray this club in a “financial” crisis, which I think is a bit over the top.

    Jon: Great point. I agree with you completely about it matters nought if they don’t put the money back into the club. But my opinion is that they constantly walk this tightrope, hoping that some rich investor will come in, agree to take on the debt accumulated, and then reap a tidy profit. Although I have to admit I’m a bit confused over their protestations that they want to stay and own the club [probably just posturing]. The problem is that everyone else sees what they are trying to accomplish also and are not playing ball. They’ll just wait this out. What will inevitably happen is that to preserve the profit margin, they’ll have to put money into the club. Entirely skeptical and cynical outlook on the ownership situation, but entirely warranted, I think, given what has happened over the past two years.

    Merry Christmas all.

  6. The selling of Alonso, injuries to Torres and Gerrard is not necessarily the crash behind Liverpool FC in recent games but the tactical error in players placement in the pitch causes all the mismatches. Benayoun may be better than Lukas to pass ball. Why on earth is Aurelio in midfield attacking position? Was Vononin bought to be fan for Liverpool from the bench?

    Liverpool is now riding in the limbo unlikely to finger-tip even the Fourth Place in Barclay EPL table. Just two players out injured and entire team deflated. Man Utd is only a stronger team with Rooney, Ronaldo, Tevez, Hargreaves and Ferdinand but without them they are a strong team.

  7. Is it really all that bad or crazy to have one or more of the teams from the ‘Big 4’ not finish in the Top 4? Go figure, we could have a season where it isn’t a foregone conclusion that the same teams end up at the top of the table.

    Funny thing is, with Manchester City spending to improve their team this year, there was a strong chance that one of the Big 4 wouldn’t have made it this year anyways. Just happens that Liverpool is flailing away instead of being a few points out and it’s the high quality of Aston Villa that has moved into the fourth spot at this point.

  8. As impartially as possible, I believe that this is the core problem with Benitez: he is tactically astute and does very well with an inherited squad — thus was his success at Valencia and Liverpool — but is also quite arrogant and divisive, and not a team-builder, and over time, both overreaches and also alienates players and management.

    Compare his player relations to the other top managers in the EPL. Horrendous.

    Benitez thought that he was invincible after his success at Valencia and the incredible fluke his first year at Liverpool, with Houllier’s side. So, he thought that he would re-create Madrid on the Mersey, turning an essentially British side, even under Houllier, into a Spanish ghetto.

    He should be tarred and feathered and put in the public stock on Albert Dock.

  9. I know most of you are talking about the financial issues here – complete with crazy figures that can be made up to fit whatever argument you want to present.

    However, I think the real issue here is that Liverpool is a decent squad that is playing well below where they should be playing.

    I think this will work out once the season progresses and all we have to worry about is the 4th spot of the EPL. The other teams will be stretched at that point.

    “Will Steven Gerrard decide that, if he ever wants to add an EPL Champions medal to his collection, he will have to do that in blue rather than red?”

    Keep dreaming! For better or worse, he’s a lifer.

Leave a Reply

Your email address will not be published. Required fields are marked *