The rebuild/transfer policy

[bluebell]

With all the new contract renewals, how much has the club increased its salary pay-out? Is it 20,30 or even 40m? Unless there is an appreciable rise in earnings or cost cutting in other areas, I can't really see how the club can fund a decent transfer round next season unless we offload a big star. The senior player are at their peak, and the fall in performance bound to happen as our core group of players hit 30. I just can't help but think we're repeating Arsenal's mistakes

 

[The Nomad]

With all the new contract renewals, how much has the club increased its salary pay-out? Is it 20,30 or even 40m? Unless there is an appreciable rise in earnings or cost cutting in other areas, I can't really see how the club can fund a decent transfer round next season unless we offload a big star. The senior player are at their peak, and the fall in performance bound to happen as our core group of players hit 30. I just can't help but think we're repeating Arsenal's mistakes

Or our own mistake of the late 80s into early 90s.

 

[SummerOnions]

I think the way we brought in Jota tells me the club are taking steps to address things. If Eliott shows up to be something special, and Konate too, I think it's clear the rebuild is already happening.

I expect we will sign a winger and a midfielder with world class potential next summer

 

[binomial]

I've never really been 1 to criticise the owners in fact quite the contrary but after this summer I can't help but feel let down.

I've just come to terms in the last few weeks our net spend since 2015 has been -40 odd mill, that's outrageous for a stature of LFC.

Have no idea what the plan is, Are we expecting for big summer sales for the likes of Mo Fab ?? because it's clearly not coming out the John Henry's pocket that much we know.

 

[tombrown]

FSG might erect a stature of LFC, in recognition

 

[Beamrider]

LONG POST, SORRY.
Possibly a little geeky too but hopefully informative.

