As we all know, money makes the world go round. Liverpool management have figured this out by deciding to partner with Nike. And so with the team dominating on field, management has hatched a diabolical plan to dominate in the financial football world as well. *Cue Evil Laugh*
Liverpool is a team blessed with an amazing history and a trophy case that most teams would love to have, but they are not the top earning football team in the world. In fact they’re not in the top 5. The EPL distributes annually about $2.5B US among it’s clubs which is 40% more than the $1.5B US that La Liga distributes to their clubs, and yet Barcelona and Real Madrid are still top earners:
| Position (last year’s position) | Club | 2017/18 Revenue in (€M) |
| 1 (2) | Real Madrid | 750.9 (854.8) |
| 2 (3) | FC Barcelona | 690.4 (785.8) |
| 3 (1) | Manchester United | 666 (758) |
| 4 (4) | Bayern Munich | 629.2 (716.4) |
| 5 (5) | Manchester City | 568.4 (647.1) |
| 6 (7) | Paris Saint-Germain | 541.7 (616.7) |
| 7 (9) | Liverpool | 513.7 (584.8) |
| 8 (8) | Chelsea | 505.7 (575.7) |
| 9 (6) | Arsenal | 439.2 (500.1) |
| 10 (11) | Tottenham Hotspur | 428.3 (487.7) |
Looking at teams above them in the rankings provides goal to strive for, and Liverpool are doing just that. In fact in just one year they jumped up the rankings from 9th place to 7th. They now have oil funded giants PSG and Man City in front of them, and are clearly looking to move past them in revenue at get into the top 5 crazy money group.
To that end they need to see what the clubs above them are doing and find a way to catch up. PSG and Man City are oil funded and there’s not a lot to do other than find a rich sugar daddy which owner John Henry is not, which is not in the plan, but Liverpool is looking even above them to the big earners, Real Mardid, Barcelona and even Manchester United and Bayern Munich. What do those teams have?
A huge base of fans that help earn the money. When you look at the top 4 clubs on the list, the ones making over €600M total revenue, those clubs have fans all over the world. The next two, Man City and PSG have overvalued commercial deals due to their owners (another story for another time).
| Revenue (€M) | Matchday | Broadcast | Commercial |
| Real Madrid | 143.4 | 251.3 | 356.2 |
| Barcelona | 144.8 | 223 | 322.6 |
| Man United | 119.5 | 230.4 | 316.1 |
| Bayern Munich | 103.8 | 176.7 | 348.7 |
| Man City | 63.9 | 238.8 | 265.7 |
| PSG | 100.6 | 127.8 | 313.3 |
| Liverpool | 91.6 | 251.3 | 170.8 |
Liverpool matchday revenue is good but not at the levels of the top earners, but stadium additions can help. Additionally, the teams above them are in larger and more affluent cities so they can charge more for tickets. That’s not something Liverpool can change and is not the main issue. Likewise, the broadcast revenue is actually tied for the highest of all football clubs due to Liverpool success in the EPL and in the Champions League. So where Liverpool is seriously behind, is the commercial revenue.
To that end, they have looking to move up to the level of the top clubs by focusing on building the brand (what does that even mean, I’ll tell you) and creating a whole new generation of Kopites. This strategy isn’t about maximizing revenue today, it’s about maximizing in the future and playing the long game. This doesn’t mean they’re going to not be competitive in the short term, it means leaving some money on the table today so they can get a lot more in the future.
You can see this in their desire to prioritize certain competitions over others: the Carabao Cup and the FA Cup have some monetary value but they have limited reach outside England. Why does that matter, because in England, most people have already decided who they’re cheering for and the ability to pick up new fans is limited. So what you’re really looking for is international exposure.
A good way to get international fans is winning the Champions League. To a lot of European teams, that’s the dream and it ends there. But Liverpool looked further to the Club World Cup. European teams have never put a lot of stock in this competition because it doesn’t move the needle financially (about $5M US for the winner), but the larger Liverpool management team realized that this is a big deal for countries outside Europe.
In fact the Brazilian team Flamengo who Liverpool beat in the final this year still talks about having previously beaten Liverpool in the Intercontinental Cup in 1981. The Club World Cup is a big deal outside Europe, and that’s where Liverpool is looking to become a household name (that’s what we mean by build their brand) grow their fanbase, outside Europe.
So Liverpool committed itself to winning the Club World Cup and sacrificed the Carabo Cup because there were millions of eyeballs from all over the world watching the Club World Cup as opposed to limited viewership of the Carabo Cup. Sure winning trophies helps to build your brand and expand your base, but winning the right trophies is key, and Liverpool understand that.
Additionally you can see the desire to build the brand by analyzing the sponsorship deal with Nike. By all accounts the guaranteed money is around $40M US which is well below comparable teams who are within shouting distance of $100M annually. Yes that’s just a base number and can grown as Liverpool will get a piece of the sales, but the main part of this deal is the branding.
Liverpool management is well aware that in 2018 PSG signed a deal with the Nike Jordan brand and saw the US sales of their shirts explode by 470%. Let that sink in for a minute, an increase of almost 5 fold just for signing with the right company. That puts in perspective why Liverpool were desperate to get away from New Balance and look for more exposure.
And the Nike deal should provide just that exposure. It’s no coincidence that PSG tied their name to Jordan to help explode sales, and now Liverpool have put into their deal with Nike that they must have 3 high end influencers wear their shirt. The ability of Nike to make that happen was clearly more than enough for Liverpool to agree to less money up front so they can help build their base and make their way towards the following that the top earners in football have.
Another undervalued item is the fact that Liverpool sold a sliver of the company to LeBron James. He paid $6.5M for a tiny piece, but that deal wasn’t about the money of the purchase, it was about the money that will be brought in by his brand name and reach. This is a savvy Liverpool management group and they are working a larger plan.
The one item that I was not going to mention to not start a huge argument about why he was bought, was the acquisition of Takumi Minamino. In no way do I think that this was anything other than a football move with the Japanese start impressing Klopp live and impressing the data analysts as well.
But what I do think is that while the football minds were opening champagne to celebrate a quality player acquired for a paltry fee of £7.25 million, management was sharing a different bottle of champagne with the marketing department who must be positively salivating at the prospect of putting a Liverpool kit on the brightest football star in Japan, a country with over 125 million people where football is the second favorite sport behind baseball.
And that is the definition of the word “perk”. In fact I think if you look up the word “perk” in the definition they’re going to officially change it to show Minamino’s picture. It’s a dream signing in every way, but for this thought, it’s a dream signing to grow the brand and the fanbase.
And so the Liverpool machine keeps chugging along. But the one that everyone sees on the field is only part of the machine. In the back end there is a focus on reaching the heights of revenue of the top teams and competing on even footing with Barcelona and Real Madrid. They are winning which is the first key to getting new fans, they are focusing on the competitions that will give them the most new eyeballs to see the fantastic on field product and they are working the marketing through Nike and through new signings like Minamino fantastically. This is a team on the rise, and I don’t mean in the standings. I mean in the pocketbook.
Daniel is a professionally designated accountant who has spent 20 years in the finance and data analytics field which has skewed his view of the sporting world. Instead of seeing simply an athletic competition, he sees a financial exercise waiting to be unlocked by data analysis. He enjoys reading professional publications such as the annual deloitte football report and team financials as well as spending hours putting together and analyzing football data, which saves his readers from having to do it themselves.
