Chartered Postgraduate Diploma in Marketing (Level 7)

© The Chartered Institute of Marketing 2014

561 – Analysis and Decision

Case Study

June and September 2014 Association Football with a focus on Liverpool Football Club

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Analysis and Decision – Case Study Important guidance notes for candidates regarding the pre-prepared analysis The examination is designed to assess knowledge and understanding of the Analysis and Decision syllabus, in the context of the relevant case study. The examiners will be marking candidates’ scripts on the basis of the tasks set. Candidates are advised to pay particular attention to the mark allocation on the examination paper and plan their time accordingly. The role is outlined in the Candidate’s Brief and candidates will be required to recommend clear courses of action. Candidates should acquaint themselves thoroughly with the case study and be prepared to follow closely the instructions given to them on the examination day. Candidates are advised not to waste valuable time collecting unnecessary data. The cases are based upon real-life situations and all the information about the chosen organisation is contained within the case study. No useful purpose will therefore be served by contacting companies in the industry and candidates are strictly instructed not to do so as it may cause unnecessary confusion. As in real life, anomalies may be found in the information provided within this case study. Please state any assumptions, where necessary, when answering tasks. The Chartered Institute of Marketing is not in a position to answer queries on case data. Candidates are tested on their overall understanding of the case and its key issues, not on minor details. In preparation for the examination, candidates need to carry out a detailed strategic marketing audit of the case study. The audit allows candidates to demonstrate their ability to: apply the appropriate models and techniques to analyse information on an

organisation/sector facing particular circumstances interpret the results of this audit to provide insights into the current situation and the

conclusions they are able to draw utilise their own ideas and create their own models for interpreting the data. When compiling their audit, candidates should only use the information found within the case, supported by their knowledge and understanding of the syllabus. Candidates are expected to bring individuality to their audit and submit their own work. In doing so, they must not attach essay-style descriptive work that could be considered as an attempt to gain unfair advantage whilst responding to the examination tasks. The copying of pre-prepared ‘group’ answers, including those written by consultants/tutors, or by any third party, is strictly forbidden and will be penalised by failure. The tasks will demand analysis in the examination itself and individually composed answers are required to pass. Candidates will then need to condense their strategic marketing audit into a SIX page summary (a maximum of six sides of A4, no smaller than font size 11. The content of tables, models or diagrams must be in a minimum of font size 8). The six sides must contain a summary of the audit only. It should not contain decisions, objectives or plans. The audit should be numbered for ease of reference when answering the examination tasks. Although no marks are awarded for the audit itself, candidates will be awarded marks for how the audit is used and referred to in answering the tasks set.

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Candidates are advised not to repeat or copy the audit summary when answering the exam tasks. It is important that candidates refer the examiner to the audit summary, where and when appropriate, when answering the tasks. Candidates must hole-punch and staple their summary audit in the top left hand corner. They should have written their CIM membership number and examination centre name on the top of the right hand corner of each page of the audit. It should then be attached to the answer book on completion of their examination, using the treasury tag provided. Candidates must take their original copy of the case study (not a photocopy) and summary audit into the examination room. The case study may be annotated with ideas for possible decisions or courses of action. Candidates may not attach any other additional information in any format to their answer book. Any attempt to introduce such additional material will result in the candidate’s paper being declared null and void. The Chartered Institute of Marketing reserves the right not to mark any submission that does not comply with these guidelines.

Important Notice The following data has been based on real-life organisations, but details have been changed for assessment purposes and do not necessarily reflect current management practices of the industries or the views and opinions of The Chartered Institute of Marketing. Candidates are strictly instructed NOT to contact individuals or organisations mentioned in the case study or any other organisations in the industry. Copies of the case study may be obtained from: The Chartered Institute of Marketing, Moor Hall, Cookham, Berkshire SL6 9QH, UK or may be downloaded from the CIM student website www.cimlearningzone.co.uk.

© The Chartered Institute of Marketing 2014. All rights reserved. This assessment, in full or in part, cannot be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of The Chartered Institute of Marketing.

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Candidate brief Scenario You are a self-employed Marketing Consultant who has been hired by Liverpool Football Club (LFC). You have been asked by LFC to undertake a strategic marketing audit to analyse its current market position, brand strategy and key factors impacting success and growth, including consideration of competitive positioning, competitive advantage and value creation. LFC is keen to exploit opportunities in international markets and you have been asked to consider how the organisation can work with its stakeholders to maximise opportunities. Consideration should be given to the organisation’s financial position, its strategic risks, organisation risks and mitigating strategies to overcome risks.

