FSG: A Review

Posted by Grobbelrevell on June 3, 2012, 07:12:52 PM

After seeing and hearing an increasing number of overtly negative opinions on our current owners I felt compelled to attempt to put together a balanced review of their time at the club to this point. Mods, if you feel that this is better added to an existing thread them please merge.

FSG: A Review

On the 15th of October 2010 Fenway Sports Group (then New England Sporting Ventures) completed the purchase of Liverpool Football Club in a deal valued at around £224million amid scenes of jubilation from anyone with an affinity with the red half of Merseyside. After what felt like an eternity of protests, boycotts and infighting, as talk of team selections and tactics were replaced by forensic assessment of balance sheets and a healthy dose of internet terrorism, suddenly it felt as though the clouds had parted. The gut wrenching prospect of administration had been removed and replaced by hope. Hope that civil war had been replaced by unity, that promises would be kept and transparency would ultimately reign. But above all that the football club could once again focus on being the best that it could possibly be and that we as supporters could return to simply loving the game again.

One of the lasting legacies of the Hicks and Gillett era (and arguably the only positive) can be found within the minds of the supporters and that is made up primarily of a now deep rooted cynicism, or rather, the perceived – and understandable – need to be forever vigilant. From this point on it would take more than just words to make us believe. Wealthy businessmen waving wads of dollars whilst making promises of spades in the ground within sixty days and the imminent arrival of ‘Snoogy Doogy’ will simply no longer wash. Any new owner will be critiqued against their own declarations and held to account where necessary, which is a role that continues to be headed up brilliantly by the likes of Spirit of Shankly.

What I have begun to notice occurring increasingly frequently though - particularly in the aftermath of Dalglish’ departure - is an incredibly negative and often sensationalist viewpoint on FSG based almost entirely on speculation. Whilst remaining vigilant and holding any ownership to account is right and sensible it should also be both objective and realistic. As hinted at above I would argue that the starting point upon which FSG should be held accountable would be in line with their opening statements when purchasing the club.

If we begin with these opening declarations then, upon completion of the takeover principle owner John Henry stated that:

“On behalf of the entire NESV partnership, I want to express how incredibly proud and humbled we are to be confirmed as the new owners of Liverpool FC. We regard our role as that of stewards for the Club with a primary focus on returning the Club to greatness on and off the field for the long-term. We are committed first and foremost to winning. We have a history of winning, and today we want LFC supporters to know that this approach is what we intend to bring to this great Club.”

Newly appointed club chairman Tom Werner added:

“We recognize that Liverpool Football Club is an historic institution ultimately grounded in the community and the fans. Our first step as new owners will be to listen. We want to hear from the Manager and the players and those who are part of the daily operation of the Club. We will be visible at Anfield and will embrace and listen to those who have stood by this Club and who are the rock on which its future success will be built. We want to hear from the fans, local leaders and the local community. We want to hear from those who know LFC best, who have made it the best and share our desire to return to a culture of winning.

“NESV is committed to creating a long-term, financially strong foundation for the Club and dedicated to ensuring the Club has the financial resources to be successful again and attract the best players. To that end, the transaction has been structured in such a way as to eliminate all of the acquisition debt on the Club.

“In the coming days and months, NESV will work closely with the LFC executive team to listen and learn about every facet of the organization. During this time, the new owners will begin to look at areas for greatest opportunity to increase the appeal of the Club nationally and internationally. NESV wants to once again create a culture and environment to allow people to excel at the Club on every front. During this period, NESV will also begin to examine opportunities to enhance the matchday experience in the short-term, while also carefully studying the various long-term options that may be possible.”