I think the way the club will approach things is as follows:
Do a budget / forecast for the next 12 months (and a broader forecast for 3-4 years beyond that) assuming no signings or wage increases. This will throw off a base level of profit (and, more importantly, cash).
This base level of cash will be calculated AFTER taking into account transfer receipts and payments from deals in the last two windows (assuming the standard three instalments, we'll have money in/out from deals over the last two years that is already baked in). As we spent vert little two years ago, these figures won't be too significant in the grand scheme (and the last major splurge on VVD, Keita, Alisson and Fabinho should have been fully paid up by last summer, mostly funded by the Coutinho sale). However, rumour had it that there wasn't a big down payment on Jota so the instalment for his transfer will probably be higher than normal, but we're potentially only taking £5m-10m difference.
The club will then decide how they wish to spend this spare cash - this will be split between infrastructure spending (in the next two years that basically means Annie Road) and then player spending. I'd expect there will be discussions on priorities involving Klopp. Edwards, FSG and the Liverpool finance team / board of directors as this decision will be strategically driven. After any "non-player" commitments, there'll be a pot of money left over. FSG don't seem to be motivated by profit, so much as running the club without having to plough in extra cash investment. So if the club can fund spending from its profits or banking then they seem to be OK with that and Klopp / Edwards can basically have whatever is left over and maybe bend FSG's ears if they want to spend against future year's budgets (which would mean pushing the bank facilities to their limit to fund the short-fall).
Player spending will be looked out as follows:
What does the manager want - i.e. which areas of the team does he want to improve, any particular players he wants to bring in?
Who is he happy to sell?
They'll then run the numbers for a base case and a series of alternative scenarios. I can only speak to the financial aspects, but I expect the football guys will be looking at other factors such as age profile of the squad, balance, cover for key positions etc. This is likely something Klopp and Edwards will discuss and I'd expect they'd have discretion to do what they like, but that they'd come under pressure about stuff like letting contracts run down, contract clauses that are overly-friendly to the players coming in (release fees etc).
For each player sale: there'll be a transfer fee assumed, in instalments, plus a wage saving (which could have a multi-year impact if the player has several years on his contract). They'll also assess the likelihood of triggering any significant contingent fees / sell-ons from prior sales. This will bring some cash into the club and boost spending power for the proposed ins / contract renewals.
For each contract renewal: model expected agent fee (by instalments) and impact on wages (and bonuses) from the new contract offer.
For each purchase: model transfer fee (by instalments, unless exploiting a release fee), agent fee (instalments), wages impact. Also any solidarity payments due to clubs that trained the player as a kid (if the purchase is from outside England) or transfer levy for deals between English clubs.
Having done a first cut, they'll likely go back over it again and again until they get to a series of numbers that work for the current year and are within tolerances (i.e. affordable, even if performance isn't great). If the plan is likely to stretch things (assuming a base level of performance) then everyone needs to get comfortable that it won't lead to a breach in banking covenants etc. and possibly the commercial guys will come under pressure to improve their sales forecasts to pay for it. Finally, if performance exceeds expectations then there's always the January window to look at or some additional contract extensions can be brought forward.
It's likely the club's forecasts will be for the current season (in a lot of detail) with some broader estimates for future years (so Klopp / Edwards have an idea of what money will be available over the next few years and they can make a rough long-term plan or identify areas where there may be pinches on available funds and make sure they retain promising youngsters who could provide cover in those years).
All of this process needs to be dynamic because there are a number of factors that can completely turn things on their head, and it will be updated regularly as and when deals are agreed or valuations move (or it becomes obvious that a particular player isn't going to leave at all, much less at the assumed fee). They'll also need to look at lining things up timing wise, which may mean taking a risk that sales will go through if they need to do a deal quickly on a top target where there is competition for the signing. The biggest of these factors would be the sale of a star player, which would obviously allow for greater flexibility on who can be brought in.
The key thing to remember in all of this (and I'm not saying anything insightful here) is that if you want to compete at the top level, you need top players and you need to pay them top wages. It is much cheaper to keep existing players on the books. Say we signed a new player to replace Mo. We're still going to have to pay the new guy the same sort of money, plus transfer fees on top. So you'd only really do that if you had no choice (i.e. Mo was intent on leaving or getting past his best before date), if you had some money burning a hole in your pocket and a fan base screaming for a shiny new player or if a game-changing player became available to you and it's now or never. A responsible and commercially managed club doesn't go out and spend £100m on a player they don't really need just because they can (or to stop someone else getting him).
So if you have a pinch on spending, of course you'll look to extend existing deals. We've got a pinch right now because:
- We haven't made any major sales since Coutinho
- We've just had a shit 18 months because of covid and under-performance due to injuries will have hit our media revenue last year (NB the last two year's published accounts haven't followed the normal model of low cash balances at year end because of prize money earned for the Champions League win and because we drew down all of their bank debt at the year end in 2020 for a reason I don't fully understand).
- We're about to start building the Annie Road.
On the plus side, as mentioned above, we haven't paid out any major instalments on historic deals this summer.
All of these factors will affect how the process works, and because of the major swings in earnings that can arise from player sales, on-pitch performance etc it's rare that two windows follow a similar direction.

And if I can just pick up on binomial's point about net spend, per the last 5 years' (available) accounts (from 2015-16 through to 2019-20), the net cash out on transfers (i.e. fees spent less fees received, which will include agent's fees but EXCLUDE increased wages) is £277.5m (i.e. we SPENT that much money). That said, the last available year (2019-20) was a net in-flow of £61k, which is crap, obviously, but we did win the league and we had a new training ground to pay for. This is not to say that the figures bandied about in the press are wildly inaccurate, just that they don't take into account the timing aspect, and they tend to be based on headline (often unconfirmed) transfer fees, not including agents and contingent stuff.

Finally, no, almost none of this will be paid for by increased shirt sales (or by Nike on the sly).

 

[Beamrider]

TLDR version:

OPTION 1:
FSG: Jurgen, there's some cash to spend. Do you want to spend it?
Jurgen: Yes please.
[Spends cash]
Jurgen: Can I have a bit more?
FSG: Err, let's see what we can do, no promises. Might help if you could sell Divock...