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Index

Contents

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Important guidance notes for candidates regarding the pre-prepared analysis

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Candidate brief

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Background and introduction

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History of Liverpool Football Club 11

Key issues in the Football Market 15 Liverpool Football Club Limited 18

LFC Corporate Social Responsibility (CSR) Initiatives 20 LFC International Markets 21 The Future is Red 23

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Appendices Contents Page

1 LFC and Warrior announcement

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2 Chelsea FC: the green team?

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3 Beer and football: A game of four brands

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4 Sports sponsorship moves into the fast lane

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5 Man Utd’s tactics a whole new ball game

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6 Sponsorship: Associations with football do no harm to marketing

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7 Fenway Sports Management and LRMR Marketing & Branding Announce a Strategic Business Partnership

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8 Has the beautiful game dropped the ball?

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9 Football clubs offset match-day revenues dip with real-time marketing

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10 Capital Expenditure on stadia/facilities, by division, 2001/02-2010/11

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11 FA Premier League television audience distribution, by continent, 2011/12

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12 Premiership clubs’ revenues, on-field performance and average attendances, 2011/12 and 2011/12

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13 Key financial indicators, Liverpool Football Club, 2005/06-2010/11

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14 Forecast of English professional football club revenues, 2012/13-2017/18

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15 Forecast of English professional football club attendances, 2012/13-2017/18

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16 Frequency of attending live football matches, July 2012

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17 Liverpool Football Club and Athletic Grounds Limited balance sheet 31

18 Liverpool Football Club and Athletic Grounds Limited profit and loss account

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19 Deloitte Football Money League 2011 (top 15)

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20 Deloitte Football Money League 2012 (top 15)

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Association Football with a focus on Liverpool Football Club Background and Introduction Association football, which is more commonly referred to as simply football or soccer, traces its modern history from the formation of the first Football Association in London, England, in 1863. This formal organisation was motivated by a desire to regulate and standardise the game and hence create an undisputed format that was suitable for a multiple team competition. The Football Association proceeded to draw up the first Laws of the Game, and these laws are the foundation upon which football is played today, all over the world. The Football Association of England became the first official football association in the world, and consequently is now widely known and referred to as simply The FA. The game came to be known as ‘soccer’, drawn from a shortened derivative of ‘association’. The next challenge for The FA was to create a competition that would attract and recruit participant teams under the defined rules and other parameters of the game. A number of competitions were proposed, with little success, until in 1872 The FA Challenge Cup gave birth to the first formally accepted and recognised model. Fifteen clubs entered the first competition in the same year. In the final, watched by around 2,000 paying spectators, a team from London called Wanderers defeated The Royal Engineers by 1 goal to 0 to win The FA Cup. Within a few years, all of the teams in England wanted to take part and were able to do so only after signing up to The FA Codes and Laws of the Game. Because of problems of limited resources, and distance to travel for many teams from around the United Kingdom and Ireland, The Scottish Football Association was formed in 1873, The Football Association of Wales was formed in 1876 and The Irish Football Association was formed in 1880, to organise competitions in the respective countries. However, the format meant that any team knocked out of the competition in the first or early rounds, might not have the opportunity to play competitively again for another 12 months. This in turn created financial losses and the erosion of any potential fan base, and ultimately created a model that was not sustainable. Therefore, there was a need to pursue other competitive formats that would give a longer and more viable alternative. The first Football League was formed in 1888 by 12 founding football clubs (FC), including Aston Villa FC, Everton FC, Stoke City FC and West Bromwich Albion FC, all of which remain at the top level of the English game to this day. 1872 also witnessed the first international fixture between teams representing England and Scotland, which would go on to lay the foundations of international competitions contested in the modern era. It is of relevance also that the first non-European international was contested in 1885 between the US and Canada. Association football had its roots mainly in the midlands and northern regions of the UK and was predominantly played by the working class populations with amateur status. However, with the increasing popularity of the game and its competitions throughout the 1870s and 1880s, there was a requirement to professionalise the player aspect in order to offer a viable alternative to other forms of work. To this end, teams started hiring what were called ‘professors of football’ and as a result professional footballers were officially recognised in 1885. The maximum weekly earnings for a professional football player were capped at £4.

