Liverpool FC released their financial results recently to great fanfare, record profits, growing revenue and a competitive wage structure were all reasons for Liverpool fans to get excited. Among all this excitement the composition of their revenue went under the radar.

Roughly half of their revenue was from TV money and prize money, which although shows success in a season, isn’t something that can be relied upon each year. Unless your Real Madrid or Barcelona, Champions League finals/trophies are a rare occurrence due to the strength of the competing rivals.

Roughly a fifth of Liverpool’s revenue came from matchday earnings which has remained fairly stable but is increasing as the capacity of Anfield increases.

This leaves around a third of Liverpool’s revenue being from commercial revenue. Commercial revenue is made up of sponsorship deals and merchandise sales. This is the area where Liverpool are below Europe’s top table and an area that has significant room for improvement.

The Problem

The graph above shows the potential Liverpool have to grow this area of revenue and boost income significantly to boost their financial muscle. Liverpool’s commercial revenue is the 8^th highest in Europe according to Deloitte and is less than half the amount Real Madrid command. Although no one is saying Liverpool are as big a club as Real Madrid, the difference is much bigger than it should be.

Liverpool lag their northern rivals in Manchester significantly too, by more than £100m in Manchester United’s case. This gap needs to shrink if Liverpool are serious about mixing with Europe’s finest.

Mr. Popular

The reason Liverpool have so much potential and are currently under achieving when it comes to commercial revenue is the growth the club has experienced in popularity and appeal worldwide under Klopp.

Liverpool have struggled over the past couple of decades to ‘get with the times’ and match their rivals in digital popularity as football moved into the modern era. Manchester United perfectly exploited and channelled the new commercial era and as a result saw their finances explode with Liverpool playing catch up ever since.

However, Liverpool are catching up and are ahead of many in terms of social media followers. The club have the 6^th highest number of twitter followers of the twenty teams to make up the Deloitte Money League. They also have 9^th highest number of followers on Instagram which could be improved upon with more engagement and is an area for growth.

The club only has the 10^th highest number of Facebook ‘likes’ and should look at these platforms as areas that could grow significantly. In all these areas they aren’t far of moving further up the social media chain as the club engage to a greater extent with the fans and their success on the pitch attracts more digital fans.

The importance of this nowadays cannot be underestimated, a club’s social media pull gives companies a great way to advertise directly to their target market being football fans or geographical location. A greater number of followers makes it much easier to negotiate lucrative sponsorship deals, especially the smaller club partners who can make up a considerable amount of a club’s commercial revenue.

Kitted Out

Liverpool currently earn roughly £28m from their kit manufacturer New Balance annually. This is almost a third of the amount Manchester United attract in their £75m deal with Adidas and 5 times less than Barcelona’s high of £140m from Nike.

Liverpool are (and should be) entertaining offers from the likes of Adidas and Nike as they look to match, if not exceed the amount earned by Manchester United when their deal with New Balance runs out at the end of next season.

Liverpool should be able to increase their kit deal significantly as Manchester United negotiated their deal a few years ago so by now, this should be well within the grasp of Liverpool considering the growth in popularity the club has sustained of late.

Their current deal is also below the likes of Chelsea and Manchester City, clubs of a similar stature social media wise however Liverpool also have a larger fan base outside of this and would therefore hope to command at least in excess of the £50m Manchester City recently negotiated with Puma.

Getting More Shirty

Liverpool have stayed loyal to their shirt sponsors historically, seemingly married to Carlsberg until they parted ways a few years ago and Standard Chartered took their place. Liverpool chose wisely and have recently renegotiated their deal on £40m a year for four years, up from £30m. This was a shrewd move and Liverpool are doing well in terms of their shirt sponsor and there is not much room to improve in this area.

The club should focus on maintaining a good working relationship with Standard Chartered and negotiate at the appropriate time to improve the terms, maybe by incentivising additional performance related bonuses that will reward the club on the back of successes on the pitch.

Opportunity Knocks

Liverpool have many additional areas that could enhance commercial revenue with some controversial and others just sensible.

Sleeves

Liverpool currently have a 5-year deal with Western Union as their sleeve sponsor, mainly in line with their rivals. Arsenal are currently leading the way with an £8m-a-year deal, something Liverpool should consider exceeding considerably when their current deal expires in 3 years, something for the future.

Training kits

Liverpool’s training kit is sponsored by BetVictor and their current deal expires at the end of the season, making it an opportunity to bring in a more lucrative deal. For comparison, Barcelona have reportedly the highest training kit deal (with Beko) at around £16m a year, which offers a sizeable boost in revenue should Liverpool get anyway near that figure, either by improved terms of a new sponsor.

