A £150m risk for Liverpool FC?

NESV John Henry and backgroundWith strong rumours that a final decision has been made on the stadium issue over at Liverpool, it is thought that after months of dithering over the matter, that John W. Henry is said to be coming to the conclusion, much like he did with the Boston Red Sox, that staying put at Anfield and redeveloping the site there instead of a full scale move to another site is the play to make, but is this in the best interests of the club?

The report published in the Daily Mail a few days ago states that: “Detailed plans are in place for a phased expansion of the Main Stand and then the Anfield Road stand. The work is expected to cost about £150 million, a huge saving on the estimated £400m that a new stadium in Stanley Park would cost, although an estimated £50m has been spent by the club on designs and planning for a new stadium.”

This was backed up even further by a Liverpool council spokesperson, who have worked with the club closely for years on how best to resolve not only Liverpool’s, but Everton’s future homes, had this to say on the matter, with an announcement thought to be imminent: “It does seem to be the case that the club have decided to stay at Anfield and that Liverpool officials are preparing to confirm the decision.” But is it the best move for the club?

Well the answer to that one, in the short-term at least, is an overwhelming yes. Match-day revenues at the club have long been a source of frustration by the hierarchy at the club and even though they are said to have made £1.5m from the game at the weekend at Anfield, Manchester United are set to bring in double that for the game at the 75, 765-seater stadium at Old Trafford. When you add that number up across the whole season, with league games alone, that comes to £38.5m that they are missing out on. The new site would see Anfield turned into a 60,000-seater stadium, up from the current 45,000, with 7,000 of those reserved for corporate seating at a cost of £150m.

It’s a sad indictment at the way the game is heading and at times these days supporters are treated more like customers rather than the life-blood of the club, but since football cross over from a sport into a fully-fledged entertainment business, the trend was bound to happen. There’s also the knowledge that if every other club is doing, particularly your rivals, why run the risk of falling further behind financially due to principle in a game that increasingly is starting to be run without it.

The breakthrough comes as the council’s director for regeneration Mark Kitts intimated that homes would be given “an open market valuation” – which he suggested could be upgraded to reflect an area in better condition – plus a 10% “home loss payment” and removal costs and matters are eased even further by the fact that the club will not have to negotiate directly with residents or buy their houses,with the council stepping in to perform an arbitrary role. The council has the option of applying for compulsory purchase powers which would force residents to sell, if necessary, but the added 10% bonus on top of many homes receiving as close to their market value as you’re likely to get in today’s economic climate appears to have smoothed things over to an extent.

Building a new stadium would be fraught with risks and most importantly, would have to comply with the strict Financial Fair Play (FFP) rules which are coming into effect at the start of next season and after nearly 15 years of stagnation over the issue, the time for a move appears to have passed. Getting this call right is a huge decision and one that could have repercussions on the club’s long-term future for decades to come and the sensible approach appears to be erring on the side of caution and maximising the current’ sites potential. Manchester United make on average from match-day income 108m per year, Arsenal 93m, Chelsea 67m while Liverpool bring up the rear on 40m, so a decision has to be made and soon, but it has to be the right one for the club going forward.

The club’s owner John W.Henry stated in a letter to The Anfield Wrap back in June: “A long-term myth has existed about the financial impact of a new stadium for Liverpool. Maybe it became a good reason for selling the club at one point. Whatever the reason, a belief has grown that Liverpool FC must have a new stadium to compete with United, Arsenal and others.  No one has ever addressed whether or not a new stadium is rational. New stadiums that are publicly financed make sense for clubs. I’ve never heard of a club turning down a publicly financed stadium. But privately carrying new stadiums is an enormous challenge. Arsenal is centered in a very wealthy city with a metropolitan population of approximately 14 million people. They did a tremendous job of carrying it off on a number of levels. But how many new football stadiums with more than 30,000 seats have been built in the UK over the past decade or so?  I’m sure every club would like to move to a new facility.

“Can Liverpool as a community afford Chelsea or Arsenal prices?  No.”It is often said that for Liverpool to compete in match-day revenue with United, Arsenal and Chelsea, we need a new stadium.  But you can see that the £50 or £60 million differences stem as much from revenue per seat as from the number of seats. Even if Liverpool were able to get to 60,000 seats, there would have to be an increase from £900 to £1550 in revenue per seat as well to catch Arsenal. “If Anfield yielded £1550 per seat, without adding seats, LFC match-day revenue would rise from £41M to £71M.  That would be the same as building a new stadium with 60,000 seats or increasing seating at Anfield and increasing revenue per seat to £1170.

“Building new or refurbishing Anfield is going to lead to an increase from £40M of match-day revenue to perhaps £60-70M if you don’t factor in debt service. That would certainly help, but it’s just one component of LFC long-term fortunes. This will be principally driven financially by our commercial strengths globally.”

Henry appears to be that rare breed of owner in football that actually ‘get’s’ his local community to an extent. There’s simply no point in building a new stadium or ramping up ticket prices to such an extent that you alienate the community you purport to represent. There’s a clear difference in expendable income between London and Liverpool, so why try and pretend that it doesn’t exist in the first place? At the moment, Anfield may have increasingly become awash with what we shall politely call ‘tourist fans’, but that is what the 7,000 seats being created are for, while there will be an extra 8,000 for regular punters. On the face of it, it looks a decent compromise.

You sense that Henry is extremely mindful of tinkering too much with the ground at the risk of losing some of its famous atmosphere and while the process to get to this point may have been frustratingly slow at times, it at least looks like it’s heading towards a logical and fiscally-responsible conclusion.

It’s far from ideal and Henry’s words imply that there’s already a tacit acceptance that they will never be able to keep up with the match-day incomes of both Arsenal and Manchester United, but the club have improved immeasurably in marketing themselves to a worldwide audience and in truth, that’s where the real big bucks lie these days. Thankfully, it’s not quite another ‘spade in the ground’ moment, but it’s certainly in the best interests of the club in not only short, but also the long-term.

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