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Association football spread throughout Europe and the developed world, with the formation of associations in Denmark (1889), Switzerland (1895), Belgium (1895), Italy (1898), Germany (1900), Spain (1909) and France (1919). Further afield, associations were formed in Argentina (1893) and Brazil (1914). The first game played in the US under The FA rules and regulations was in 1869 between Princeton and Rutgers. The first national association was formed in 1913 and was known as The US Football Association. The US FA became the US Soccer Football Association in 1945 and The US Soccer Federation in 1974. The North American Soccer League started in 1968 and was dissolved in 1984. A new league was formed in 1993, Major League Soccer, as part of the US bid that successfully won the hosting of the FIFA World Cup in 1994. The governing body of the sport in the US today is The United States Soccer Federation (US Soccer). With this global spread came the necessity for a single entity and governing body to oversee the worldwide game. At the turn of the twentieth century The FA had instigated a number of discussions and meetings on the formation of an international governing body, but without success. This lack of progress motivated the other seven European associations to form FIFA (Fédération Internationale de Football Association) in Paris in 1904. The FA joined FIFA in advance of the first real competition under the federation’s auspices, the 1908 Olympic Games in London. However, over the next 40 years FIFA was to struggle in the face of two world wars, with member associations withdrawing as a consequence. After World War 2 The FA and the other UK associations re-joined, and a landmark international fixture was arranged between Great Britain XI and Rest of Europe XI in 1947. The proceeds of the game totalled £35,000, which was donated to FIFA in order to help relaunch and develop a true worldwide governing federation. Today FIFA has 209 member associations. The first football World Cup was held in Uruguay in 1930, but few football associations entered. Those that did mainly came from the Americas, and the competition was won by the host nation defeating Argentina by 4 goals to 2, with 93,000 paying spectators. By 1950, the UK and European associations were taking a more active role, and the competition emerged as the biggest football event in the world and the template for other continental competitions such as The Asian Cup, The African Cup of Nations and The European Championships. The Asian Football Confederation was formed in 1954 and now has 46 members; the Confederation of African Football was formed in 1957 and now has 53 members. UEFA (Union of European Football Associations) was formed in 1954 and now has 53 members. The major themes dominating the game today are an interdependent thread including emerging nations, globalisation, regional, national and international competition, women’s football, economic development, youth fitness and health, corruption and technology.

The Premier League By the late 1980s, association football in the UK was suffering from falling attendances and consequently shrinking club revenues, which additionally impacted upon the maintenance of stadiums. Furthermore, the climate of hooliganism that surrounded the game at that time did little to suggest that football clubs could be viable business propositions. Liverpool Football Club (LFC) had been directly and devastatingly affected by two disasters which together not only had a detrimental impact on the club, its fans and its owners, but also deeply impacted the sport. Firstly, the Heysel Stadium disaster of 1985, when 39

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Juventus FC fans, from Italy, lost their lives after LFC fans broke through security fencing, forcing Juventus fans to flee, an ensuing crush caused a stadium wall to collapse. All English clubs were placed under an indefinite ban from UEFA competitions as a result. Secondly, the Hillsborough disaster of 1989, when 96 Liverpool fans lost their lives after a crush occurred as a result of crowd and stadium mismanagement by the relevant authorities and subsequent emergency response services. This was the worst stadium disaster in British history and resulted in the publication of the Taylor Report, which insisted that all stadiums must be upgraded and become all-seated, as a minimum. The game was in urgent need of inward investment and the top clubs identified the necessity to capitalise on available revenues in a collective format, if the viability of the sport in general and the individual clubs specifically, were to be secured. The rights to televise and broadcast games live and as highlights financed this. The television rights were sold by The FA in 1986 for £6 million over two years. However, in 1988 the rights contract was renewed at £44 million over four years. The trend here was obvious to any dedicated observer, and reflected the obligations of the Taylor Report. The improved performances of England’s international team; the top clubs in the top division began the process of discussion and organisation as a collective, with a view to exploit this trend. England’s national team reached the last four of The FIFA World Cup competition in 1990, and UEFA lifted the ban on English clubs participation in their European competitions. Attendances and therefore revenues started to rise among the top clubs and boards of directors at each club were projecting a massive change in fortunes. At this time, the average attendance in the top division was about 21,000 per game, the average annual earnings for players was £75,000 and average total annual revenue per club was £8 million. The salary-to-turnover ratio was 44%. The Founder Members’ Agreement to establish The FA Premier League was signed in July 1991 and created an independent top division free to negotiate its own commercial contracts without any reference to The FA or The Football League. A limited company was formed and its member clubs own the league as shareholders with single voting rights on corporate matters. The member clubs elect executive officers to manage the daily operations of the league. The FA is a special shareholder with veto power on matters of elected officers and rule changes. There are currently twenty member clubs of The Premier League who on an annual basis compete for the league title by playing all the other teams twice, home and away, with three points being awarded for a win, one point for a draw and nil points for losing. The team with the most points wins the league title. The three teams with the lowest total number of points each year are relegated to The FA Football League Championship and replaced by the three top teams from the Championship. Each member club has three main income streams from the Premier League. The main element is from global television rights. The income from this is divided equally among all members. The secondary element is through a merit-based system dependent upon finishing position in the overall final league table. Under this model the top club receives twenty times as much as the bottom club, reducing in equal sums from top to bottom. The final element is via facility fees on specific televised matches, where it is normal for the top six clubs to receive a larger share. Other European competitions offer additional income streams under similar models, and The Premier League also sets aside annual parachute payments for those clubs relegated at the end of each season. The screening of live matches on television has transformed the sport and the business of association football in the UK and around the world. The first broadcast rights deal was awarded to British Sky Broadcasting Corporation (BSkyB, now more commonly known as

