Liverpool, Spurs and the Europa League.

 

Supporting a lower league side means that as a top flight neutral you can engage without fear of reprisals mercilessly joshing your compadre’s who have “second teams” (often first teams TBH) in the top flight. I have an unusually large number of Liverpool supporting pals, which is a little odd given the geographical distance between Plymouth and Liverpool. However I am sure they all have bona fida reasons for supporting Liverpool, their milkmans sisters cat once went to Merseyside or something and it has nothing to do with Liverpool being the dominant force when we were growing up (cough glory hunters, cough)….. but I digress. Liverpool have provided me with rich comic potential over the last few years and I have ever so enjoyed winding pals up. But in all that I have had the occasional genuine philosophical disagreement about football, one such row with my mate Moz has prompted me to blog.

Liverpool FC in Europe?

The question at hand is do Liverpool and Spurs really want to qualify for the Europa League next season, or more to the point should they? Moz (who has maintained for some time that he doesn’t want Liverpool to qualify for the Europa League) triumphantly emailed me last night with an appeal to dubious authority what he said was the killer argument, end of story  ‘Arry Redknapp didn’t want to qualify for the Europa league proving what a disaster it would be. Superficially that did seem like something of a show stopper I have to say.

Now I don’t, and never have, claimed that there isn’t a sporting reason to think that being outside of the Europa league (or any cup competition for that matter) might help a clubs league performance.  The more games you play the more tired you are. All clubs often suffer in terms of performance and results after big cup games at home or abroad. Given that British clubs don’t seem to value the Europa league as a tournament to win or do well in, then I expect if participation in it made no other difference whatsoever to clubs then they would probably all value giving it a miss.

However I don’t think it is really that simple at all. Because football may well be a sporting endeavour, but it is also business now. And the business side, crucially how much money clubs can spend, has a direct impact on the sporting side. It all comes down to money in the end. You see for both Liverpool and Spurs they are not just “any” team happy to propel themselves up the table a bit. If this was true then it would probably be spot on to say they might in all honesty want to give the Europa League a miss. No both Liverpool and Spurs see themselves as “big clubs”, who think they should be competing for trophies at the highest level and who want to play in the Champions League.

In the Premier League (well most football actually) there is a particularly strong correlation between wage spend and league success. Around 80% correlation in fact, in the Premier League you get what you pay for. So in order to get into the Champions League you are going to need to try and spend more, or at least nearly as much, as your rivals on wages. Now until pretty darned recently provided your club had an appropriate sugar daddy, or at least an accommodating bank then clubs could just find the money to bridge the gap and hope for the best, or at least gamble on getting the success to pay the bills.

But the financial fair play regulation introduced by UEFA have put the kibosh on that. Put really simply clubs have to break even they can only spend what they earn. The is some wriggle room, but they must lose no more than £40 million quid over a three season period, part of this caveat is that these losses cannot be made up of loans but have to be covered as effectively “gifts” of money given to the club by the proprietors. If clubs are unable to meet these stringent solvency rules they will be prevented from playing in Europe. Should that happen to a club with a budget predicated on getting money from Europe that would represent a massive double whammy.

Worse, it grants a massive “incumbency bonus” to any club that has qualified for the the Champions League from this season onward because of the expected 30-40 million pounds in TV and Prize money a decent run in the Champions league will net you. So for Spurs and Liverpool next season they will be trying to overhaul a team that the league suggests are better than them in terms of playing personnel, meaning they will need to strengthen relatively. On top of this they need to ensure their books balance, against a backdrop of the team they are competing against having an additional 30-40 million quid in their budget.

Now what this means in practice is that frankly every penny is going to count, if Spurs and Liverpool want to overhaul Manchester City and get back in the champions league they need to make as much money as they possibly can.  The Europa league is going to be a source of income and I guess the real question is “is it worth it?”. Now no doubt the Europa League is a poor, poor second to the Champions League in terms of what a club can expect to earn from it. Rather than the 30-40 million champtions league clubs routinely get,  a club who wins the Europa league will earn in TV and Prize money about 8-10 million quid. When you are having to balance the books an amount of money that will clearly have some impact on a clubs spending potential. But probably not in of itself the difference between whether or not a club can afford to mount a serious challenge for the top four.

