This post has been written by Naz Da Gama.
For those who had the misfortune to follow me long enough on Twitter, they would remember me suggesting on multiple occasions that Fenway Sports Group (FSG) deemed that the risk and cost of buying new players for Liverpool Football club (LFC) is not commensurate with the reward of moving up the Premier League table from, say, fourth place (2022/23: Liverpool -£151 million) to First place winner (2022/23 : Man City -£161.3 million which translates to around £10 million of additional revenue.
In other words, FSG are unlikely to sanction a £80m investment — which we as fans think will make us title contenders — as the financial reward is only £10m if the transfer actually results in a first-place finish.
I also opined that it would take a Premier League season crash for FSG to even consider investing in the LFC squad, which in essence meant LFC falling outside the Top 4 league spots and losing that Champions League revenue which could be anywhere between £50 million to £100 million, depending on your progression in the competition.
In this scenario, the stakes are between £50 million to £100 million, so FSG are more likely to sanction an £80m squad investment. But will they? It is a bit complicated and LFC’s statto team might have a different view. I’ll come to that later.
I also argued that FSG were riding the Klopp and PL TV Money gravy train and that expecting a similar investment (or more accurately re-investment) that happened following Philippe Coutinho’s record sale — which resulted in LFC winning the Premier League title and CL title — is unlikely to happen again for the following reasons:
- LFC was, and is still, running out of sellable assets, especially as the club have developed a habit of losing senior players on free transfers. Some of those players are:
Alex Oxlade-Chamberlain
Bobby Firmino
Naby Keita
Divock Origi
Emre Can
Gini Wijnaldum
Lazar Markovic
Nathaniel Clyne
Adam Lallana
Alberto Moreno
Loris Karius
Daniel Sturridge
Jose Enrique
Mario Balotelli
This list does not include players who joined LFC on free transfers such as James Milner and Kolo Toure.
2. Buying players as a strategy to improve the team is largely against the FSG modus operandi which is principally supported by LFC’s analytics and research team within the recruitment department. In other words, and to simplify, it is not simply case that some LFC fans think FSG do not like to invest in new players. Rather, LFC’s much coveted stats team support and promote this view. This, I will discuss below.
LFC’s view of player recruitment
It is a widely held belief that FSG’s perceived reluctance to invest in the squad is purely due to economic or financial reasons. Whilst this is one of the reasons, it is not the only reason. The reality is that this inclination is strongly held and supported by LFC’s coveted stats team who have provided the supporting narrative. Below is my summary of this position with direct quotes or rephrasing of such quotes when necessary:
“Wins and losses are made here (points to the pitch), not in the transfer market… I worry more about getting the most out of the money that we spend rather than competing in the transfer market on a pound for pound basis“
Mike Gordon President — 9th September 2016
The first point is that a new signing’s chance of success is under 50% even if they score a high 90% in all seven measuring categories that LFC have relied on. In essence, the point being made here is that playing the transfer market is so often a loser’s game.
Dr. Ian Graham, LFC’s former Director of Research argued that a new signings’ overall chance of success is 48 % (less than the chance of winning a coin flip). He attributes this to the fact that new signings tend to fail for the following seven reasons:
- a current player is better than the new player,
- the player is not as good as first thought,
- the player does not fit the style of the team,
- the player is played out of their preferred position,
- the manager does not rate the player,
- the player has fitness issues, and
- the player has personal issues.
That 48% ratio is the cumulative probability of having 90% probability or likelihood in each of the above seven categories. This is essentially 90% multiplied by itself seven times since there are seven conditions. The equation is thus:
90%*90%*90%*90%*90%*90%*90% = 47.8%
Dr. Graham further suggested that Analytics has significant power in assisting with the first three of those areas. Following the same logic, when taking into account that most transfers don’t carry that 90% certainty factor across all seven factors, this will lead to even lower chances of success. In a nutshell, it is pretty easy to understand why playing the transfer market is so often a loser’s game.
The second point relates to the quality of player who replaces the existing player.
Replacing a 30th-percentile player in the squad with a 70th-percentile player gains you roughly ONLY 2 points per season.
Dr. Ian Graham — StatsBomb Conference, 2022
For clarity, Dr. Graham never said the word ‘ONLY’. To give a couple of examples of the kind of replacements that have occurred in the past, one can look at the replacement of Loris Karius/Simon Mignolet with Álisson Becker and replacing Dejan Lovren with Virgil van Dijk.
While Karius/Mignolet and Lovren may very well be above 30th-percentile players, both VVD and Alisson are probably much higher than 70th-percentile players. It is also worth remembering that LFC lost the Premier League title twice by a one-point margin to Manchester City in 2018/19 and 2021/22.
The bottom line is that replacing a weak player with a decent player, results in only two league points per season and that is assuming this new signing actually succeeds. Not much of an upside, is it?
The third point is that contract renewal and keeping the players is the default position, not signing new ones. Moreover, Pumpkins Pies was wrong about the wage bill theory:
“Some economists would tell you that wages cause performance, but that is not right. You can’t just double the wages of your squad and watch them win the league!
Wages are a result of performance. If you’ve done well, you need to pay your players more money to keep them. So, it’s about extending contracts and hopefully they can repeat that performance next season.”
Dr. Ian Graham — 2022
The Athletic’s Tom Worville, commenting on Dr. Graham’s presentation said:
‘That, perhaps, goes some way to explain Liverpool’s lack of transfer dealings this summer, with the exception of Ibrahim Konate being bought from RB Leipzig and young Harvey Elliott becoming a full-time member of the first team. It’s better to keep players whose abilities you know and can trust, retaining them for their peak (Trent Alexander-Arnold) or post-peak (Jordan Henderson) years, rather than roll the dice trying to replace them’.
On this note, a lot has been said throughout the years about those heavily incentivised or bonus-loaded players’ contracts as the reason behind a seemingly inflated LFC wage bill, given the size, quality and reported wages of the squad. That was without much divulsion or detail about the quantity and value of such bonuses (I think around £15m for PL or CL title which still wouldn’t explain the reason). This was largely accepted until the latest LFC financials which showed increasing wages without winning a major trophy.
In summary, FSG’s default position is non-action in the transfer market; keeping the players they have, renewing their contracts and avoiding transfers as much as possible. They view new signings as having less probability of succeeding than winning a coin flip, although analytics can improve those chances. But even if it did improve the odds, replacing a mediocre player with half decent players will only result (from their view) in the equivalent of two extra points in the league season.
Conclusion:
As LFC fans, we aren’t fighting against Financial Fair Play (FFP). Our struggle is against this mentality, which has been saved by Klopp and PL money. We haven’t built a stadium, we are not Arsene’s Arsenal with Emirates Stadium (they needed the savings because the PL/CL money wasn’t enough). We only built stands yet we have substantial PL and TV money.
LFC have no sustainable competitive advantage: no wealthy owners, or owners willing to invest, no academy, no top scouts unearthing gems and value for either the youth or senior teams, and contrary to common belief — LFC is not very well run.
Either we make our voices heard or we accept mediocrity.
