We spoke to the excellent Mo Chatra – a football finance expert – about the state of Liverpool commercially right now.
His comments were superb and we think EOTK readers are going to really enjoy his analysis.
So.. first up – were you surprised to see Liverpool bring in Thiago and Diogo Jota in the space of two days – considering the information many were receiving about Liverpool not having much to spend – especially off the back of the @SwissRamble thread?
I posted a pretty similar thread I think shortly before Swiss Ramble’s one, but I came to a slightly different conclusion. He posted a thread to try to explain why the club perhaps didn’t have the funds to spend, whereas my analysis of the not-long-since concluded 2019/20 was to suggest that we should have the money available to spend. In fact, I pointed out that, though the club had lost out on income during 2019/20, it wasn’t as much as people – including some in the money – believed and that, in fact, the bigger losses would come in this new season. So I was confident the club had the funds to spend but they wanted more certainty about the upcoming season before committing funds on transfers. That’s why I argued that when the Werner deal was there to be done in May, there was far less financial certainty than there was in recent weeks when we spent the money on Thiago and Jota. I also think the club over recent weeks has had a better idea of which players who are on the periphery of the squad were likely to have buying clubs come in for them, so that too will have helped with making decisions about signing Thiago and Jota.
Much has been made of the fact our payments for those deals are based on instalments (only £5m for Thiago this year) – alleviating our financial spend in 2020 – is that something we’ve always done? And are there any downsides?
Spreading the cost of transfer fees over several years has been around for many years and is very common in football. The vast majority of deals Liverpool – and all its big competitors – puts together fees paid over several years. I think a point was made of it following the signings of Thiago and Jota specifically because of how low, cumulatively speaking, the initial outlay is for both players. I go back to when the Werner deal didn’t ultimately transpire. As for whether there are downsides to paying in instalments, the key one is that a club is committing to a financial commitment over a several year period when it isn’t certain of its income over that period- so a bad season which results in lesser income being generated means that paying instalments for transfers agreed in the past become more difficult if lesser funds are available.
Can we assume that if Rb Leipzig accepted this kind of payment structure, we’d have been able to secure Timo Werner earlier on in this window?
I had many people asking me, after it emerged he would sign for Chelsea and not the Reds, about whether we couldn’t afford to sign him and if we had little or no funds to spend. I said that wasn’t the case. It was something we could have potentially agreed with RB Leipzig, if both parties were in agreement, for Werner’s fee to be spread over the term of his contract and for the initial payment to be lower. That’s not to say Leipzig wouldn’t have been open to a deal, but if I recall correctly, we didn’t even go in with a formal offer in the end. As I pointed out before, there was a lot of uncertainty at the time we walked away from this deal. We didn’t even know if the season would be concluded, whether the club would have to pay a significant chunk of its Premier League and Champions League prize money back to broadcasters, when the next season would commence and a variety of other unknowns. Much as it was difficult for us fans to take at the time, the owners were trying to take a careful approach to ensure we didn’t enter into an expensive deal – when you factor in wages and agents fees – when financial catastrophe was a real and genuine concern.
Is Liverpool’s current wage bill manageable – or does the fact we spend huge amounts on performance-based bonuses alleviate any risk?
I think it’s possibly a tad generous, on the basis that it appears the first team squad make more money from bonuses and other such payments than they do from their basic weekly pay. That said, you cannot argue that this heavily-incentivised pay structure has worked extremely well. Since being introduced in 2013, we have been Premier League runners-up twice, won the Premier League, won the Champions League and been runners-up in two other European finals. The wage bill nearly doubled over a five-six year period due to introducing incentivisation, but it’s linked to success and in the last several years, the club’s wages-to-turnover ratio has been in and around 58%. That’s certainly manageable, but ideally, the club would love to get that under 50% in due course. That will be achievable by growing revenue streams such as matchday, which will increase when Anfield’s capacity increases in the next two-three years, as well as commercial, which the club is intent on growing following the club’s tremendous success and popularity growth of recent times.
We’ve recently heard that all three of our new kits – the home, away and third – have broken sales records. How beneficial will this be to the club considering the clever deal we negotiated with Nike?
It should be great for revenue, because I’ve been predicting that the club will generate up to £100m this season. More importantly, for me, is that it will send a message out to other potential partners that doing business with Liverpool is great for business. The club is such a hot commodity and demand for Liverpool’s Nike merchandise – despite the pandemic and widespread worldwide economic woes and mass job losses – is just remarkable. The club generated £188m in commercial revenue in 2018/19 and I believe it generated in the region of £200m for the full 2019/20 season- but to really compete with Europe’s elite, the club needs to be targeting annual commercial revenues of £300m. That will only be achieved by striking more lucrative deals with big brands- and the great start to the Nike deal adds weight to new commercial supremo Matt Scammell when he sits down with blue-chip companies to try and secure more lucrative deals for Liverpool.
Finally – as a fan – do you want any more business done this month? And what are your hopes and predictions for the season?
I’m delighted that we’ve signed Thiago and I’m equally as pleased that we’ve addressed the issue of a lack of depth in the left back and front-line departments. Before the season started, the other position I was keen to see the club invest in was at centre back. After Lovren moved on, we were left with only three senior and established centre backs- two of whom do not have the best of injury records. Though Fabinho can certainly do a job there, I still feel we should look to add a fourth centre back- and that should have all of us Reds more than content with the squad. As for the season, I had us as slight favourites to win the league before the season began. Following the signings of Thiago and Jota, and seeing the starts some of our rivals have made to the new season, I see us as very strong favourites to win the league again. Just like buses eh, you wait ages for a league title and then two could come along in succession- one after another!