But it isn’t just in terms of prize money, clubs make a huge amount of money form “match day revenue” what they take on the gate and what fans spend at the ground. According to “The Swiss Ramble” (a most excellent blog BTW) Liverpool make around £1.7 million per game in match revenue. A run to the final will involve around about 16 games so a team that wins the tournament will probably have an extra 8 home games. Even assuming that match day revenue for a Europa League game is less than average that is probably for a club like Liverpool an additional ten million or so quid.  Further Clubs will benefit commercially from performing in Europe. Commercial sponsors like to get exposure and clubs being internationally successful, and crucially appearing on free to air TV will give teams performing in the Europa league an uplift to their bottom line.

Next year's Europa League Sponsor

This is of course true, and too a much greater extent, for the Champions League clubs so the real difference in terms of income (and therefore under FFP ability to spend) is greater than the oft quoted 30-40 million. For the team that doesn’t get into the Europa league they could be looking at a difference in budget of quite possibly considerably north of £50 million all in just on the basis of European competition or not. The £20 million or so a big club could potentially expect to earn from winning the Europa league isn’t enough of course but it will help.

Fans always like to think about the “manifest destiny” of their clubs, the glamour, the history, the tradition. And whilst I am sure this does have some impact on footballers the truth is, if we are honest, that in descending order of importance players are motivated by:-

  1. Money
  2. Cash
  3. Moolah
  4. Wonger
  5. Success on the pitch

I don’t doubt that there are exceptions, but we all know that in the main this is true. So for a club rebuilding and hoping to overhaul rivals they are going to need to spend big. Competing in Europe, even the Europa league helps. Firstly because of the money a club can afford to pay, secondly because agents like their players to play in europe as they are in the “shop window” increasing their earning potential (for both player and agent) in the future.  It is widely accepted that clubs not competing in Europe have to pay more in wages to attract players of similar quality to clubs not in Europe for precisely this reason.

I realise fans are far from rational or sensible when it comes to their club. But I think that if fans do engage their critical faculties here they will realise that the situation facing clubs is different now. Assuming UEFA actually do rigorously enforce the Financial Fair Play regulations (I guess that is in reality far from certain) then a club hoping to dine at the top table simply cannot afford not to be in the Europa league given half a chance. And let’s see for all ‘Arry’s bluster if the Europa league was really so bad he would surely be fielding his reserve team for the last few matches trying ever so hard to “secure” sixth place. I cant see that, anyone else?

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07. May 2011 by Ralph Ferrett
Categories: Sport | Tags: , , , , , , , , , | 6 comments

Comments (6)

  1. Alright, I’ll bite…

    It seems to me that a team’s desire to win and improve it’s league position is not mutually inclusive of the consequences of that success. Take the Liverpool vs. Arsenal match a couple of weeks ago. As a ‘devoted’ Liverpool fan, I could see the argument in us rolling over in that match to enable the title race to remain open in the hope that Arsenal would help prevent Utd winning that coveted 19th title. When Arsenal won their penalty in the 97th minute I was almost, not quite but almost, satisfied. Yet when Lucas went down in the box in the 102nd minute I was overjoyed – I was willing Kuyt to convert his spot kick and erupted with the rest of the Bangkok Liverpool faithful when the ball hit the back of the net (on a side note, Kuyt’s penalty record is pretty impressive).

    I think the same goes for the less coveted 5th spot. When I go to the pub to watch Liverpool play I don’t go there to see them put in anything less than 100%. I want to see them win, I want to see them score goals and I want to see them finish as high up the league as they can.

    However, I do feel that Europa League football will be a curse next season. I don’t agree with the financial statistics in your article, and although I haven’t done extensive research myself, the numbers I’ve heard bandied around on the 5Live Football Daily and The Times and Guardian podcasts are nearer the £8 million mark for the team that goes all the way and wins it. Considering Liverpool and City failed to display convincing performances in the competition this year I fail to see how Liverpool or Spurs could consider themselves a shoe in for the title next season. Thus cup winnings will likely be around half that.

