How do you make $100 million in soccer? Start with $1 billion. This joke was first told in the 1980s by the chairman of an English soccer club. The numbers were smaller then, but such has been the inflation in the English Premier League in recent years that these figures are now actually looking reasonable.
And that makes the news that New England Sports Ventures, the owner of the Boston Red Sox and led by hedge fund manager John Henry, plans to buy Liverpool Football Club in England even more surprising.
Since TV money began to pour into English football in the 1990s, foreign ownership of English clubs has soared. Despite huge revenue from TV and big growth areas in Asia, where football, or soccer as my American friends insist calling the world’s most popular game, huge amounts of money have been lost by those buying clubs.
Liverpool have won more European Cups — the premier international competition for individual clubs — than any British team in history and, during the 1970s and 1980s, were the dominant force in European football. Since those glory days Liverpool’s fortunes have taken a turn for the worse as their arch rivals Manchester United and clubs like Chelsea and Arsenal have dominated the English league.
Americans Tom Hicks and George Gillett, Jr. bought Liverpool FC via a typical private-equity-type deal before the credit crisis emerged. When the credit markets dried up, they were unable to raise the finance needed for a new stadium and have seen their teams performance on the pitch disappoint despite having one of the best strikers in the world, Fernando Torres, and England midfield general Steven Gerrard in the squad.
Hicks and Gillett are now arguably the most hated people in the city of Liverpool and need heavy security when attending games at Anfield (Liverpool’s famous, if rather cramped, stadium). On UK news channels, fans were saying they don’t want another load of Americans running our once-great club and were asking what had actually changed.
New England Sports Ventures, in their favor, plan to buy the club and wipe out its debts, which will make it easier to buy new players and compete. But whether they can actually make any money out of their new venture is open to question.
The reason it will be difficult for anyone to turn a profit from soccer can be found in oil fields of Abu Dhabi and Siberia. Manchester City, a club that became a by-word for failure, was recently bought by Sheikh Mansour of Abu Dhabi, who has spent half a billion dollars on new players and committed the club to similar spending on wages over the next three to four years.
That spending has improved Manchester City’s performance on the pitch, but they will struggle to overtake Manchester United, Chelsea and Arsenal this season and will probably be happy to finish in the Premier League’s top four which guarantee’s qualification for the lucrative European Champions League.
Chelsea, owned by Russian billionaire Roman Abramovich, underwent a similar transformation earlier in the decade and are league champions. Manchester United makes a fortune from its huge fan base and global profile, while Arsenal have managed to compete without huge spending due to the brilliance of French manager Arsene Wenger.
For New England Sports Ventures to be seen as a success they need to get Liverpool competing on the pitch with these four clubs and a number of others that have money to spend. Liverpool fans demand success and will be unhappy with anything else. To achieve this Liverpool need to buy world-class players in a market dictated by Sheikh Mancour, who can outbid anyone on the planet, and other clubs with better squads playing in the Champions League.
To do this will cost hundreds of millions of dollars. Any return on that money spent would be a miracle for Henry and his team. Unless Asia suddenly starts enforcing copyright law on sales of football shirts, buying Liverpool will just be a good way of transferring cash from the TV stations and owners in the US to players and their agents.
Liverpool fans talk of the Ferguson curse which refers to the day Sir Alex Ferguson took over as manager of Manchester United. Liverpool’s fortunes fell in line with Ferguson’s success at Manchester United.
This curse could take longer to lift than the Curse of the Bambino, which lasted 86 years for the Beantown faithful. And it will certainly take more cash to lift it.