Growing revenues has been key to Liverpool’s long-term strategy under the ownership of Fenway Sports Group.
For some years now success on the pitch has underpinned success off it, and vice versa, with the club having seen revenues grow from £ 184.5m the year that FSG took over to a high watermark of £ 533m in the 2019 season that the Reds won the Champions League. The following two seasons have been significantly impacted by the financial pressures created from the pandemic.
Liverpool posted their accounts for the 2020/21 period at the end of February where a £ 4.8m loss was seen a strong performance in uniquely challenging times, and a time when their rivals were accruing losses into the hundreds of millions. Revenue for the Reds fell year on year by £ 3m to £ 487m, impacted by a 95 per cent drop in matchday revenues due to a season played behind closed doors, although a figure offset in part by a higher media revenue income due to deferred rights payments from the previous year.
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While some clubs have to be a concerned with Financial Fair Play, for Liverpool they have sailed comfortably under the FFP threshold for some time, their ability to run a profitable and sustainable business and having greater cost control over their wage bill meaning that they are a long way from troubling UEFA.
UEFA want to bring about reform to the current FFP model, one that has been accused of being toothless following the decision from European football’s governing body to ban Manchester City for two years from the Champions League for alleged breaches relating to the inflation of related party commercial deals being thrown out on appeal by the Court of Arbitration for Sport back in 2019.
UEFA have previously cited FFP as being a reason why European football managed to find its way through the pandemic due to greater cost controls brought about as a result of the restrictions, but with Champions League reform on the way in 2024 through the ‘Swiss Model’ , where a league system will be in operation and the competition will rise from 32 teams to 36, UEFA are reportedly ready to bring about FFP change to coincide with the changing nature of Europe’s elite knockout club competition.
And growing revenues will be key to how much teams can spend under proposed new rules, according to reports from French media outlet RMC Sport, via GFFN, who claim that UEFA are wanting to see clubs take more control over their finances and have less reliance on debt as a way of managing.
It is claimed that UEFA will seek clubs to grow their own equity through business growth of 10 per cent year on year or face potential sanctions. The idea around such a move is to ‘increase the responsibility of the shareholders, increase the solidity of their assets and make sure losses are covered by capital stock’, thus making them less reliant on turning to debt.
Other measures include real-time monitoring of club accounts, assessed for the current year rather than the previous one, with specific focus on wage bills, transfer fees and agent commission. Clubs will be able to invest in their squads according to a percentage of their turnover, meaning that growing revenues will be something ever more important to Liverpool and FSG in order to invest in the on-field product. The report also claims that the deficit clubs would allowed to sustain over three years will be doubled from the € 30m it currently stands at to € 60m as long as those losses are covered by the owner.
For clubs such as Liverpool, Manchester United, Manchester City and Chelsea, revenues have already risen to such levels that would allow them to invest on a fairly even keel, although City’s recent surge in commercial activity, much of it linked back to the United Arab Emirates where club ownership resides, and the welcome bonus of prize money from the Premier League and Champions League mean that the issue that some thought City would face at one time, where the revenue didn’t match the spend, has now been kicked into touch after the Etihad Stadium side recorded the biggest revenues of all Premier League clubs for the very first time, knocking their city rivals United off their perch.
While that means that City could well be afforded more financial freedom than Liverpool in the transfer market when the new rules come into place, something that hasn’t really been too much of an issue in recent seasons due to the differing transfer policies of the two clubs, what it does mean is that things may become more challenging for clubs looking to make a run at ending the dominance of the top sides, such as Newcastle United.
The Magpies, bought by the Saudi Arabian Public Investment Fund worth £ 300bn last year, are well behind in terms of their revenue streams when compared to the likes of Liverpool and Manchester City, bringing in £ 153m for the last accounting period they filed, for the 2019/20 season. And while PIF have committed to playing the long game at Newcastle, an increased focus by the Premier League on cracking down on inflated related party transactions, allied with existing FFP measures and the bigger clubs able to leverage their global appeal to a far greater extent and further down the road in terms of seizing new opportunities that come with that, means that the challenge will be even greater.
For Liverpool and FSG, an ownership group that has invested money in infrastructure but one that has put mechanisms in place in terms of strategy where the team and success is sustainable within the confines of a more strict business model, the increasing revenues will be crucial to the club continuing to operate at the elite level they currently do, a level where they are a destination again for the world’s best players and where success in the biggest trophies leans more towards expectation than hope after a triumphant few years.
UEFA will reportedly vote on the plans in May before being introduced in July, with a grace period given until 2024, when the new Champions League reform kicks in. Sanctions for failing to meet the FFP framework set out would remain, with other potential penalties from 2024 being points deductions from the new Champions League ‘Swiss Model’.