    In not reaching the final, fewer home games are likely to be played, and thus match day revenue (reduced as it will be for non-stella European ties) also won’t total the £8 million predicted.

    So in general I’m not sure if the financial argument for the Europa League being worthwhile stacks up. I’m sure from a short term business perspective owners would like to see the turnover, but in the long term a successful cup run is likely to result in a lower league position through fatigue and injury and thus a poorer chance of catching up with the top four spots in the Premier League.

    I also disagree with your point that teams not in Europe have to pay more in player wages than their ‘top table’ (a much over used phrase) counterparts. The only team that has put this to the test in Man City who are clearly the exception to the rule. No teams out of Europe pay more in wages than Utd and Chelsea, so postulating this is merely speculation.

    From a purely selfish point of view, I want to see Liverpool playing in Europe because I like having something to watch on TV on a Thursday night, but I don’t think that it will be in anyway beneficial to their long term plans of breaking back into the top four. Conversley however, I do feel that finishing 5th rather than 6th this year is a sign that the team have the motivation and the desire needed to scrape an extra 5 or 6 points together next season that may well prove to be the difference between Big Cup or Mickey Mouse Cup next year.

    All these points would be moot of course if Arsenal had done what they were supposed to do at Wembley in the League Cup final.

    • “I don’t agree with the financial statistics in your article, and although I haven’t done extensive research myself, the numbers I’ve heard bandied around on the 5Live Football Daily and The Times and Guardian podcasts are nearer the £8 million mark for the team that goes all the way and wins it.”

      Hi Alex, as I thought i’d explained in the article (and sorry if it wasn’t clear) the 8-10 million figure that they bandy about is is the TV and Prize money. Clubs also make money like I said from match day revenue, and sponsorship which is why it is worth more than just in these terms. Also Champions League teams get this income difference as well. So it isn’t just the 30-40 million tv and prize money difference that Liverpool would need to make up but all the money they make from match day revenue and that. If Liverpool are not in europe at all you could be looking at in the region of north of £50 Million difference between their budget and Man Citys under the FFP. That kind of thing makes a difficult job close to impossible.

      “So in general I’m not sure if the financial argument for the Europa League being worthwhile stacks up. I’m sure from a short term business perspective owners would like to see the turnover, but in the long term a successful cup run is likely to result in a lower league position through fatigue and injury and thus a poorer chance of catching up with the top four spots in the Premier League.”

      But…. surely that is an argument that those clubs in the Champions league would constantly struggle but that just simply isn’t true. Man U, Chelsea and Arsenal have consistently qualified for the Champions league year in, year out. Despite the “fatigue” of a long European run. This happens every year. Unless you either

      a) Don’t believe the research about how wages spend correlates to league success
      AND/OR
      b) Think the FFP are somehow not going to apply to Liverpool

      Then I dont see how you can reconcile expecting Liverpool to get into the top four with them dropping an eight figure revenue stream. The problem is the difference between what they earn and what the current top four earn. Simply put in stark financial terms they are not going to be able to perform on the pitch at the required level without the money.

      “I also disagree with your point that teams not in Europe have to pay more in player wages than their ‘top table’ (a much over used phrase) counterparts”

      I have read this in several places over the last couple of years. I’ll try and dig out a source but the logic is that overseas players tend to want to be compensated because they are not in the shop window. I need to do some research to find out where I read that.

    • “Conversley however, I do feel that finishing 5th rather than 6th this year is a sign that the team have the motivation and the desire needed to scrape an extra 5 or 6 points together next season that may well prove to be the difference between Big Cup or Mickey Mouse Cup next year.”

      An another thing that partisan (blinkered) fans seem to forget is that football is about continuos improvement. It isn’t just that Liverpool/Spurs have to improve by 5-6 points to get into the Champions League. This is the important thing they have to improve by 5-6 points *MORE THAN CITY DO*.

      City already have a bigger squad with much more quality in depth (and in the first team) than either Liverpool or Spurs. They have owners who unlike Liverpool and Spurs have shown they are quite happy to cover losses so will probably put the full 40 million over three years they are allowed to do so (Fenway sports and Enic might do this though it isn’t their normal Modus Operandi). I would say it is fanciful to beleive that Citeh are not going to try and bring in some real quality.

