LeBron Goes to Liverpool: Yanks Pour Money Into European Soccer's Money Pit
Soccer's English Premier League is seeing a massive influx of American cash as U.S. owners and advertisers gamble that they can do better than the "prawn sandwich brigade" that has traditionally controlled Europe's top clubs. (Prawn sandwiches being what fans imagine is served in the corporate hospitality suites from which management observes its games.) Recent examples of the almighty dollar's intervention in the beautiful game include:
- Liverpool F.C.'s £25 million-a-year shirt deal with Boston's Warrior Sports -- a lacrosse and ice hockey company that has never supplied a major football team with a uniform -- is reportedly twice what Adidas (ADDYY) previously paid for the rights to sell up to 900,000 shirts a year. It's also more than Nike (NKE)'s £23.5 million deal with Manchester United.
- The Miami Heat's LeBron James inexplicably bought an ownership stake in Liverpool even though he has never been to Anfield to see a game. He was inspired by seeing videos of Liverpool's fans singing "You'll Never Walk Alone."
- And five Premier League teams are now controlled by American owners: "Collectively Stan Kroenke, Malcolm Glazer and John W Henry represent a definite tilt in the delicate balance of power around the table at Premier League shareholder meetings, Arsenal, Manchester United and Liverpool -- arguably the three most famous and evocative names in English football -- are all now in American hands, as are Randy Lerner's Aston Villa and Ellis Short's Sunderland," Football Marketing wrote recently. "Kroenke's £500m bid to take majority control at Arsenal last week took the number of US owners of Premier League sides to five."
There is one huge strategic difference between the way costs are controlled in U.S. and the way they aren't in European sports franchises. Failing to understand this difference -- which hobbles soccer teams with massive, intractable debts despite their global revenue base -- could be make America's European vacation a miserable one.
As I've argued before (here and here and here), revenues in soccer are relatively fixed: Once you've soaked the fans for tickets and shirts, the broadcasters for TV rights, and advertisers for sponsorship deals you've reached the ceiling on all the sales you can make. It is nigh impossible to generate new fans or new products out of thin air, although the biggest teams are trying their hardest in Asia. (This desperate need for new cash explains why Oxford United F.C. spent the 1980s wearing this horrible Wang computers-sponsored shirt.)
Costs, on the other hand, only rise. A star player can make or break a team, and those players trade their skills to the highest bidder. There are no salary caps in Europe and everyone agrees that players' wages are bankrupting the game.
Conversely, what makes American sports franchises so successful is that players' wages are capped. Owners know their expenses ahead of time and can plan accordingly. Every sale they make beyond the cost of the cap is pure profit.
Some have suggested that the new American owners are hoping to re-engage the Europe-wide Champions League in talks about installing American-style salary controls. But unlike the U.S., soccer is played all over the world. There are only 32 teams in the Champions League, and any player who wants to avoid a cap can go to Brazil or Argentina or any of hundreds of clubs that aren't in those leagues. (Liverpool, for instance, isn't currently playing in Europe and just paid €26.5 million for Ajax Amsterdam's Luis Suarez.)
In the U.S., American owners have virtual monopolies on American football, baseball, ice hockey and basketball because there aren't significant markets elsewhere for players to go. Recreating a U.S.-style owner-monopoly in Europe will be like trying to herd cats back into the bag.
As for Warrior, a unit of sneaker company New Balance, some words of advice: Start by admitting that designing football shirts is not your core strength. The worst thing you could do is try to innovate out of the gate. Liverpool has seen some horrible strips through the years, and you don't want to add to them. There is an obvious new design staring you in the face: Resurrect the 1976-1982 kit, as worn by legendary former striker and current manager Kenny Dalglish. It's a simple, handsome shirt and with the Dalglish connection it ought to be given another airing.
Related:
Top image: How The Daily Mirror greeted James' L.F.C. stake.