OPTION 2:
FSG: Jurgen, there's some cash to spend. Do you want to spend it?
Jurgen: Only if I can have Mbappe.
FSG: Nope, sorry.
Jurgen: I understand, disappointed like. I think it would be nice to build a new stand for the fans.
FSG: OK, let's crack on with the Annie Road then.

 

[moron]

This is fucking terrible, we must be so damn poor compared to the other clubs. I mean Arsenal for fucks sake - we cannot even compete with them for transfers. People think I am moaning but I just feel if a key player (just one) gets injured - our season will go down the drain.

 

[The Nomad]

This is fucking terrible, we must be so damn poor compared to the other clubs. I mean Arsenal for fucks sake - we cannot even compete with them for transfers. People think I am moaning but I just feel if a key player (just one) gets injured - our season will go down the drain.

I think we are banking on AFCON to be postponed again.

 

[Woland]

TLDR version:

OPTION 1:
FSG: Jurgen, there's some cash to spend. Do you want to spend it?
Jurgen: Yes please.
[Spends cash]
Jurgen: Can I have a bit more?
FSG: Err, let's see what we can do, no promises. Might help if you could sell Divock...

OPTION 2:
FSG: Jurgen, there's some cash to spend. Do you want to spend it?
Jurgen: Only if I can have Mbappe.
FSG: Nope, sorry.
Jurgen: I understand, disappointed like. I think it would be nice to build a new stand for the fans.
FSG: OK, let's crack on with the Annie Road then.

How come the other clubs get external financing for infrastructural projects that are going to generate profit but it comes out of the same pot we use for transfers though? That's the bit that does my head in. Building the Annie Road is adding a shitload to the asset value, an asset they basically stole and is already worth ten times what they got it for, so go get the money somewhere else for it and pay it off over the years, because if we stop qualifying for the CL all the other projections go in the bin.

 

[Beamrider]

How come the other clubs get external financing for infrastructural projects that are going to generate profit but it comes out of the same pot we use for transfers though? That's the bit that does my head in. Building the Annie Road is adding a shitload to the asset value, an asset they basically stole and is already worth ten times what they got it for, so go get the money somewhere else for it and pay it off over the years, because if we stop qualifying for the CL all the other projections go in the bin.

I agree, it would make absolute business sense to borrow to build the Annie Road. I can only assume they don't want to do that because they're nervous about saddling the club with more debt (because SOS and the like would lose their shit because they don't understand it) or else because they're worried about an extra level of debt affecting their ability to get cash out in future.
But you're right, lenders would bend over backwards to give us that money, and at decent rates too. It would be easily repaid from the extra revenue earned. I can understand not borrowing for the training ground because it doesn't throw off cash, but not for ground expansion.
And ultimately I'm only assuming we're not borrowing because it would explain our hesitancy in the transfer market. I'd love to be wrong about that and for us to splash the cash between now and the end of the month.

 

[Woland]

Yeah I totally agree about the training ground and that's why I haven't brought it up, but when you're building something that's such a no brainer in terms of making money having the debt on it actually makes more sense than doing it from revenue.

 

[Brizzle]

This is fucking terrible, we must be so damn poor compared to the other clubs. I mean Arsenal for fucks sake - we cannot even compete with them for transfers. People think I am moaning but I just feel if a key player (just one) gets injured - our season will go down the drain.

Do we need to be outspending Arsenal? They are spunking huge fees on average players who are probably not far off the wages of our best.

 

[Frogfish]

With all the new contract renewals, how much has the club increased its salary pay-out? Is it 20,30 or even 40m? Unless there is an appreciable rise in earnings or cost cutting in other areas, I can't really see how the club can fund a decent transfer round next season unless we offload a big star. The senior player are at their peak, and the fall in performance bound to happen as our core group of players hit 30. I just can't help but think we're repeating Arsenal's mistakes

Sigh.

