What Liverpool have done is wrong, but they had no choice – thoughts on Liverpool’s pricing announcement and the need for regulation.

My first thought yesterday on reading about Liverpool’s new ticket prices was, as yours might have been: isn’t it sad to see Liverpool, one of the world’s great clubs, saddled with owners who seem happy to raise prices despite taking the club no nearer to success.

Once the anger subsidies, though, you recognise that pure greed is rarely a motivation behind someone’s actions, especially successful businessmen.

If it were – if they felt they could massively jack up prices without any consequences and they didn’t care what people felt about it – they could easily have pushed them up further. (I should say at this point that, if you’re a Liverpool die-hard getting angry at the thought I might be about to defend the rises, relax: I don’t support them at all. Ticket and wage inflation is a key reason I no longer go to games.)

The decision needs to be seen, I’d argue, less in terms of the venality of the owners than by appreciating the context of the market in which they operate.

Do that and it’s my belief that greed or even the dressed up version of the argument – ‘it’s supply and demand’ – doesn’t account for it. No, the problem is one of an under-regulated market and its catastrophic consequences for owner decision-making. Put simply, the way the Premier League is structured compels owners – actually forces them on pain of huge financial penalty – to keep raising prices. Even if they have no particular desire to do so. Even, in fact, if they are actively opposed to raising them.

It’s not a particularly complex argument and it won’t take long to make.

Clubs have a number of major sources of revenue: TV income, ticket sales, merchandising and sponsorship. With the new Sky-BT deal, however, TV income is overwhelmingly the largest, even at the clubs who monopolise the top of the table.

Crucially, this TV money isn’t distributed completely equally; what you get is a function of how often you are televised and, above all, how high you finish in the table. Even dropping a few places knocks millions off your annual revenue.

In the absence of a salary cap, clubs can spend the vast majority of this money on transfer and wages. And, while coaching and scouting matter, what you spend on transfers and wages broadly determines where you end up in the table.

In other words, somewhat paradoxically, to keep growing your major source of revenue, you need to continually increase how much you spend on players.

Since all other clubs are doing likewise, wages and transfer fees continue to inflate.

Under Financial Fair Play, clubs are compelled to reduce their loses and so, to compete in the league and secure their major source of revenue while avoiding penalties, they must also seek out other sources of income growth.

Building larger stadia and charging higher average ticket prices per seat is the simplest, most predictable way of doing this.

But what if you’re a decent sort who wants to make money but isn’t keen to soak fans? Or what if you’re a philanthropically minded billionaire who could afford to pay top dollar for players and keep prices down? Well, in the latter case, since it’s now much harder to simply give money to your club – rightly, to make it harder for the rich to buy titles – there’s not an outlet for your generosity.

In the former case, the gentle billionaire could choose to cut ticket prices, but what would happen? That ticket price reduction would directly affect the amount the manager could spend on players. A good manager might be able to overachieve but, eventually, it will catch up with the club. They won’t finish as high, they won’t be able to sign or re-sign top players and they will begin to slide down the table.

If that happens, then even the most generous owner is going to see that his or her asset risks a financial disaster (relegation) or, at the very least, a massive reduction in its value. A couple of poor seasons could blow a hole in the books and then the squad, knocking tens or even hundreds of millions off the value of the club should the owner ever want – or need – to sell it. Before you know it, you’re Randy Lerner heading for the Championship and a major write-down in the value of your asset.

With the current financial structure of the Premier League, then – skyrocketing income tied to finishing positions, a need to break-even and no control over player wage growth – all clubs, regardless of the intensions of their owners, are forced to pursue variations of the same strategy: spend as much as they can afford on players while seeking to drive up revenue in any way possible.

No other strategy – find a good manager, invest in youth – has any track record as a reliable way of delivering sustained success in the Premier League.

In other words, Liverpool are simply doing what they have to: running as fast as they can so as not to lose ground on the rest. The relatively modesty increases (don’t yell at me, it could conceivably have been even worse) could even be taken as an attempt by Liverpool to limit how much they scalp fans. (This last point isn’t speculation about their actual motives, just simply an attempt to reframe what’s happened. I don’t know anyone who works for Liverpool and don’t know the thinking behind the rises.)

So, yes, it’s terrible – shameful, even – that a great club like Liverpool is squeezing their fans and risking pricing out the next generation. But, in a business sense, they have no choice. They simply can’t stand alone.

Right now the only sensible thing an owner could do if they couldn’t face the thought of having to raise ticket prices year after year would be to sell their club.

Even if most clubs were in favour of controlling ticket price inflation, it would only take one club to smash their good intentions.

Meaningful change, then, will only come with a recognition of the need for more and better regulation. Where owners can’t or won’t control themselves, there must be enforcement. The way TV money is distributed should change so winning – or losing – doesn’t become a self-reinforcing cycle. And, crucially, there needs to be some smarter regulation of expenditure to control wage inflation and bring some greater equality to the spending power of clubs.

Safe-standing is the other major change we need. No other single proposal can square the circle of allowing clubs to significantly, affordably and rapidly increase stadium capacities without necessitating ticket price rises. The technology and case studies exist. It is only the will that is lacking.

If these measures all happened, then, instead of spending every last penny on trying to compete, clubs could actually begin to make a profit. A huge and sustainable profit. And then some of them – the ones who really mean what they say when they issue press releases stressing the centrality of fans to the club – might begin to cut ticket prices.

In the absence of that, we can get angry at Liverpool’s carpet-bagging owners and their weasely pricing policies, but it’s just howling at the moon. They’re on an economic treadmill the same as the rest of us.

By attacking owners in isolation, fans are being divided and turning on their own clubs.

Instead, our anger – and our efforts at reform – must be directed at the Premier League as a whole. Some chairmen may even thank us for it.

 

Martin Calladine is a freelance writer and the author of a book “The Ugly Game: How Football Lost Its Magic And What It Could Learn From The NFL”.

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