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Posted

As some sort of take over looms nearer, we going to (thankfully) be getting back to talking about building new stadiums and investing in the squad. All the anecdotal stuff coming out at the moment hints at transfer budgets of £20-40m a season. I'm not hearing any bidder saying 'we're going to blow everybody out of the water with the strength of our recruitment drive'. It got me to thinking about what the club's priorities should be going forward. If it came down to a simple choice, what would be better, spending £300m on a new stadium, or blowing the lot on players (and a great manager) instead ?

 

Most of the approximations I've read about suggest we lose about a million pounds a home game on Man Utd and Arsenal because of our smaller ground capacity. So that's about £25-30m a season ? Simplistically speaking if the club borrowed all the money needed for a new ground, that extra revenue would only really cover the interest bill. I suppose there may be more dough to come from naming rights, but you can do that (to an extent) with an existing ground. I'm not seeing where the vast fortunes are getting made from a bigger ground, but I can certainly see how it could end up being an albatross if the team's fortunes declined and the ground was only two thirds full.

 

What I don't hear talked about enough is the price of not properly 'investing' in the success of the team. For me, if you plan to spend £25m net a season on players there are no guarantees that you will achieve anything. In fact, given LFC's current status, even with a top top manager, I don't think £25m net over each of the next 5 seasons would make CL qualification likely. Just as likely is continuing to hover around mid table.

 

Let's be stupid for a minute and imagine, that instead of spending £300m on a stadium, you blow it all on players (and a manager). You bribe Mourinho, and you outspend City for a couple of years. What happens ? You can as good as guarantee CL football, and a strong chance of particpating in the very last stages of the competition. You can also be sure you'll be up there battling for the title. No guarantees that you'll actually win either of the big two, but you will be competing for them.

 

In money terms, that 'competing' equals about £30m in CL related revenue that you won't get if you under invest in the team. On top of that you'll earn, as a consequence of your success and high profile, more in sponsorship than you would were you hovering around in Aston Villa to Blackburn territory. You'd also earn more in TV revenues, more in prize money, and you'd sell truck load more shirts all over the globe. I think the difference between having a 5th to midtable team, and having a strong CL team, could be worth in the region of £50-60m a season on a club's bottom line. That compares very favourably with the benefits accrued from a bigger capacity ground.

 

Also, in reality, if a club had and wanted to spend £300m on squad building it need only spend that over the first two years, and could then probably sustain itself with a zero net spend for the following 4 years, by simply offloading expensive surplus players. It's more or less what Chelsea have been doing. Their net spending hasn't been significant for 3 years, yet they are stronger than ever. So, with this model of using cash to give the squad a steroid boost, the spend on players is probably £300m over 6 years (but front loaded) vs the softy softly approach where you spend £25m a year, and total £150m over 6 years but achieve little.

 

I'd rather find the cash now to take the club up a quantum leap with 2 years of mega spending, and then start retaining profits in years 3-6 to put towards building/renovating a stadium. I want our new castle built on the foundations of established onfield success (and therefore revenue streams) than see money going into building a ground that by the time it's built might be a struggle to fill for a midtable team. The small extra revenues provided in the early years of that new ground will do little to improve the teams prospects.

 

Now, more than ever, Mr Henry (or whomever) the dough will only follow those who are sustainable winners. Don't penny pinch or you'll make exactly the same complacent mistake Hicks and Gillete made.

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