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Sky), for a total package amounting to about £300 million over five years to 1997. The next contract, to 2001, was negotiated in excess of £650 million. The third contract awarded to Sky on an exclusive basis from 2001 to 2004 totalled in the region of £1.1 billion. A further £300 million was secured for international television rights between 2004 and 2006. After a European Commission ruling on the illegality of awarding exclusive rights, the rights letting model was changed to create a number of packages, and to introduce competition within the football broadcasting environment. This created a massive opportunity for The Premier League and in total across the contract period 2007 to 2010, revenue of £2.7 billion was secured from television alone. This represents an average annual income per member club from broadcast media of £40 million. This is projected to double by the end of 2015. Premier League fixtures are now broadcast live and in highlights packages to over 600 million people in 200 countries worldwide. It is the biggest sports package distributed and broadcast in Asia, and there are on-going discussions to take the league on tour by playing friendly games, exhibition matches or even formal fixtures on a regular basis in China, the Americas and Africa. The Premier League has the highest revenues of any league in the world, and received a Queen Elizabeth II Award for Enterprise in International Trade, recognising the outstanding contribution made to the development of the sport, member club commerce and the UK broadcasting industry. In addition, the UK’s national tourism body, VisitBritain, suggests that in the region of 750,000 people visited the UK in 2010 to attend a Premier League match, and spent around £600 million during their trips. The top five nations fuelling this data are Norway, United Arab Emirates, Japan, China and Australia. What dominates the game today, however, is big business.

The UEFA Champions League The UEFA Champions League, simply known as The Champions League and formerly known as the European Cup, is the annual continental competition for the highest ranked teams from all of the domestic league competitions from affiliated European associations. Since 1992, this competition has grown to include 32 qualifying teams each year and participation is one of the most lucrative income streams a club can potentially realise, if progression and success coupled with consistent qualification are maintained. The model is based around The Premier League television rights and sponsorship model, but with a graduated distribution based on performance. The winner earned total revenues in the region of £70 million in 2013. Liverpool Football Club (LFC) has won this competition five times, most recently in 2005. The club has failed to qualify for the competition since 2010.

The History of Liverpool Football Club LFC is the UK’s fourth largest football club and the world’s ninth largest, according to Deloitte’s Football Money League. When the original Football League was founded in 1888, one of the founding members was Everton FC. Everton was created out of the St Domingo’s Church football team, which was set up to encourage the youth in and around Stanley Park in the city of Liverpool to remain on a disciplined path of religious well-being through competitive sport. The location of the church was adjacent to the old Everton Toffee House, and hence this name was taken for the new football club.

