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Moneyball: Liverpool F.C. Looks Forward to a Future Dependent on Asian Finance

Liverpool F.C. lost £20 million in its last financial year in part because the club rejected the company that offered the most money for its shirt sponsorship in favor of one with more exposure in Asia, which is fast emerging as the financial future of football.

Likewise, Chelsea F.C. hired ECN Management to sell the image rights to their players in Asian markets. And Manchester United have long held a permanent beachhead in the East.

The moves highlight the soccer's desperate search for new revenue sources as expenses -- mainly player purchases and wages -- far outstrip the willingness of domestic fans, media and sponsors to keep paying more for the same thing.

On the day Liverpool published its first set of accounts since being bought by the owners of the Boston Red Sox, Ian Ayre, the club's commercial director, told Management Today that he could have gotten an "additional 20%" from other companies when he was negotiating with them in September 2009. In the event, he went with Standard Chartered (STAN.L), which paid £20 million a year for four years:

We didn't actually choose the one offering the biggest amount of money; another company offered significantly more. But what Standard Chartered had that we thought was more valuable than that additional 20% or whatever, was that there was a real match in terms of what kind of business they are; how they conduct themselves; what markets they're targeting for growth; and how they were going to go about activating the sponsorship internally. And I think it was absolutely the right choice.
The "headline" on the net loss was that much of it came from a contractual payment to Rafael Benitez, the team's mercurial former manager, who was paid to go away after a disappointing 2009/2010 season. But in terms of the underlying business Liverpool seems set to become financially dependent on a continent where few have ever been to Anfield to actually see a game. Here's a snapshot of the income statement, which I've pieced together from the scant details provided by the club itself and Bloomberg:
  • FY ending July 2010
  • Revenue: £184 million
  • Of which, commercial/media/other income: ~£58.5 million*
  • Interest payments (on net debt of £123 million): £17 million
  • Players and staff wages: £108.5 million
  • Net loss: £19.9 million *Estimate-- actual numbers not released
The loss explains the distances Liverpool is willing to go to find new money.

The club is touring Malaysia, China and Korea this July -- as if it were a rock band -- to play its preseason games. And Ayre even declined to rule out playing an additional 39th game in the season on foreign territory to promote the league abroad. (That's sacrilege to fans, as each team would face one of the Premier League's 20 clubs three times in a season, an advantage if your side were drawn against lowly Wigan Athletic but a nightmare if you had to face Manchester.) Ayre said:

I don't know - it's fraught with lots of issues. But somehow we have a duty to fans around the world to give them access to the product. So never say never.
Hard to believe the team was once managed by a socialist.

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