This is likely the most frugal ownership in the PL and you're worried it's the opposite.

 

[binomial]

Do we need to be outspending Arsenal? They are spunking huge fees on average players who are probably not far off the wages of our best.

You'd need to spend first before you could outspend them....we haven't even done that really and that's what fans are annoyed about.

1 player brought in this summer and he's not going to be a regular for another season or 2 unless injuries happen...it's not good enough.

 

[Brizzle]

You'd need to spend first before you could outspend them....we haven't even done that really and that's what fans are annoyed about.

1 player brought in this summer and he's not going to be a regular for another season or 2 unless injuries happen...it's not good enough.

Just out of curiosity, when did you start following football?

 

[moron]

Do we need to be outspending Arsenal? They are spunking huge fees on average players who are probably not far off the wages of our best.

They can afford to spunk 50M on that defender from Brighton.

 

[binomial]

Just out of curiosity, when did you start following football?

Since midnight on 25.8.21 , fuck does it matter

 

[bluebell]

Sigh.

This is likely the most frugal ownership in the PL and you're worried it's the opposite.

During the Wenger years the club underinvested, and some argue this is the reason they are where they are today. Wenger was starved of funds due to a new stadium being built. He got them consistently into top 4 on a shoe string budget, imagine what he could have done if he had the budget of Fergie?
I am convinced the owners didn't want to win the PL title last season, and waited till the last day to get loanees in. I think for them top 4 is enough as it returns the financial dividend of CLs without having to pay the win bonus of a PL title.

 

[peekay]

During the Wenger years the club underinvested, and some argue this is the reason they are where they are today. Wenger was starved of funds due to a new stadium being built. He got them consistently into top 4 on a shoe string budget, imagine what he could have done if he had the budget of Fergie?
I am convinced the owners didn't want to win the PL title last season, and waited till the last day to get loanees in. I think for them top 4 is enough as it returns the financial dividend of CLs without having to pay the win bonus of a PL title.

Well, there definitely was a period of time where Arsenal underinvested but I think after three to four years of austerity, they did start spending money. Not Chelsea, City, or United levels, but definitely a healthy amount. I remember them spending around 12 million on Walcott, who had limited appearance in the Championship, which was more than what we paid for Alonso, a much more established player at that time.

Then after 2010-2012, they spent a decent amount consistently. Quite a bit of money on Ozil, Mustafi, Mertsesacker etc. They were spunking 35 million-plus on central defenders like Mustafi which was a hefty amount at that time. I also remember reading about their wages which were high. I think the Ozil contract was 350k per week and I don't think Salah's base reaches that even now. And I don't remember a Coutinho, Suarez, Torres level sale to balance their spending. Not trying to downplay Wenger's achievements but I think the problem with Arsenal was also on whom they are spending on rather than the amount spent. The problem which they don't seem to have rectified now also.

 

[Beamrider]

Re the whole Arsenal thing, some very basic stats on club's transfer spending. These figures are the values for the cost of each club's squad as at the end of the 2019-20 season (latest year for which the figures are available). These figures are taken directly from each club's accounts. This represents transfer fees, levies, agent fees (on purchase and contract renewals) spent on players still on each club's books (in accountancy speak, it's the carried forward cost of player registrations for each club). It will include costs of buying players out on loan to other clubs and is the full cost amount (so the value of any unpaid instalments is included). It will include academy players as well as first-teamers.

Man City - £977.7m
Man United - £831.1m
Chelsea - £821.6m
LFC - £634.1m
Arsenal - £615.3m
Everton - £498.4m
Tottenham - £397.1m
Leicester - £374.3m


Make of it what you will.
Obviously there have been two full transfer windows, plus the current one since then, so these figures will have moved on a fair bit.

