Why football isn’t normal business
October 8, 2010I’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
What intrigues me about football as a “brand” is why people continue to buy into it, even when the reality has changed. Are they buying into a myth?
Businesses like Liverpool FC, Man Utd, Chelsea and more recently Man City continue to support “their” club even though it is not “theirs” in the same sense as it was 20 years ago: before the impact of the influx of foreign owners, foreign money, foreign managers, foreign players, and TV deals – which have driven up players wages and ticket prices.
I repeat the word “foreign” only to emphasise “not local”.
I enjoy Premier League and European football solely on TV courtesy of Richard Branson (Virgin Cable) and Rupert Murdoch (Sky Sports). It no longer makes sense to me to call myself a “fan” (a buyer into the brand) of any Club.
That said, I always check the results for Stoke City! So maybe a part of me does still subscribe to the “fan” myth.
I think in respect of the paying fans, certainly the ones that have been going to games for 20 years or more, it doesn’t matter how much their team has changed in terms of players & owners, it still “theirs” in the same sense that it was when they were young supporters.
The badge is still the same, the team colours are still the same. In most cases, so is the ground.
The teams that existed when we were little boys and girls mostly still exist today. I’m guessing that’s why you still look for Stoke City’s results (I need to have a word with you about that!)
I can’t answer for the people that are only now just buying into the brand. Like you, I’d like an explanation. The days of half time bovril for 20p is now certainly no more than myth!
Stoke City? I know! Comes of having been born in Newcastle-under-Lyme and taken to see Stoke as a boy. Could have been worse, could have been Port Vale FC.
To the point here, arguably Stoke’s most famous and important player,more than Sir Stanley Matthews (one of whose last ever games I saw at Stamford Bridge) was Neil Franklin. Check him out on Wikipedia http://bit.ly/cAXaFG
Franklin was the first English player to move abroad to play for a foreign side. Caused unimaginably huge upset and wrecked his career. Having won 132 caps for England, he never played again. How different from our own dear pampered players today who can do pretty much as they please without fear of retribution.
This is more my Dad’s era than my own, but it speaks of a time when footballers were part of their local community in a way that just is not the same today. Agreed the superficial emblems and badges are there – but I seriously wonder the value of Liverpool and their fans invoking the spirit of Shankley as if it has some relevance to American owners today. Is Shankley part of the ‘brand’ – or the ‘myth’?
Shankly is very much part of the “brand” as far as the owners are concerned – how can he be anything else?
What I’m struggling to understand is why the current owners don’t want to enhance that “brand” by building a business that enjoys current success alongside with it’s past glories.
With the high court judgement imminent, and then perhaps the administration on Friday, followed by a small matter of an away game at Everton, this is one of the most important weeks in the history of Liverpool Football Club. Time will tell.