I’ve posted a number of links onto our facebook page recently to articles about the ongoing saga at Liverpool Football Club.
Going back 20+ years, by the late 80′s and early 90′s Liverpool were not only far and away the most successful team in Britain, the club management were also some of the most vocal exponents of a breakaway “elite” premier league.
Whilst the clubs supporters were bemoaning John Barnes demands for a £10k per week salary (hard to imagine now), the management were sending the club and it’s rivals down a commercial path that would generate much greater riches (and hopefully, success).
It has to be said that in most other areas of business a substantial increases in revenue, continued loyal customers, world class assets and worldwide brand adoration would be a massive target to aim for. These are truly world renowned businesses (Apple?).
I’ve always thought football is different though.
The revenues stay as long as the business remains successful, the business remains successful as long as it can continue to attract world class assets, and the assets can continue to perform at world class levels.
Brand loyalty is a little harder to diminish, especially for a team such as Liverpool who have huge numbers of followers across the world. However, with competition fierce for worldwide support, it only takes two or three seasons of mediocrity for all the previous goodwill to be undone.
And that leaves the supporters of the club – and by supporters I mean the ones that either regularly, or infrequently, go to the matches. The paying customer if you like, where paying means being counted through the turnstile.
These “customers” remain loyal to the “brand” however badly it performs – there’s no question any of them would consider switching brands and moving to a new supplier.
They essentially have two options (1) Put up with the inferior product, pay less for it, and hope that with good management one day a better product will be produced; or (2) Stop buying that product altogether – walk away.
It’s difficult to understand why the current management of Liverpool FC now want to take legal action to maintain control. The sale of the club is never going to be higher than the offer currently on the table. This sale essentially allows the current owners to minimise their losses.
If they’re successful in the legal action, what will they have left in their business?
- a decrease in asset performance
- decrease in the standard of asset purchases
- an eroding brand
- reducing revenues
Oh, and more than likely, lots of supporters who decide to walk away.
That’s why I think football isn’t like a normal business.
You can probably tell where I spend some of my spare time, but this situation isn’t unique to Liverpool Football Club.
What do you think?
UPDATE: As I was publishing this blog on Friday, news broke about Manchester United’s £80m loss. I subsequently saw a former colleague, and MU season ticket holder, yesterday and he told me that MU stated one of the reasons for their lower revenues/profit this year is due to reduced transfer fees (no more large Ronaldo type sales).
It seems selling the very best assets (to competitors) is a key driver in the MU business plan. Where else in business would this happen?
As my friend and ex-colleague plainly said, it’s not just the shirt colour that our two teams now have in common.
Martin
www.mymanagementaccountant.co.uk