 

[737Max]

This is fucking terrible, we must be so damn poor compared to the other clubs. I mean Arsenal for fucks sake - we cannot even compete with them for transfers. People think I am moaning but I just feel if a key player (just one) gets injured - our season will go down the drain.

Yeah cos right now we're all jealous of them signing Pepe, Ben White, Odegard then spunking stupid money in wages on Aubamayang and Willian

 

[Frogfish]

Yeah I totally agree about the training ground and that's why I haven't brought it up, but when you're building something that's such a no brainer in terms of making money having the debt on it actually makes more sense than doing it from revenue.

But this is the thing here ... we are not talking about brainless idiots owning the club therefore we have to assume that they absolutely know what they are doing and that there are reasons they haven't saddled us with more debt at what would likely be historically low interest rates. Maybe the reasons are hidden in the accounts somewhere.

 

[RedStar]

The real concern is that next summer Klopp will have 2 years left. I can't see FSG investing serious funds into the plans of a manager who will not be around much longer. Would Klopp want to buy players that wouldn't even be near their peak til after he's left?

I suspect we won't see any major cash investments, unless prompted by selling Salah or another £100m player, until a new manager comes in to rebuild.

 

[Brizzle]

Since midnight on 25.8.21 , fuck does it matter

It is just interesting to understand what creates the 'spending money is the most important thing for my club' mentality. Very FIFA generation with too much time on twitter debating which players have the greatest xG.

 

[Brizzle]

The real concern is that next summer Klopp will have 2 years left. I can't see FSG investing serious funds into the plans of a manager who will not be around much longer. Would Klopp want to buy players that wouldn't even be near their peak til after he's left?

I suspect we won't see any major cash investments, unless prompted by selling Salah or another £100m player, until a new manager comes in to rebuild.

Depends if they think he would buy a dud in that time? Would FSG have had any problems with him buying Ali, VVD, Salah, Thiago etc. even if he was leaving 12 months later? I don't think they would.

 

[binomial]

It is just interesting to understand what creates the 'spending money is the most important thing for my club' mentality. Very FIFA generation with too much time on twitter debating which players have the greatest xG.

You do realise if we keep going on the way we are we'll be out of contention completely like we were post Rafa?

Virgil Mo etc can only keep doing what that they're for so long. Klopp will only be around for so long and then the onus is on the guys with the money to plan and strategise.

At this moment in time are you satisfied?

 

[Brizzle]

You do realise if we keep going on the way we are we'll be out of contention completely like we were post Rafa?

Virgil Mo etc can only keep doing what that they're for so long. Klopp will only be around for so long and then the onus is on the guys with the money to plan and strategise.

At this moment in time are you satisfied?

At this very moment - yes. Look at our team, we have an incredible set of players. There is a very fine balance in squad investment - do we want to be maximising our chances of winning the league this year, in 2 seasons time or in 5 seasons time. Some teams are investing heavily looking in 2+ years time (Chelsea, although they have arguably over performed their expectations!), some 5+ years time (Arsenal buying the likes of White, Lokonga, Ramsdale etc). Others are going all out to try and win this year (United - Varane, Sancho).

I think we have got stuck between the two. We've bought players like Thiago who will be here 1-2 seasons max, looking for short term quality to win the title again with this group, but also spending on players to grow into the first team like Konate & Jota.

We have a team that is going to challenge for the title and will go deep into the CL. What is there to be unhappy about? Do you want us to be acting like one of the state owned clubs and buying players for £100m? That isn't football for me, and I don't want the club I support going down that route. If you do, that is fine, each to their own.

 

[Frogfish]

I think the way we brought in Jota tells me the club are taking steps to address things. If Eliott shows up to be something special, and Konate too, I think it's clear the rebuild is already happening.

I expect we will sign a winger and a midfielder with world class potential next summer

Yep this. There is no urgency, the sky is not falling, as some of our more 'emotional' posters would have you believe. This group are good, with blooding new players at an average of two per year, for the next 4-5 years.

