- Commercial revenues have doubled during Billy Hogan’s tenure as chief commercial officer, from £77.5m to £154m
- Liverpool focused on diversifying revenue streams through stadium, retail and partnerships
- Club increasingly willing to use superstar players and other intellectual property to add value to partnerships
Liverpool FC’s world-record £125m (€143m/$162m) profit is a consequence of the club’s ongoing efforts to diversify and deepen its revenue streams, says chief commercial officer Billy Hogan.
Pre-tax profit of £125m for the financial year 2017-18 exceeded the previous high watermark – set by Premier League rivals Leicester City in 2016 – by over £30m, but also more than doubled the club’s own previous record.
Unsurprisingly, Liverpool’s run to the final of the Uefa Champions League accounted for a significant proportion of the year-on-year growth. Having not played in European competition at all in the previous season, media revenues grew by £66m, to £220m, contributing close to half of overall turnover.
Furthermore, high-profile player sales made a major contribution, particularly the £140m transfer of Philippe Coutinho to FC Barcelona.
Hogan is keen to argue, however, that the club’s success cannot be entirely explained by these two factors. Other teams have reached the Champions League final and reaped transfer windfalls; not all have posted such profits. For Hogan and Fenway Sports Group, the American investment company which bought Liverpool in 2010, there is a belief that the team’s current position at the summit of the Premier League and the financial success of 2018 are both consequences of the commercial strategy of diversification pursued over the past eight years. This is not a one-off: Liverpool has now posted a profit in four of the last five years since 2014, something it failed to do at all in the five years previous to that period.
“When FSG bought the club, it took over an operation that, at that point, really wasn’t about building a sustainable business,” Hogan says. “Over the course of the last eight years now, we’ve been focused on maximising the potential of this football club on the global stage. You’ve seen progressive growth year after year, and that’s obviously translated into on-pitch success as well.”
The focus on monetising Anfield Stadium better is a perfect example of how the club has looked to increase both the breadth and depth of its revenue streams. FSG moved quickly after buying the club to expand the stadium, adding 8,500 seats to take capacity to a total of 55,000, with further expansion planned. Match day income reached £81m in 2018, up £38m since FSG bought the club and second only to Manchester United and Arsenal in the Premier League in the 2017-18 season.
Last year, it also confirmed it had received permission from Liverpool council to host additional sporting events, including rugby and boxing, as well as three music concerts over the summer. “The strategy is around finding new ways to bring in revenue, 100 per cent,” says Hogan. “We play 30 or 35 games at home a season, and the rest of the time the stadium isn’t being used. It’s an incredible building and we want to open the doors for more people to experience that.”
He has also placed a major focus on capitalising on the team’s current high-profile on the pitch to create a “virtuous circle” to better exploit existing revenue streams like merchandising and sponsorship.
Global brand platform
Commercial revenues – incorporating both retail and sponsorship – reached a record high of £154m in 2018. That figure is almost exactly double the £77.5m posted for the 2011-12 season, the year prior to Hogan’s installation as chief commercial officer.
“What we changed was to really recognise the potential of Liverpool FC as a global marketing platform,” he says. “We have a truly global fanbase, we provide a tremendous opportunity for global brands to generate global exposure. But we needed to provide that platform 24/7, 365 days a year, not just on matchdays and over the course of the season.”
Simply being a top-end Premier League football team in 2019 does some of that work, Hogan says, providing year-round, worldwide visibility. “If you consider it from the standpoint of a marketing platform, the Premier League starts in August and ends in May, but even during that summer time, where traditionally in the sports calendar you are in your off-season break and it might go dark, we have our touring business and our preseason business as well as the transfer window which keeps football, and Liverpool FC, at the top of the news list.”
In overhauling the commercial strategy, Hogan looked at the areas in which Liverpool could differentiate itself from its Premier League rivals and eke out extra value from its partnerships. The club’s popularity around the world was a starting point, he says: last year, a study for English sportswear retailer JD Sports showed that Liverpool was the most-searched for club in world football in Indonesia, Laos, Norway, Egypt and Ireland, while among English clubs they are the most popular across much of Asia and Africa.
One of the greatest strengths developed since Hogan arrived at the club, he says, is the “ability to customise the relationship if our partners are not necessarily a global business but focused on a particular region or part of the world”. Tailoring the assets a partner receives to suit the requirements of its audience is something that has become considerably easier by the emergence of digital media, with the club able to more specifically target content to relevant audiences through its various accounts. It has also allowed the club to create new inventory – particularly important as physical assets, including the shirt, sleeve, training kit and in-stadium LED hoardings, are close to saturation.
In the period covered by the 2017-18 accounts, Liverpool signed eight new corporate partners, as well as renewing terms with four existing sponsors, which saw an 18-per-cent boost to commercial revenues. Regional deals with Alcatel in New Zealand and Australia, AlexBank in Egypt and Petro-Canada Lubricants in Canada are exemplary of how Liverpool has built a platform that can be tailored for brands to target particular territories. Additionally, all involved the creation of new sponsorship categories for the club, opening brand new revenue streams.
“When you consider certain categories, it might not seem like there’s an exact fit with football or with sports,” says Hogan. “But when you start to think about what every organisation is trying to do, it is to try and influence fans’ behaviour. We have an incredibly passionate and global fanbase that we can direct towards our partners. Some of the partnerships we’re most proud of are those that don’t quite seem to fit but which we make work.” An ‘Official Coconut Water’ deal with Thai brand Chaokoh and the club’s ‘Official Cyber Security’ relationship with NordVPN are among the distinctive categories Liverpool has created.
Hogan says the club has data which evidences that Liverpool fans around the world are more likely to support a brand which has a partnership with the club – though this data is not publicly available.