As opening statements are concerned these highlight if anything, the PR savvy nature of Messrs Henry and Werner. They are very careful to avoid making specific promises and instead offer a generic insight into a bright new era. Even so, there are indeed promises made in there that effectively form the basis of the contract that FSG entered into (sub-consciously or otherwise) upon completion of the takeover with us, as the supporters, which were as follows:

1) To listen – to the fans, local leaders and the community

The takeover of the club by FSG signalled the beginning of a whirlwind PR campaign in what was a concerted effort to outline that, despite the matching passports, just how far removed from the previous reviled American owners they were and this was particularly highlighted in November 2010 by a number of face-to-face meetings with prominent supporter groups such as Spirit of Shankly and Share Liverpool, as well as various local leaders. Following the meetings John Henry told the BBC that they had spent the day “listening” and when asked what had been gleaned from the meetings he answered that “the biggest issue was [the fans] sense of disenfranchisement, their sense of not being a part of their own club”. He also added when asked what they planned to do to tackle this moving forward that “this was the first step”.

The implication both of this response as well as the dialogue within the meetings themselves was that this was not to be a one-off but rather the forging of what would become open lines of communication. The mood amongst the supporters at this point was understandably overwhelmingly positive. To see the ownership of the club taking steps to interact with the supporters, to listen to their concerns and hopefully carry them into the boardroom decision making process in a positive manner was a world away from what had been happening at the club previously.

In January 2011, two months after the initial meetings, the club announced plans for a Supporters Committee which it hoped would “allow fans to help shape the club’s future through regular and constructive dialogue with senior LFC officials”. The club invited applications from supporters around the world and eventually appointed an eighteen person panel which would meet four times per season, with the owners being present for at least two of those meetings. To date the committee has met four times during the 2011/12 season – as promised – with the minutes of the meetings being made available via the clubs official website.

The inception of the supporters committee supports the claim by John Henry that they would listen. Those initial meetings – as Henry alluded to – made it abundantly clear that the biggest issue was a lack of communication with the fans and the committee was subsequently formed as a result with the sole purpose of tackling that and providing each cross-section of supporters with a voice.

Despite this, one of the most common criticisms of FSG regarding this entire point has been the fact that those initial meetings with Spirit of Shankly and Share Liverpool et al have remained one-off events and that this signifies a betrayal of sorts in their failure to enact the communication lines that were promised. In a statement released by Spirit of Shankly in May 2012 they outline this viewpoint by adding that:

“[Spirit of Shankly] would also expect those charged with moving the Club forward to engage in meaningful dialogue with supporters, something promised to us in those early meetings with Mr Henry and Mr Werner, but which is yet to materialise.”

Whilst there is some justification to that view it does also need to be remembered that despite the impressive support that SoS in particular enjoys, the majority of the club’s worldwide supporter base are not members and in addition, a significant proportion also (rightly or wrongly) question the nature and ideals of such a group. With these additional factors in mind it is fair to say that a democratically elected committee, representing each facet of our spectrum of support with the sole intention of interacting directly with the club was idealistically the correct one and it should be applauded as such. FSG actually allude to this point in a response to Spirit of Shankly in January 2011:

“Many of your core questions are similar to those we receive from many fans of the club on a regular basis.  And we have made a very deliberate decision to share our thoughts and responses as widely as we can ever since we have become involved with LFC. Our view is that the club belongs to all its supporters and we want to have our views disseminated to the same wide audience.”

Perhaps FSG could and should have maintained a dialogue with existing supporter groups in addition to that, after all they clearly recognised the influence of such groups by taking the time to meet and listen to them in the first place and I personally believe that it would have been beneficial to their image if they had done so. Overall though I do feel that looking at this point objectively, it cannot be argued that at the very least they have carried out their promise to listen and have in turn taken steps to work on erasing the concerns that were evident within those initial meetings. Whether the steps taken to date are enough is debatable but as Henry pointed out these are merely the first. Hopefully they will continue moving forward allowing what is a promising concept to evolve and eventually restore the link between the club and the community, as well as the supporters at large.

