Liverpool’s signing of Thiago Alcantara has been hailed as a master move demonstrating the Red’s desire to win repeat as EPL champions. And while that story plays well for fans, looking below the surface you see that Liverpool who were tight on money this summer, paid £27 million for Thiago so that they can make much more than that amount in the next year or two thanks to the new addition.
For fans who want to see Liverpool raise the EPL title again, signing Thiago makes all the sense in the world. But in reality it actually goes against everything that Liverpool has established in their team building template.
Thiago Does not Make Sense
Breaks the Blueprint
Liverpool’s recent success is predicated on finding undervalued players who have yet to blossom. And a key part of that is young players who can give the team 5-7 years of their prime. Thiago is neither undervalued nor young. He is a player at the tail end of his prime who is well known for his mesmerizing ability in the middle of the field.
Thiago is not a player who will increase his value exponentially in the next few years. Players like Andy Robertson and Mohamed Salah joined the team at what now looks like an absolute steal, with their current value several times higher than their original purchase fee. Even players like Alisson and Virgil Van Dijk who were the highest paid transfers at the time have increased their value while also offering the team at least half a decade of their prime.
Thiago clearly breaks the mould that Liverpool have operated in during Klopp’s tenure, so the question has to be asked: why break a successful blueprint?…and why now?
Thiago is Not Necessary for the EPL Title
Winning the EPL title and breaking the 30 year drought is a great achievement that will be remembered by Reds fans for generations. The relevant question now is whether Liverpool can repeat as champions and etch their name in lore as one of the greatest Liverpool teams ever.
But the real question that should be asked is why wouldn’t Liverpool win a second title in 2020-21? Seems presumptuous, but it really isn’t. Liverpool won the title in 2019-20 by 17 points despite clearly shifting out of top gear in March (yes, March). The title was already assured (not mathematically but there was no question) so early that the players simply could not maintain that focus the rest of the season, and still finished ahead by 17 points.
Looking at other competitors suggests that the title is there for Liverpool to win as top competition is unlikely to rise significantly:
- Manchester City – Pep Guardiola is entering year 5 of his standard 3 year tenure. He stays 3 years because beyond that he loses his players with his highly demanding style, as evidenced by year 4 results. The defence is in flux, Fernandinho and Aguero are aging, Sane has left and the team simply doesn’t intimidate like it used to.
- Chelsea – Went out and spent an obscene amount in the summer but haven’t shored up their defence; needed to buy a good (not great) keeper and still have to figure out how to play together
- Manchester United – Frankly nothing more needs to be said than Man U is acting like Man U, and is not a threat for the EPL title.
- Arsenal – Has some nice pieces up front but is lacking in the midfield and defence and is in the same group as Man U, not legitimately a threat for the EPL title.
- Spurs– Only managed to get into Europa League in 2019-20, and aren’t looking much better this year
- Leicester City – Their drop down the standings and out of the Champions League positions wasn’t a fluke, they are simply not deep or consistent enough
Liverpool seem to be firing on all cylinders in this new season, even though a look at their top competition suggests that they don’t even need to achieve the same lofty standards of 2019-20 to with the EPL title. Without Thiago Liverpool is able to duplicate enough of the 2019-20 season to win. The Reds could have lost 5 additional games and still have won. That’s a huge difference to bridge for teams that have significantly more questions than Liverpool
EPL Title is Nice, But not Necessary (Blasphemy)
While repeating as the EPL champions is a dream for many Liverpool fans, now that the drought has ended it is not of paramount importance. While that seems horrible to say, if fans were told when Klopp joined that Liverpool would win one EPL title in his tenure they would happily have taken it. The truth is that fans have gotten greedy (as they should) when looking at the potential for the team.
But looking at the numbers, there’s more than just the title that matters. Winning is more of a cherry on top when it comes to the numbers for the team. Liverpool got the highest EPL broadcast revenue share in 2019-20 as the EPL winners. But it should be noted that Liverpool also got the highest broadcast revenue share in 2018-19 when they didn’t win the title. Man City won the title, Liverpool got more money.
A lot of that comes down to the number of games shown on local broadcast, and to put it simply, people want to see Liverpool. Man City wins games, but they play Pep’s tiki-taka football style that focuses on possession and control over inventiveness and ingenuity. Pep’s style of play isn’t fun to watch, and fans looking for an entertaining game to tune in to would rather see Liverpool’s more entertaining creative brand of heavy metal football.
And so while winning the EPL title is a great achievement, if you look simply at the money part of the equation, the difference between winning and placing second is about one additional broadcast game, so if you as the bean counters if they would rather win a game or make it entertaining, bottom line is that the bottom line for entertaining games is higher in the EPL broadcast share calculation.
Thiago Does Make Sense
Champion’s League Money
Liverpool is not yet a major player in the commercial revenue space (like Barcelona, Real Madrid or Manchester United) and so much of their revenue is in the broadcast category. As a top 6 team in the EPL there is a significant portion of their revenue assured, and with a good team they make premium money in the EPL broadcast share.
What is not assured is money from Champions League. Making it to the Champions League final two years in a row was a major boon to Liverpool’s coffers. In the opposite vein, losing in the round of 16 to Athletico Madrid in 2020 was a major blow, to the tune of €36 loss in revenue compared to prior year.
While losing a game or two in the EPL is upsetting but not fatal financially, losing a game or two in Champions League, particularly at the exact wrong time in the round of 16 is a huge problem. And this is where Thiago comes in. Liverpool management analyzed the loss and realized that a world class player like Thiago would have been the difference between progressing and getting eliminated. Thiago can anchor the middle while using his vision and skill to feed the front three and creating a whole new threat for the Reds. And that would have been the difference in advancing past Atletico, but more important, that would have been the key to making more money.
So all of a sudden the £27 million for Thiago looks a little different, in that it can be viewed as the amount of money Liverpool would have made had they advanced to the final four. Therefore if Thiago takes Liverpool further in Champions League by two rounds, he has paid off his fee.
Jersey Sales and the Nike Deal
The other aspect of the Thiago deal that hasn’t been look at is the jerseys that will be sold with his name on it. New players are a key part of selling additional jerseys, as fans can wear a jersey with Salah’s name from last year or the year before, but nobody has a Thiago jersey. And so a new player spurs sales, in particular a new player who will be slotting into the starting 11 and will be an integral part of a winning team.
More than just pushing jersey sales is the structure of deal that Liverpool signed with Nike, where the Reds get less money up front for a 20% share of net sales, so jersey sales directly help Liverpool, so there is an incentive for the team to push sales. Liverpool could have entered the new football season with no new players, but getting a legitimate star on the team could go a long way to making the Nike deal a financial windfall for the team.
It’s All About the Money
As with most things in life, it’s all about the money. And the Thiago deal was all about making money. Spending £27 million was simply a calculated risk to try to make a whole lot more. Thiago’s on field impact to push Liverpool further in Champions League will complement his jerseys sales and more than likely that combined impact will exceed his purchase price, meaning Liverpool will have made money on his acquisition. And that sounds much more like the Liverpool blueprint for success.
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.