Basically looking at the squad we have at least 7, maybe 8, positions covered for the next generation of this team (28, 24, 22, 27, 22, 27, 18, 20, 24, 17) noting that older players can easily play into their mid-30s in some positions (GK & CB and maybe DM for example), and these are already covered with the new contracts, and barring something unforeseen, for the next 5 years. Squad depth within that 5 years is another issue.

I'm assuming that Milner, Ox. Origi, Minamino and Nat will all be gone within the next 12-18 months.

Ali (28) + Kelleher (22) = good for the next 5 years at the very least.

VvD (30) + Matip (30) + Gomez (24) + Konate (22) = good for the next 5 years at the very least.

Robbo (27) + Tsimitas (25) = good for the next 3-4 years.

TAA (22) = clearly we need backup here as Neco W. isn't going to be around for much longer. Likely one of the key positions to address, especially if Trent moves into midfield at some time.

Fabs (27) + Hendo (31) linked here because Hendo is the de facto replacement when Fabs is missing for any reason = Fabs is good for the next 5 years though a replacement for Hendo will be required sooner rather than later (blooding within 2 years, take over in 3).

Thiago (30) + Keita (26) + Elliott (18) + Jones (20) = considering mobility required I'd give Thiago 2-3 seasons tops. So another couple of high quality midfielders are required over the next two seasons.

Firmino (soon to be 30) + Jota (24) + Salah (29) + Mane (29) = Good for the next two seasons but we'll need to address both Salah and Mane in the next 24 months (as in blooding replacements even if they don't relegate them to the bench for another season after that). I'm guessing Bobby will be gone within 2 years but it could be longer if he's happy to accept a bit part. Clearly Gordon is likely to be one of them.

By my reckoning that's maybe 6-7 new players over the next 3-4 years. That isn't an emergency and shows the value of tying down our existing stars with new contracts.

 

[StevieM]

Yep this. There is no urgency, the sky is not falling, as some of our more 'emotional' posters would have you believe. This group are good, with blooding new players at an average of two per year, for the next 4-5 years.

Basically looking at the squad we have at least 7, maybe 8, positions covered for the next generation of this team (28, 24, 22, 27, 22, 27, 18, 20, 24, 17) noting that older players can easily play into their mid-30s in some positions (GK & CB and maybe DM for example), and these are already covered with the new contracts, and barring something unforeseen, for the next 5 years. Squad depth within that 5 years is another issue.

I'm assuming that Milner, Ox. Origi, Minamino and Nat will all be gone within the next 12-18 months.

Ali (28) + Kelleher (22) = good for the next 5 years at the very least.

VvD (30) + Matip (30) + Gomez (24) + Konate (22) = good for the next 5 years at the very least.

Robbo (27) + Tsimitas (25) = good for the next 3-4 years.

TAA (22) = clearly we need backup here as Neco W. isn't going to be around for much longer. Likely one of the key positions to address, especially if Trent moves into midfield at some time.

Fabs (27) + Hendo (31) linked here because Hendo is the de facto replacement when Fabs is missing for any reason = Fabs is good for the next 5 years though a replacement for Hendo will be required sooner rather than later (blooding within 2 years, take over in 3).

Thiago (30) + Keita (26) + Elliott (18) + Jones (20) = considering mobility required I'd give Thiago 2-3 seasons tops. So another couple of high quality midfielders are required over the next two seasons.

Firmino (soon to be 30) + Jota (24) + Salah (29) + Mane (29) = Good for the next two seasons but we'll need to address both Salah and Mane in the next 24 months (as in blooding replacements even if they don't relegate them to the bench for another season after that). I'm guessing Bobby will be gone within 2 years but it could be longer if he's happy to accept a bit part. Clearly Gordon is likely to be one of them.

By my reckoning that's maybe 6-7 new players over the next 3-4 years. That isn't an emergency and shows the value of tying down our existing stars with new contracts.

Keita.... 26..... hahahahaha