      The Champions League mean they are going to have a huge amount more money to spend on the squad and wages than Liverpool so is is it realistic to expect that Liverpool can bridge that gap and some spending 50-60 million pound less? I just don’t think it is remotely credible. The money they might make from the Europa league could be crucial in terms of trying to bridge the gap.

      Like I said at the end of the blog people need to engage their critical faculties. It is the combination of talent of existing playing staff, financial fair play and prize money that make the difference.

  2. I am the aforementioned Moz and whilst there is some merit to Ralph’s arguement there are also holes in his argument that are larger than the holes in swiss cheese,

    1) I am willing to bet a large amount of money that Liverpool’s match day revenue for Europa League is far less than the £1.7m Ralph is banding about, most of the games were half full, ticket prices were lower than a top band premier league game (Manu, Everton etc) – and I know this as I nearly went to the Utrict game, and you can bet your bottom dollar that corporate and hospitality packages (that make up a large part of the normal £1.7m) would have been at a low take up or almost non existant.

    2) Liverpool have a shallow squad without enough quality in key positions, playing in the Europa League will require purchasing more utility players out of the transfer budget, dwarfing the maybe £10m that the team may make from a good run in the competition.

    3) Being in the Europa League does not attract top marquee players (or get good performances out of them as Man City’s dire performances proved), as also does, I profess, not being in the Champ League, however Liverpool will always attract good quality players even if there is no guarantee of European football, as signings like Suarez and Carroll testify. Also, one has to remember the new model that Fenway Sports are following – young, quality signings with long term contracts and likely high signing on fees later, the top 18, 19, 20 year olds do not necessarilly only join clubs in the Champ League, especially when many end up languishing in the reserves, many at that age just want to be guaranteed game time, also players develop at different rates and are often not the finished article way into their 20′s. It also looks like the acedemy is also starting to bear some fruit, actually something Rafa that Rafa did right.

    4) Liverpool have a major problem of match day revenue in comparison to their rivals and hopefully there will not be a long wait for redevelopment of Anfield or a new stadium (unlike Gillett and Hicks), however Liverpool have just signed a £25m a year kit deal, along with an previous £80m sponsorship deal and have no debt, unlike Man U who are reportedly paying £70m a year in interest payments alone.

    I think Ralph is right in one respect, there can be a situation where Liverpool can carry on languishing out of the top 4 for too many more years, however this is of far more consequence then not being in the Europa League. Therefore the crux of my argument is that Liverpool do not currently have a squad of enough quality and depth to be fighting on two fronts next season. A year out of the Europa League will be beneficial, this will allow Liverpool to continue to build their squad and concentrate on the league. Obviously I am aware that over a longer period this may hurt Liverpool’s finances, but one year? I dont think so. The only merit of the Europa League is that maybe Kenny could blood his youngsters.

    Liverpool are out of debt, which cannot be said about any of the top 4 aside from Arsenal, add to this that Liverpool have a huge and loyal fan base and have a brand recognition that Man City and Chelsea can only dream of (particularly in Asia) and appear to be in the hands of a board that actually know how to run a business, this gives me great hope for the future, and Ralph I look forward to telling you “I told you so in the next season or two”. I rest my case

    • Ah Minteroo wondered when you would show up! I have been so missing your fan’s wilful ignorance and blindness to reason! (Get a nice Ad Hominem attack in the first sentence! You like?)

      Anyhow allow me to retort

      1) Glad to see you are basing your arguments on something you “reckon”, rather than something you know or have looked into! I call this the George W Bush school of evidence needed for a war.

      Let’s be honest I am sure actually that net match day revenue is less than for say a champions league game. But I also bet it is much higher than an FA or Carling cup match. Whilst they don’t always fill the ground tickets are not included in Season Ticket prices meaning there is some additional premium. Hard to get attendance figures but the last four matches in the Europa league had attendances of 37494, 42949, 37806 and 33895. Anfield not packed out but certainly a lot of money.