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The fledgling club played at various locations around the city, but eventually settled at a greenfield site between Anfield Road and Walton Breck Road. The team flourished and prospered under the stewardship of their President, John Houlding, who was a brewer, a member of the local council and later Mayor of Liverpool. Houlding had secured a deal to bring Everton to Anfield in 1884, but by 1892, discontent was at crisis levels among other board members, for a number of reasons. In addition to their displeasure at the amount of rent levied, the board was also annoyed by the considerable amount of profit that Houlding’s business secured by nature of the fact that only his company’s liquid refreshments could be sold at the ground on match days. However, they seemed to overlook the fact that it was Houlding who came up with the finance to purchase players and upgrade the playing ground. John Houlding’s proposed solution to the increasing disquiet was the formation of a public limited company (PLC) whose shares could be bought and sold on. The deal breaker was that Everton FC PLC had to purchase Anfield and the surrounding land from John Houlding himself. The price was deemed too high and the board rejected the proposal. The board issued an ultimatum that the lease was to be secured on a long-term fixed rent deal that was at a lower rate than was currently being paid. The official split between John Houlding and Everton FC happened at a further board meeting on 12 March 1892, when Houlding famously declared that it was as if he ‘was on trial’. He left the club, accompanied by more than a dozen other board members. LFC was formed on 15 March 1892 and on 3 June the same year Liverpool Football Club and Athletic Grounds Limited was recognised as incorporated by the UK Board of Trade. LFC adopted the city’s colour of red for playing shirts and its Liverbird crest as the official club emblem. John Houlding proceeded to lend the club £500, which was never paid back, for the acquisition of players to form the first team. The creation of the original team was overseen by an Irishman called John McKenna, who would remain as a director of the club for more than 30 years, and who initially sourced the majority of the playing staff from Scotland. Liverpool were admitted to the second division of The Football League in 1893, and duly won the division at its first attempt, gaining promotion to the first division. The average paying spectator crowd at Anfield around this time was approximately 6,000, and it was in 1901 that LFC secured its first League Championship win, just eight years after entering The Football League. By this time the Anfield spectator crowd had risen to its full capacity of 20,000. It was 1914 when LFC reached its first final in The FA Challenge Cup, resulting in a defeat to Burnley Athletic FC in front of 73,000 paying spectators at Crystal Palace. Incredibly, the club had to wait until 1965 for its first winning final in The FA Challenge Cup. In the years between securing its second and third league titles (1906 and 1922), the finances of the professional game had increased significantly, and the capacity of Anfield had been increased to 50,000. In 1922, the going rate to purchase a top professional player for a top club was around £2,500, which is equivalent to about £96,000 at today’s rates. Such strategic investments allowed LFC to secure the first back-to-back League Championship title in 1923. However, the club was to enter a rather lean and relatively unsuccessful period over the next twenty years. A popular growth strategy used by many clubs was to invest in players, facilities and stadiums, and within this period very little investment took place at LFC. But in 1946, £12,500 (circa £425,000 today) was paid as a transfer fee to bring Albert Stubbins, a future

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legend, to the club. The strategy paid off and the club went on to secure the first post war League Championship title in 1947. By 1952, 60,000 paying spectators were cramming into Anfield to watch home fixtures, reflecting the strong brand credentials of LFC. However, relegation to the second division after over 50 consecutive years at the top was to devastate the club, and it languished for another eight years with little or no investment. Then in December 1959, the board of LFC made its most momentous appointment. William (Bill) Shankly, who was relatively unknown and untested, was made the first team manager. Shankly was more than aware of the business model built up around association football, and therefore in 1961 he persuaded the board to make a record strategic investment of £37,500 (circa £680,000 today), in bringing Ian St John, the best attacking player in Britain at that time. The strategy paid off, and within twelve months of St John’s arrival, and along with other astute signings, Shankly’s team was promoted back to the first division of the Football League. Bill Shankly’s era at Liverpool Football Club would define the philosophy and vision that is still in existence to this day, albeit with a few departures in the intervening years. In his time at the helm, the club won the league title in 1964, The FA Cup in 1965, the league title again in 1966 and 1973, the European UEFA Cup in 1973 and The FA Cup in 1974. To the astonishment of many people, Bill Shankly resigned in the summer of 1974, citing personal reasons for his retirement. His successful 15-year era laid the foundations of a business model built upon strategic investments in quality on and off the pitch, which would allow Liverpool Football Club to become the most successful club in the history of the British game of Association Football. To date, LFC has won 18 League Championships, seven FA Cups, eight League Cups, five European Cups and three UEFA Cups, reflecting a very strong history of success. However, the greatest prize, the League Championship, has not been won by Liverpool since 1990, and after the establishment of the 22-team breakaway English Premier League in 1992, the business of Association Football changed forever.

