New rulings will prove cruical to NESV’s plans

NESV John Henry and backgroundIn his response to questions put forward by Liverpool fans site Red and White Kop, John W Henry once again highlighted the importance of UEFA’s Financial Fair Play which will come into effect next year:

“We don’t know English football, but we do know the sports business and what it takes to be successful. You must first of all have the right people in place and you must be able to give them the resources they need to be successful. With the new Financial Fair Play Rules coming into effect next year, we know that we need to emphasize revenue growth. That is an area we feel we are very strong. And LFC already has a strong commercial team.”

As Henry says, NESV have been experts in increasing revenue growth at the Boston Red Sox to the point they are now second only to the New York Yankees in Baseball in regards to turnover. Despite having a small Ballpark at Fenway, they have managed through corporate sponsorship, improved marketing and increased ticket prices to make the Red Sox into a profitable, sustainable business model, crucially helped by the team’s success on the Baseball field. Success on the field has led to increasing profits off the field, making the Red Sox a franchise to compete with the best without NESV pumping money into the team.

The ability to replicate this success with Liverpool was crucial to NESV’s decision to buy Liverpool. Currently, as for things stand, this could prove to be difficult with “Sugar Daddy” owners such as Sheikh Mansour and Roman Abramovich ploughing money into their clubs without a care for profit, making it difficult for others to compete. What will be changing in the not too distant future though, is the introduction of UEFA’s Financial Fair Play laws.

It will require clubs to break even over a continuous three-year period within the next ten years if they want to play in European competitions. The UEFA rules state that clubs will only be allowed losses of 45m between 2012-2015 (meaning owners can pump in 15m per season in exchange for shares), and this will be reduced to 30m between 2015-2018 (10m per season) . The figures will be reduced even further still by 2019 until a point when European clubs will have to break even if they want to play in Europe. It is an initiative put forward by UEFA president Michel Platini to encourage clubs to spend wisely, and to prevent clubs spending their way to success despite accruing mountains of debt. It is designed to increase competition in Europe and prevent what UEFA sees as not playing by the rules of “fair competition.”

It effectively means that wage bills exceeding revenues will be a thing of the past, and this was crucial in attracting the interest of NESV to Liverpool. Former Reds Chairman Martin Broughton commented before the takeover by NESV was completed:

“We weren’t looking for an Abramovich or Sheikh Mansour, because we understand a rational commercial approach is the way forward in football now. . . A hugely important aspect for Liverpool is [Uefa’s] financial fair play rules. They come into effect pretty damn soon, and will have a massive effect on many, many clubs. I couldn’t help notice that Manchester City’s wage bill for last year was exceeding its revenue. That is going to be very difficult under financial fair play.”

You could certainly describe Henry’s business model at Boston Red Sox as a “rational commercial approach.” The Financial Fair Play rules are also why Henry & Co have been looking so closely at Arsenal’s business model and footballing philosophy. It is a sustainable profitable enterprise but also develops young players that are capable of competing at the top level in the Premier League. Henry’s three visits to the Kirkby Academy and his appointment of Damien Comolli are strong indications that he is already focused on preparing Liverpool for these new Financial Fair Play rules. It also tallies with his philosophy of developing youngsters with the values of the team; something they are developing at the Boston Red Sox.

Overall then, it looks as if John W Henry has a pretty coherent long term strategy for the club but it is predicated on UEFA’s Financial Fair Play laws being a success. Whether UEFA’s guidelines work, could be crucial to how successful Liverpool are in the next ten years.

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