Naming Rights

Stadium naming rights are a controversial topic in England among fans with many opposed to the idea of ruining club traditions all for the sake of a few quid. However, recent studies have shown it is no longer a few quid with valuations in excess of £10m being placed on Anfield and other famous stadiums. A boost of even £10m in commercial revenue would by over 5%.

Club Partners

Liverpool could attempt to go a different way and go for volume with sponsors. Club partners can add small multi-million-pound deals here and there however if this was scaled up, could run to the tens of millions. The main drawback here is the time it may take and the devaluing of their main sponsor who may not be best pleased to see all these deals that take the shine of their large deals.

Go Strange

What if Liverpool find the newest trend like the sleeve sponsor? This is an option for the creative. How about shorts sponsors? Press conference sponsors? These are all options and many more. The club could also develop a new medium to share their content that substantially boost their social media following and attracts more lucrative deals.

Thanks for reading – share with a Liverpool fan!

Please follow and like us:

One of the current hot topics in football is the leaked discussions of a new European Super League, a 11 – 16 team league consisting of only the top European teams across England, Spain, Italy, France and Germany.

This article looks to explain the incentives for the Spanish clubs Real Madrid, Barcelona and Atletico Madrid of joining such a league and ditching the Champions League and/or La Liga.

Current Financial Situation

Despite Real Madrid (£594m) and Barcelona (£571m) being the second and third highest revenue generating teams in world football in 2017 (behind only Manchester United), they continue to grow envious of the ever-increasing revenues of their Premier League rivals as the Spanish Giants see their revenue growth slow.

Atletico Madrid (£240m), despite their successes over recent years, still see their revenue severely lag similar Premier League teams who are arguably achieving less (Arsenal – £488m, Chelsea – £428m, Liverpool – £424m and Tottenham – £356m).

The below goes into the reason behind these discrepancies.

TV Money Compared

La Liga TV prize money for the 2017/18 season was a record breaking year for all La Liga clubs despite still paling in comparison to their Premier League counterparts.

Spanish clubs shared a €2.65bn (£1.8bn) pot which was split as followed:

50% shared equally
25% based on league position
25% of resource money

Of this £1.8bn pot, the top three in Spain received:

Barcelona – £129m (7.2%)
Atletico Madrid – £127m (7.1%)
Real Madrid – £100m (5.6%)
Average of top 3 – £119m

Taking this information with the graph above comparing them to their Premier League counterparts is telling, with the three biggest clubs in Spain achieving average TV money of £119m compared to the Premier League top 6 averaging £146m despite having double the number of big teams, making the average much more representative of the League’s financial clout.

Champions League Prize Money

A more contentious point is the overriding feeling that the split of Champions League prize money doesn’t adequately reward the top clubs. Last year both Liverpool and Real Madrid banked around £70-80m from their European endeavours which does seem a lot.

However a new European Super League could easily blow this amount out of the water should the clubs have greater control over distribution and the ability to negotiate their own TV deals and its economic distribution.

UEFA have headed this threat and announced they would be increasing the prize money available to Europe’s top clubs from €1.95m to €2.28bn (17%), with the new distribution also favouring Europe’s elite as a new point system of historic performance used to distribute 30% of the funds.

It looks unlikely that these changes alone will stop Spanish clubs from pursuing this new Super League however it may make them have second thoughts about such a hasty move with all the downsides such a transition may have.

Social Media

Everyone wants to be popular right? No more so than a sports team who have the huge opportunity to monetize all their social fans through advertising, merchandise and new sponsorship deals.

Other than Facebook (where they actually have more ‘likes’), La Liga clearly lags the cool kid in school by a fair few million which is another reason La Liga clubs want to move to the Super League. The proposed Super League would put Real, Atletico and Barca in front of the world to a greater extent than they currently are seeing.

This will help these clubs further increase their popularity and increase commercial revenues further.

What else are they doing to bridge the gap?

If this proposed move doesn’t happen, which is a real possibility given the backlash received since its leak, these three Spanish giants will have to find different ways to bridge the financial gap.

A 15 year deal with a US media company has been agreed for La Liga clubs to play La Liga games in the US for a total fee of €200m. This deal is a ground-breaking move in football and such lucrative deals may become commonplace in a few years.

It is also likely that should this deal be successful, Premier League clubs will join the party and benefit also which may increase the gap again.

Further to the above, this all part of a major push to rival the Premier League as the premium European League as detailed by the BBC.

Conclusion

There are a lot of reasons for Spanish clubs to want to join the proposed European Super League due to the financial clout it may bring so that they can better compete with their Premier League rivals however all these moves are risky and come at a costs with disgruntled fans and bad press which may negate any positive effects.

We, and the world will be watching to see how this story developments and other strategies deployed by La Liga to enhance their finances.

Stay tuned to Financial Football News for further in-depth analysis on the European Super League and much more by following our social media platforms (via the logos at the bottom of this page).