2) To remove all of the acquisition debt from the club

The club accounts released on the 30th April 2012 confirm that of the £224m used to purchase the club, £200m of that was used to clear the existing debts left in place by the previous ownership, in turn reducing the annual interest burden from £18m to £3m. There remains an existing debt of £37m which was not paid off, although this debt relates to the costs incurred by the stadium project rather than the club directly and as confirmed by John Henry, these are seen as seperate entities by FSG. When quizzed on this point Henry commented:

“The simple answer is that we paid cash for LFC and left £37 million of stadium debt in place – even though there is no stadium in place – just a lot of expensive plans etc.  We view stadiums as separate from clubs.  They are separate entities.”

In addition to the stadium debt the accounts confirm that in September 2011 FSG also took out a £120m overdraft facility across three financial institutions (RBS, Barclays and Bank of America). This facility is a three year arrangement designed to be split in two, with £45m available to finance “the existing stadium project facility” and a further £75m ”available for general corporate purposes including working capital and letters of credit”. For a global organisation the size of Liverpool Football Club, this is by no means out of the ordinary.

Following the sale of the club to FSG it was confirmed by John Henry that there had been no legal obligation written into the contract of sale to ensure that future debt would not be loaded onto the club in the same way that Hicks and Gillett had previously. The reason given for this was that both Christian Purslow and Martin Broughton (MD and Chairman at the time, respectively) did not believe that such a clause would be legally enforceable. In other words, the word of FSG had been taken on trust alone. Throughout the entire sale process and subsequently however the official line on this has been consistent and unwavering, with FSG stating catagorically that “[FSG] wants to create a long-term financially solid foundation for Liverpool FC and is dedicated to ensuring that the club has the resources to build for the future, including the removal of all acquisition debt.”

They have been true to their word as far as the acquisition debt is concerned, as the accounts have confirmed and there has been nothing to date that would indicate that this policy is due to change.

3) To ensure that the club has the financial resources to attract the best players

One of the biggest issues under the ownership of Hicks and Gillett was the inability to invest the revenue generated by the club into the playing squad. Instead that revenue – both commercial and transfer related – was eaten up by the ever increasing interest burden, which left us in a position where we were continually downgrading players and regressing as a squad, subsequently falling from being Europes number one ranked club in 2009 to the eighth placed club in England within the space of three years. Following the acquisition debt being removed as part of the initial takeover this is no longer a factor, which is a significant step in the right direction.

Further to this the most common criticism of FSG on this point is a relatively modest net spend to date (around £41m), but in their defence this is an area that they have been crystal clear on from the outset, as John Henry outlined in February 2011:

“We’ve always spent money we’ve generated rather than deficit-spending and that will be the case in Liverpool, it’s up to us to generate enough revenue to be successful over the long term. We have not and will not deviate from that.”

When asked about the Financial Fair Play regulations being implemented by UEFA Henry also commented:

“For a club to be sustainable for the long-term it is essential to live within those rules. What happens when large deficit spending for a club suddenly stops? The record isn’t very good in that regard.”

Quoting Gordon Taylor on billionnaires, he adds:

“History tells you that sometimes, like butterflies, they land on one attractive resting place then move on to another. I’m asking: when it’s time for these people to move, is there a structure in place to enable their clubs to survive?”

It’s absolutely clear from everything that FSG have said that the key to striking a balance between competitiveness and sustainability in their opinion (which is the correct one in my view) is commercial revenue. In order to compete at the top end of the transfer market we will need to increase and maximise our revenue, which will then in turn be re-invested into the playing squad – and to date that is precisely what we have seen. The progress made on the commercial side of the club is highlighted with the club record sponsorship and kit deals with Standard Chartered and Warrior respectively, both representing vast financial improvements on their predecessors and the impact of these commercial improvements are also evident within the accounts as we find a minimal financial impact in relation to the loss of Champions League football with just a £1m fall in income to £184m, despite a decrease of £14m in TV and media revenue. There is undoubtedly much more to be done in this area to arrest years of neglect but the signs are certainly positive when you consider the impact that has been made within a relatively modest eighteen month period.