The club also renewed its main partnership with banking firm Standard Chartered, bringing £40m annually into the club until 2023.
“We’re always incredibly proud to renew with any of our partners, and we’re always focused on longer-term relationships, because that’s been our history,” Hogan says. “When you look back to somebody like Carlsberg who’s been a partner of the club for 26 years, I don’t believe there’s another partner of a club a that’s anywhere close to that in terms of length. Probably one of the best barometers of success in partnerships is when you have long-term relationships, because that means people are coming back.”
Ninety per cent of Standard Chartered’s profits come from Asia, Africa and the Middle East, and the majority of its marketing efforts are focused on those territories. “We offer them global reach, but we also offer them localised, targeted activations as well. For Standard Chartered to have renewed again” – it is the second time since joining in 2009 that the bank has signed improved terms with Liverpool – “really shows us that what we’re doing is working.”
Further evidence is the signing of insurance firm Axa as an Official Partner last year, on a £2m-a-year, four-year contract. Liverpool beat their top-of-the-table rivals Manchester City to the deal – something that would have appeared unthinkable just a few seasons earlier.
The talk of creating a “virtuous circle” between on- and off-pitch performance is not hollow. Liverpool invested a record £190m into their playing staff during the period in question, in an effort to ensure the on-pitch success of 2017-18 was not a one-off. Future successes, as well as the presence of high-profile, global superstar players, then continue to drive the cycle.
“We feel really positive about the investment that has been made over the course of the last several seasons,” Hogan says. “With players like Mo Salah, Sadio Mané, Roberto Firmino, Virgil van Dijk and Alisson [Becker], you now have these global superstars that are playing for the club, which is maybe a different position than we were in a couple of years ago.
“Hopefully what follows from that is a boost elsewhere: in our merchandising, because people want to wear these players’ names on their shirts, and in sponsorship, because our partners wants to work with superstar names.”
Liverpool adds significant value to deals by offering its sponsors greater access to players than most of its rivals and is maximising its ability to cash-in on intellectual property – for example, it retains the image rights of Steven Gerrard, its legendary former club captain and current manager of Scottish Premiership side Rangers, who has also appeared in marketing materials for Nivea on behalf of Liverpool since his departure.
The digital content generated by the club is a cornerstone of this strategy. Liverpool numbers its cumulative social media and digital connections at over one billion, while its YouTube account is the most popular in English football and behind only Real Madrid, Barcelona and Juventus globally.
While most of that content is universal, the club “looks at each particular market as to what level of bespoke, customised content we would go to” in order to provide more value for its partners or to capitalise on the popularity of individual players in certain regions.
The incredible and somewhat unexpected popularity of Egyptian winger Mohamed Salah, for instance, was cited as a significant factor in the club partnering with property development firm Tatweer Misr, which became Liverpool’s Official Egyptian Real Estate Partner in 2018.
Indeed, the club’s trio of high-profile African players – the Senegalese Sadio Mané and Naby Keïta of Guinea alongside Salah – have led to an unexpected focus on Liverpool’s efforts on the continent, demonstrating how the footballing operation can lead the commercial one.
“We knew we already had a huge fanbase there, but between Mo, Sadio and Naby we now have three of the top players from the continent,” Hogan says. “That’s a unique situation and something we’d probably never seen before in terms of an off-the-pitch opportunity and one we will continue to pursue.
“When we have players that have a significant following within a region or a particular part of the world, then absolutely we’ll always look at what opportunities might exist to further that connection.”
Retail in focus
Merchandising is one of the key ways in which Hogan is focused on pursuing that international growth. The club operates its own official retail outlets in Liverpool, Belfast and Dublin, and has relationships with “a range of regional distribution and retail partners around the world, operating Liverpool-branded shops-in-shops or standalone stores” in territories across the Middle East and South-East Asia.
“From our standpoint, the focus really in this area has been on expansion over the course of the last several years and that will continue going into this calendar year certainly,” says Hogan. Across most of the world, Liverpool has taken its growing e-commerce business in-house, while it has partnered with JD Worldwide in order to provide it with a major e-commerce platform in China.
The 2017-18 season kit, celebrating the club’s 125thanniversary and returning to the darker ‘red pepper’ colour, was the most popular in Liverpool’s history. The 2018-19 shirt has already surpassed its predecessor in sales, the club claims (although it does not release precise figures and rolls retail revenue into commercial in its statements) and has frequently been sold out at the official club store due to excessive demand.
Although many of its partners are long-term, the club rarely signs deals that are longer than five seasons, with the majority in the three-or-four season range. The long-term deals the club does have are a result of partners signing on renewed and improved terms, rather than signing lengthy initial contracts.
The partnership with kit provider New Balance expires at the end of the 2019-20 season, and its renewal has taken on even greater importance given Liverpool’s focus on retail and merchandising. The club believes it is realistic to target a British-record shirt deal, given the popularity of the last two seasons’ shirts.
In light of this, the £45m-a-year contract New Balance signed in 2015 – as an extension to the previous arrangement signed through its subsidiary company Warrior Sports in 2012 – appears to be a bargain, significantly cheaper than the kit deals of all of the club’s Premier League ‘big six’ rivals aside from Tottenham Hotspur.
Hogan feels it is well within Liverpool’s grasp to secure a contract that exceeds Manchester United’s £75m-a-year agreement with adidas but, with a season still to run on the current New Balance deal and the team flying high both on the pitch and in its merchandising endeavours, Liverpool’s hand is strong, and Hogan is playing his cards close to his chest.
“New Balance has been a terrific partner for us and we’ve had some terrific success with them,” he says. “We’ve had very positive conversations with them about going forward, but we want to make sure that we continue to grow that part of the business – that is absolutely paramount. We’re talking with them and it’s natural that we’re talking with other parties, too.”