On Liverpool and the folly of relegation

As I am not an expert in corporate law in this country nor any other, I don’t want to delve too deeply into the Liverpool ownership case before a judge today in London.

But, one aspect of this has made me think a bit. Yet again, we’ve seen the risk of relegation make a well-capitalized and intelligent owner potentially think twice about investing in the sport because the risk of relegation and its associated financial calamities is just too much to bear. I’m not a Liverpool fan, but I don’t want to see a very smart, forward-thinking, and wealthy owner like John Henry (above) chased away from the sport.

But if Liverpool are given a 9-point penalty (for administration) and shoved close enough to relegation that Henry’s group turns its back on the club, I think it only serves to support my point that relegation turns European soccer into such a high-risk enterprise that it scares good, smart owners away from the sport, leaving the sport, its clubs, and their fans to the whims of charlatans, morons, and schemers.

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15 thoughts on “On Liverpool and the folly of relegation

  1. Is a nine-point deduction really enough to warrant relegation fears? This is freakin’ Liverpool we’re talking about after all. Nine points isn’t going to sink them from their perennial finishing position between 3rd and 5th down to 18th. Yeah, they’re in the relegation zone now. And West Brom is in 6th. How long do you think either of those is going to last?

  2. Actually, good businessmen are generally scared away from the sport in it’s European form because generally speaking, it simply doesn’t equate to a big enough return on the necessary investment.

    You’ve got Real Madrid, who are a not-for-profit, which pretty much ploughs all revenue back into the team – and when that’s not enough to build a major squad, they borrow money. Chelsea and Man City have billionaire Sugar Daddies. To make a club a success, you need to plough crazy-money into it.

    The only teams whose existing profits can achieve this are Man Utd (before Glazer debt) and Bayern Munich (who come with all the ownership, investment and other financial restrictions that come with the Bundesliga).

  3. Quite correct. Football is a business, in Europe anyway, where it is extremely difficult to make a profit, indeed the odds are stacked against it. There is a lot of pressure to keep up with the Joneses and this often goes before making a profit. If your rivals spend £10m on a striker, then your fans want you to do the same. An example of this was when Alan (now Lord) Sugar ran Spurs and kept them spending within their means. The fans hated it as they thought it showed a lack of ambition.

    Also, remember that even when a club makes a profit, most of that money stays in the club, not much comes out as a dividend, which puts people off.

    As for Liverpool, at present they are 5 points off 4th place. I’ve recently posted as to why I don’t beleive either administration, or should that happen, a 9-point penalty is likely for Liverpool.

  4. Yes, I mean, fancy having a penalty for poor performance on the field of play or poor management off it. What folly! Far better to scrap relegation so that the poor owners can turn a profit regardless.

  5. As much as I love your ramblings, in general, I could not disagree more. If pro/rel scares John Henry and his ilk, here in the States then our game is so much the better for their absence.

    Promotion and relegation democratize our Beautiful Game. Without it, you would have no idea who TSV Hoffenheim is. With it, every fan of every one of the nearly 100 full professional clubs in England, can dream (however delusionally) of seeing “their lads” in the top flight.

    Pressure at both ends of the table gives meaning to every match. The “Criteria-Based” allocation of Franchises in North America results in Lotteries to keep teams from throwing games in order to get to the top of the heap to choose first in the Draft. Yeah, our game needs more organizations as inept as the Clippers.

    Lastly, the richest annual two hours of sport is the play-off final for promotion from the Championship. More than $15M in straight cash on the line for the squad that wins. Not a bad payday for finishing the season in 6th in the second tier.

  6. “Promotion and relegation democratize our Beautiful Game. Without it, you would have no idea who TSV Hoffenheim is. With it, every fan of every one of the nearly 100 full professional clubs in England, can dream (however delusionally) of seeing “their lads” in the top flight.”

    Yes, because one day I want to grow up and someday cheer for a club like Fulham that maybe if they’re lucky win a third of their games and their sole aspiration their fans can look forward to is to finish 17th in a 20-team league (you mentioned them in your post, Fulham ARE the L.A. Clippers). Or cheer for a team like Portsmouth where the club is the social fabric of the community and it almost ceases to exist because people wanted to be in the top flight and bankrupted the club in doing so.

    The Premiership is a good deal and entertaining if you cheer for one of six clubs. That’s about it. And even for some of those six, I never really got the point. Liverpool’s a prime example, for a number of years were in a position where they were clearly not good enough to win the Premiership but also clearly good enough to always finish in the top 4 to guarantee the Champions League, so their season at least as far as the Premiership was concerned, was always pointless with little of value at stake because they were just simply better than those chasing them while also not being good enough for those ahead, and that was a team that always finished 3rd or 4th.

    Pro/rel is a nice system, but don’t overstate its worth.

  7. OTH, Aaron, Henry could wait for Liverpool to be relegated, then get them for much cheaper and see significant appreciation when they go back up. Of course, they probably won’t get relegated, but my point stands – pro/rel gives you downside risk, but also upside potential.

  8. Owners aren’t necessarily worried about profits year end and out. They are focused on the investment and the return on investment which is realized when they sell the team.

  9. Pro/rel and imbalance are two different things. English football has had the former for 120 years, and the latter only since the mid-90s. The imbalance was brought about partially through the existence of the Champions League, but partially because when the Premier League came along, it was designed to be inequitable.

    On the general topic, I guess this will be easy for me to say now that the sale is official, but this premise was really stupid. It was nailed by the second comment in the thread, (and you can tell that by the fact that the response was an ad hominem).

    Here you have a “what if” scenario concocted, it looks like, largely in Aaron’s own head, but used as an argument in the real world. A real world where it runs against the real facts, which even at that time were that John Henry was willing to make a bid for nearly half a billion dollars for a team that was subject to relegation.

    His interest in the first place should have completely undermined the whole thing by showing that owners like Henry are not ‘scared’ by the concept of relegation. They take a rational look at the subject, accept it as a risk in the calculation, and measure it against the potential rewards.

    And they understand something Aaron seems to fail to grasp: relegation is not permanent, and does not consign its ‘victims’ to oblivion. If Liverpool were relegated this year, it would not be great for business, but it would not, by itself, undermine what is essentially a generational investment for Henry.

    In fact, if relegation were the demon Aaron confuses it for, investors like Henry should have been damned scared of it–but they are not. This is enough to prove that Aaron’s missing something important.

  10. I bet you can’t find an actual Fulham fan to agree with you. (And BTW, Fulham finished 7th a couple of years ago.) Fulham may not be in a position to challenge for the league title, but aiming foe a European place, and to stay away from the relegation dogfight is an aim in itself.

    There are plenty of bigger teams than Fulham in the Football League. Fortunately, these things are decided on the pitch, not on the size of your wallet. If Henry decided not to buy Liverpool because of the threat of relegation, most people would shrug and say “good riddance”.

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