Whilst there is evidence of progress commercially and for that FSG deserve credit, there is also a huge question mark that remains over what is the key to the revenue aspect and in turn this entire point and that is the stadium solution. A solution that has been in the planning for over twelve years now at an ongoing cost that has seen entire stadiums built at other clubs, despite a spade thus far failing to strike dirt in anger. It needs to be recognised that this is an absolutely monumental decision in relation to the long term future of the football club and therefore it is vital that each viable option be researched as thoroughly as possible, which obviously takes time, however I do feel that this is an area whereby FSG could have communicated the process being undertaken far better than they have and if they had done so the consfusion and speculation that has occurred as a result of the information vacuum could have been avoided.

In a recent interview with The Liverpool Echo, Ian Ayre confirmed the club’s search for a naming rights partner for a new stadium was ongoing, whilst in the next sentence outlining the fact that talks with local residents around the refurbishment option also continue. In other words, we are arguably no further on in terms of deciding on a way forward than we were eighteen months ago following the takeover of the club by FSG and that is a huge disappointment.

If and when we do (finally) implement a stadium solution, coupled with the undoubted progress being made on the commercial front should see the club in a strong position financially regardless of Champions League qualification but again, the stadium solution is absolutely key and this needs to be addressed – and effectively communicated – as a priority moving forward.

4) Increase the (commercial) appeal of the club both at home and abroad

Universally recognised as the single biggest failure of the club this forms the basis of exactly why we find ourselves trailing in the wake of Manchester United commercially, despite possessing a similar (yet criminally under-utilised) global supporter base. It has also become increasingly evident from certain interviews given by senior club sources since the acquisition of the club by FSG that they see this as an area of huge potential.

In October 2011 Ian Ayre outlined the club’s (evidently controversial) desire to better utilise the global appeal of the club by seeking individual television rights:

“Personally I think the game-changer is going out and recognising our brand globally, maybe the path will be individual TV rights like they do in Spain. There are so many things moving in that particular area.”

Whilst Ayre was quickly shouted down by the majority of the Premier League clubs and therefore the re-evaluation of existing satellite television revenue looks a non-starter, there is an opportunity to be explored in relation to on-line streaming of matches and that has also been hinted at numerous times by FSG.

In May 2012 Ayre subsequently gave a further insight into the club’s imminent plans in terms of global commercial development:

“What we do very, very well commercially is deliver fantastic products across a whole range of different commercial areas and sell those very effectively in the domestic market. What we have to do next is learn – and put ourselves out there to deliver that on a more localised basis across the world.

“Take Asia as the biggest opportunity for Liverpool. If you break that down into individual markets, we have to create a solution whereby if you live in Jakarta Indonesia, you can consume almost as much.

“Obviously you can’t be at the game but you can still consume all the other level of products and services and interactions with Liverpool but you need to do that in a local language. You need to be able to shop and buy in local currency – and you want it just as fast as the guy on Merseyside.

“So we need to be creating and distributing product locally so that if you order something online in Jakarta today, you need to get it tomorrow morning and pay for it. It needs to be in the right style and size for that market and you need to be able to browse and read and consume in a local language and that’s our next big project.

“Our big step forward next year and beyond is that localisation.”

Whilst it may be somewhat galling to hear yourself being referred to as a ‘consumer’ as opposed to the “12th man” that we are subsequently marketed as, it is refreshing and indeed, promising, to see the club actively looking to pursue the huge market that exists around the world and none more so than Asia where the club have an enormous following, as the 50,000+ attendance for a training session at the Malaysian national stadium recently confirms.

Ayre is also exactly right when he states that the club need to do far more in terms of maximising retail sales opportunities and I would attribute that both domestically as well as globally and I think anyone who has attempted to purchase anything from the on-line store will back that up. This is an area that is hard to judge in the short term so we will need to be patient with this and look to assess the success (or failure) of this area of the business under FSG in the medium to long term but the right noises are certainly being made. Ian Ayre may have his detractors as a managing director, but one thing that he has proven extremely successful at in the past is in revenue generation and expansion of the club’s commercial activities so hopefully that will continue under his leadership.

