For Liverpool, the strength of revenue streams in relation to on-pitch investment is more closely aligned than most of their rivals.
The model under Fenway Sports Group since they arrived as owners back in 2010 has been one of a sustainable business which re-invests into improving the product on the pitch.
It is a model that having served Liverpool well in recent years now finds itself challenged by soaring transfer, payroll and other administrative costs. But while FSG search for a partner that could take a slice of the club in exchange for a sizeable chunk of capital to that could be reinvested, growing commercial revenues remains at the core of what Liverpool aim to do.
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The Reds published their accounts for the year ending May 2022 today (Tuesday), with the club having posted record revenues of £594m and a pre-tax profit of £7.5m.
Of that revenue figure, 41.6 per cent of it is made up of commercial revenues, a figure that jumped £29m to £247m for the 2021/22 accounting period.
Deals with Wasabi, Kodansha and VistaPrint all aided the effort, although the renewal of the Standard Chartered front of shirt sponsorship, believed to be worth upwards of £50m per year now to the Reds, was inked after the end of the financial year and will be shown in the current financial year, which runs until the end of March.
“Where we are trying to head to is to have one of the most or the most impactful partnerships platforms in sports and entertainment, that is what we want to get to,” Liverpool commercial director Ben Latty told the ECHO last week when speaking on the success of their partnership with VistaPrint.
“To do that we have to partner with industry leading brands, leaders within their field and that is really the crux of it for us. Partnerships are key to our business model. We always say that we have a sustainable business model.”
It is the deal with Nike that has been seen for some time as one that could potentially yield major revenues in the future, even if its guaranteed sum of £30m is less than what New Balance were paying the Reds for the same privilege, and £40m less than what Manchester United deliver from their partnership with Adidas.
The value lies in leverage that Nike have when it comes to the global distribution of merchandise, and that in that deal there is 20 per cent coming to the Reds on the sale each piece of Nike/Liverpool branded merchandise.
The introduction of the new Liverpool x LeBron James Collaboration is one that Nike, Liverpool and basketball icon and FSG partner James’ camp believe will position Liverpool and Nike as a lifestyle brand that can cut through a crowded market and reach demographics that may not have been keen Liverpool or football fans in the first place but who buy into the global brand of James himself.
The Nike deal was struck in 2019 and required a battle at the High Court for Liverpool to extricate themselves from their relationship with New Balance, who had argued that they could deliver what Nike were promising and should be allowed to activate a clause that would see them continue to be kit partner if they matched a rival bid. Their argument was rejected.
For Nike and Liverpool it was a partnership that began during a pandemic, where retail outlets globally were shuttered and people were having to be more conservative with their spending given the uncertainty.
But Nike made a major pivot during the pandemic, putting major effort into their direct to consumer offering through the digital side of their business, something that yielded an almost 30 per cent increase in 2021 as Nike focuses on being a 40 per cent digital business by 2025.
That strategy has aided, and will continue to aid, the relationship between Liverpool and Nike, offering more opportunities for fans globally to get access to official Liverpool/Nike merchandise.
The 2021/22 financial period saw another record-breaking kit sale while the Reds also launched a further 51 new ‘shop-in-shop’ locations and signed 19 new international licensing deals. The digital play that Nike have been championing has also been reflected at Anfield with Liverpool’s ecommerce continuing to grow, with mobile transactions increasing by over 60 per cent and shipping Liverpool products to over 190 countries.
But the Reds have to keep striking major deals just to try and keep pace with the likes of Manchester City, whose commercial revenue of almost £330m places them at the Premier League’s summit thanks to the ability to leverage simpatico relationships that exist with their Abu Dhabi ownership group and the Gulf region.
Liverpool will continue to focus on blue chip companies, and the commercial revenues will likely rise again when the next set of accounts are published for 2022/23 in 12 months time, with major deals such as Standard Chartered included and the continued growth of the Nike partnership likely to be shown.
Sleeve sponsorship, which is currently at the forefront of the minds of the Reds’ commercial team at present, with the current Expedia deal having just months left to run. Deals struck in the market for similar sponsorships over the past 12 months should give Liverpool confidence that they will be able to double their £10m figure to £20m with whoever comes next, or if it is a renewal.
The importance of Liverpool’s commercial arm is only set to grow, and with greater opportunities being presented in the coming seasons through new partnerships and adopting new technologies. In 2021/22 the commercial business increased by 11.7 per cent. That will need to be a trend that continues, and then some, to keep Liverpool snapping at the heels of Manchester City and to allow the club to continue to invest in their hefty payroll and administrative obligations.
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