Liverpool Football Club (LFC) – The Premiership Years After the resignation of Bill Shankly as manager in 1974, his successor was Bob Paisley. Paisley became the club’s most successful manager in a spell up to 1983 which yielded 20 major trophies. Joe Fagan, who led the club to a historic treble of three major trophies in his first year, succeeded Paisley. In 1985, another managerial legend was to begin his journey, initially as player/manager before dedicating himself to management only. Kenny Dalglish was at that time the greatest player who had ever worn the famous shirt of LFC. He made 515 appearances and scored 172 goals. In total he won six Football League Division 1 Championships (three as player/manager), two FA Challenge Cups (both as player/manager) and The League Cup in his second spell as manager in 2012. After the Hillsborough disaster of 1989, with the resulting stress and the constant need to succeed thereafter, Kenny Dalglish resigned as manager on 22 February 1991. This was five months before the agreement to form The Premier League was signed. In the next ten years LFC won only two trophies. As manager, Graeme Souness won The FA Challenge Cup in 1992 and Roy Evans won The League Cup in 1995. In a relatively lost decade, in which millions of pounds were flowing in and out of the club’s accounts the main business of the day concerning player recruitment (transfer policy) was in total disarray.

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Any comparative or correlative study of Premier League member club finances will show that a strategic investment in the manager and the team players is inextricably linked with the success of the team and the success of the overall business. In this period, LFC had a net expenditure in excess of £75 million, creating a cost of over £37.5 million per trophy success. In comparison, the club’s biggest domestic rival, Manchester United FC, invested in excess of £46 million and won 12 trophies at a cost of less than £4 million per trophy success. Some moderate and relative success returned in the 2001 to 2011 decade, when the club, managed by Gerard Houllier, won four trophies and under Rafael Benitez won two trophies, including a historic fifth UEFA European Cup in 2005. However, once again transfer expenditure and how it was ultimately leveraged was to push the club to the brink of bankruptcy. In this period, net expenditure came in at over £97 million, while Manchester United FC, on the back of the previous ten years of success, was now in a position to strategically invest for additional success on and off the pitch. Manchester United’s net expenditure amounted to £150 million, and another 12 major trophies were secured in this ten-year period. LFC reported an operating loss of £49 million in 2011. From a strategic point of view, as far as the next ten years are concerned, all aspects of the business and its corporate environments must be systematically interrogated. The viable future of the club, the brand and the business appear to be at stake.

New Ownership and a New Era Until 2007, the controlling share ownership of LFC belonged to David Moores, whose family had held this controlling interest for the previous 50 years. Moores eventually sold the club to American businessmen George Gillett and Tom Hicks for a total of £219 million, to include debt. Things quickly went sour when the businessmen fell into disagreement, and consequently they began the search for another buyer. In 2010, accounts were released that showed the holding company to be £350 million in debt, with annual losses of £55 million. The holding company’s major creditors obtained a court order forcing the sale of the club as the major asset, in order to pay off the liabilities. In October 2010, the Fenway Sports Group (FSG) purchased the club and grounds for £300 million. In terms of business strategy, ownership by FSG has proved more successful off the field than on it, as LFC has negotiated some new high-value sponsorships, and followed Manchester United’s lead in signing a growing number of partners from outside the UK and Europe. A four-year shirt sponsorship deal with Standard Chartered Bank, running to 2015, is worth £20 million a season – a £12.5 million increase on the previous Carlsberg deal – while the club also replaced Adidas as kit supplier with US company Warrior Sports, in a six-year deal costing a record £300 million. The agreement also allows the club to take control of its own branded merchandise operation, which was previously controlled by Adidas and is estimated by the club to have the potential to double the revenue the Warrior contract yields. LFC is also expected to develop two sides of the Anfield ground to take capacity from 45,000 to 60,000, at a cost of £150 million.