And ultimately;

5) To return the club to greatness on and off the field for the long term

Again, the last two words of this final point underline the need for patience. Both on and off the field the club needs to arrest years of neglect and this will not be a short term fix but hopefully in time we will find ourselves in a position to compete with the top clubs financially as well as being self-sufficient in doing so.

Ask yourself a question, would you prefer to wait for five, perhaps even ten years to see the club on a sound financial footing with this commercial success being translated to the playing squad itself, or rather head down the Manchester City (and Chelsea) route and see your club absolutely and completely reliant on one single individual with no affinity with the club whatsoever with the constant doubt at the back of your mind as to exactly how long they plan to underwrite the future – and indeed very possibly the survival – of the club? I know which one i’d prefer and again, I have seen nothing from FSG thus far that leads me to believe that they do not have the desire and ambition to get us to that point of sustainable, long term success.

Ultimately we may have differing long term targets as supporters than they do as businessmen, but the two are also intrinsically linked. For them to succeed financially we need to succeed as a club, both on and off the field. Yes, they have made mistakes and I think they would admit as much, but they have also got a number of things right as well. We need to be patient and give them the support that is required and that we were once famous for to allow them to prove whether or not they can translate the success enjoyed at the likes of the Boston Red Sox on Merseyside. Ongoing critical assessment, but with the required objectivity and realism.

Further to the points raised thus far FSG have also attracted a host of criticism for what was perceived as a hesitation in removing Roy Hodgson, whilst subsequently being far too swift in doing exactly that to Kenny Dalglish. Whilst discussing the merit(s) of the respective decisions is not the intended point of this article, I do feel that it is worth highlighting that there is a distinction to be made between the emotional and logical aspects of both. The fact is that as a supporter of Liverpool Football Club there is a huge emotional link to Kenny Dalglish which undoubtedly affected many peoples viewpoint on the assessment of his second reign, an emotional attachment that FSG do not share. Logically there was a case to be made for either scenario being the correct one so with that in mind it is difficult and perhaps unfair to judge FSG negatively on the back of such a decision. It is also arguably a little hypocritical to to demand swift action on the one hand (Hodgson) and then chastise the very same with the other (Dalglish). Logically speaking that is, without the linked emotional element of each decision. Again, an emotional element that FSG would not have shared.

Additionally there is the ultimately failed appointment of Damien Commolli, which according to reports owed much to the advice of Billy Beane. Whilst FSG openly admitted their footballing ignorance and therefore seeking advice from those better qualified is understandable, turning to a baseball figure for advice on a key football appointment is questionable at best.

To advocate this decision slightly FSG were clinical in assessing Commolli's subsequent performance and moving forward have looked to enact a structure that they have outlined as their preference from very early on in their ownership of the club, as seen in correspondence with Spirit of Shankly in January 2011:

“We must have more than the right manager for the long‐term – we must have the best football operation in the world.  That cannot be based on any one person because if that person leaves, you must rebuild.  LFC needs stability.  LFC must have a philosophy that endures and is in the hands a group of people devoted to the Club who work together for something much larger than themselves”

In addition to this, in October 2011 John Henry was asked if the initial plan had always been to install a young manager, commenting:

“Initially it was. You want to have long-term stability in as much as the staff as possible.”

The whirlwind success of Dalglish’ first six months in charge caused what was rightly or wrongly a short term deviation from this policy, which is now being enacted as planned and ultimately whether or not these are proved to be the correct decisions for the club will not become evident in the short term so collective patience will be vital. What is also evident at this point is that these Americans are not Hicks and Gillett. They do have a plan and they intend to see it through.

To quote John Henry following the takeover of the club, what we are witnessing both on and off the field are “the first steps” of what is a long term process.


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