      Even if the take is only half normal (and I think this is conservative) half a dozen home games is netting north of 5 million. Plus whatever uplift the club gets on its commercial deals for being in Europe. And they really will get this.

      2) I have got no doubt that you are right about the Liverpool squad and it’s quality. But I think they need to extra players *anyway* there is a mountain to climb in terms of bridging the quality gap between Liverpool and the current top four. That isn’t just in terms of best 11 but also in terms of the squad.

      Liverpool have all sorts of areas to improve and they need to spend to do this. It is a tricky equation to get right (though I note Liverpool and Spurs both seem pretty earnest in actually trying to get this so called poisoned chalice). But the extra moolah (and it would be far north of 10 Million for the business end. Probably closer to £20 million all in if you actually win it. I’d imagine Liverpools run this year was worth about 13-14 all in. That kind of money is the difference between getting a so so journeyman player of the kind Liverpool have bought lots of, and a really talented player who can make a difference in big games.

      3) I am not sure how relevant this point is to the argument Moz. Clearly the Europa league isn’t anything like the draw the Champions league is. No arguments from me there. But I have *never* heard anyone in football arguing that it doesn’t have an effect. Players, and particularly agents, love their players to be in Europe. It boosts profile and earning potential. And lets be clear that motivates players much more than club stature or history.

      And the point around the club name of Liverpool. I don’t doubt that “great clubs” have an extra pulling power. When all is equal the average player would go to the marquee club. But the truth is it isn’t all level. Because teams pay different amounts, and are in different positions visa vie Europe and the likelihood of winning trophies. You telling me that the name of Liverpool means a player would turn down Man City, fifty grand a week extra wages and Champions League football next year if both clubs were in for the same guy? Yeah good luck with that…..

      The Fenway model is a good one, but firstly that takes years to reach fruition and each year Liverpool are out of the Champions League (spesh if not in the Europa ;-) !) they are falling in terms of budget behind to the tune of 40-60 million quid a year. That is difficult to make up over one season but the cumulative effect of several years out of the limelight would be massive.

      Secondly all the top clubs are trying to do precisely what Fenway are planning, clubs like Porto, Athletic Madrid, Napoli ,Anderlecht etc have a business model set up to do this. And all the top clubs are increasingly trying to operate this way. It doesn’t mean that Liverpool wont have success at this but it isn’t like American sports where there is little competition. Football is a global and international game and there is strong competition in this field.

      4) What you are saying about the “fundamentals” of the club is fair enough. But if you look at Liverpools figures (I read when writing this article the entire Deloitte and Touche football rich list report) then Liverpool are very dependent on Television money which makes a high proportion of their revenue. Being out of the champions League for a couple of seasons will almost certainly drop them below City in the rich lists after next season.

      The Liverpool board have a sensible business plan but City are massively expanding their commercial operations overseas backed by the Mansoor billions and Chelsea have been cannae at improving their commercial revenues.

      It is all well and good talking about global fanbases but the reality is even the really top clubs like United and Madrid struggle to monetise this in a massive way. Both getting more revenue from match day income and TV money. This may be a long term solution, but it doesn’t help in the short term, and actually monetising a large fan bases probably requires short term success on the pitch.

      The bottom line Moz is you seem for me to be ignoring the Elephant in the room about Financial Fair Play. This is going to cause massive problems for clubs who are not currently in the champions League and clubs outside are going to need every penny they can get to compete.

      Liverpool will now have been without CL football for two seasons. This means that relative to United, Arsenal and Chelsea over a couple of seasons they have dipped out between 80-100 million in budget difference. The small mercy is that it looks like two different clubs in that time get 4th meaning the relative loss for Liverpool is less than if Citeh or Spurs had been in for two years. But it is a mountain to climb and more of a mountain without Europa money.

      Despite how it might look I don’t actually dislike Liverpool, in fact you have spent many a match in the pub with me cheering their success depending on the opposition. I would certainly prefer Liverpool to be successful than Chelski or United. But I think with FFP, the match day revenue that Arsenal/Chelsea/United generate, Sheikh Mansoor’s billions and Champions League money Liverpool (and Spurs) have a really difficult task. FFP changes the world (if enforced) and the “equation” is different now.

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