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Fenway Sports Group (FSG) FSG is a North American-based sports management business consisting of a portfolio of 18 companies. In addition to its ownership of LFC, Boston-based FSG also owns Major League Baseball’s Boston Red Sox, Roush Fenway Racing NASCAR team, New England Sports Network (NESN) and Fenway Sports Management (FSM). FSG also counts the New York Times Company as a major partner. The Boston Red Sox From 2002 to 2009, the Boston Red Sox (Red Sox) had the second-highest regular-season winning percentage in Major League Baseball, qualified for the postseason in a club-record six out of seven seasons, and won more postseason games and World Series championships than any other club. Red Sox fans set a new all-time major league sell-out streak record in 2008 (456 games), and at the end of the 2010 season, the streak continued at 631 consecutive games. In 2010 to 2011, the team’s ownership completed a ten-year plan for major annual improvements to Fenway Park, the Red Sox’ iconic home. The work will improve every facet of the ballpark, while preserving and protecting it for future generations of fans. The average spectator attendance per home game is 34,659, generating a total match day revenue of £64.5 million. Other revenue streams include £56 million from television rights and £10 million from merchandising. The current player salary bill is £98 million. Fenway Sports Management (FSM) FSM specialises in property representation, sponsorship sales and brand management consulting, and serves as the global sports marketing and sales arm of Fenway Sports Group. Since its inception in 2004, FSM has created successful integrated sports marketing programmes for the blue-chip brands it represents, including the Red Sox, LFC, NESN, Roush Fenway Racing, Major League Baseball Advanced Media, Boston College Athletics and PGA Tour Playoff event the Deutsche Bank Championship. FSM’s current and former consulting clients include Verizon Wireless, Dunkin’ Donuts, JetBlue Airways, Solar Blue, Gulf Oil, Athletes’ Performance and the Green Bay Packers. In 2010, FSM helped bring the NHL’s outdoor Winter Classic to Fenway Park, and to capitalise on the excitement of the event, FSM developed Sun Life Frozen Fenway, the first-ever outdoor college hockey doubleheader to take place at the historic park. That summer, FSM also produced football at Fenway, an international friendly match featuring legendary Scottish Premier League club Celtic FC vs. Sporting Lisbon, a leading club from Portugal. New England Sports Network (NESN) NESN is New England’s most-watched sports network, delivered to over four million homes throughout the six-state region and nationally as NESN National. The definitive home for fans of New England sports, NESN has consistently been one of the top-rated regional sports networks in the US. In addition to award-winning Red Sox and Bruins coverage, the network keeps fans informed and entertained with NESN Daily (a nightly sports news programme), over 100 NESN university college sporting events annually, distinctive Original NESN Entertainment (ONE) productions and NESN.com, its popular website.

Key Issues in the Football Market Association football is now established as one of the most significant market sectors in the global leisure industry. In the UK alone, annual attendances at games are in excess of 31 million, and free-to-air and paid television broadcasts of live games attract audiences of 20 million and 4 million respectively. Football continues to dominate the UK’s spectator sports market in general interest terms, with many clubs focusing on creating a wider range of options for following the game, including tablets and new media.

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The average season ticket price among Premier League clubs is £620, and the average stadium capacity utilisation rate is 97%. However, the real UK economy in terms of disposable income and leisure spending is coming under increasing pressure, given stagnant wages and the potential of a triple-dip recession. Ticket prices are increasingly becoming an issue in such an economic climate, and fans are cutting back on purchases of football club merchandise in pursuit of more valuable opportunities of engagement and fulfilment. Some football clubs have responded by allowing fans the option of paying for season tickets in interest-free monthly instalments. There is also a growing trend of fans trading down from match attendance to watching on television. Tablets, for instance, offer a strong potential to emerge as alternative screens within the home. The potential of tablets appears to be the greatest for fans in larger households, where competition for control of the main television remote is strongest. By the end of 2017, Premier League club revenues are expected to top £4.5 billion. Fan loyalty and international reach should continue to buffer the clubs, including LFC, against the impact and fall-out of the global credit crisis and the on-going slow economic growth. What will be paramount is the growth and realignment of the revenue mix. Currently clubs receive around 60% of their revenue from television broadcast rights, with the remaining sources evenly split between match day/attendance and merchandising income. The top three Premier League revenue-per-ticket clubs are Chelsea FC at £1,605 from an average attendance of 42,055, Arsenal FC at £1,543 from an average attendance of 60,355 and Manchester United FC at £1,425 from an average attendance of 76,212. With the top Premier League clubs achieving full or near-full capacity on match day and operating within an economic environment of very low inflation, increased ticket prices are not a viable option for revenue improvement. A strategic challenge for football clubs, including LFC, therefore, is increasing match day revenue per ticket sold. There is an opportunity for technology-led investment in stadiums, to offer improved and updated spectator experiences (eg, expanding WiFi connectivity enabling fans to use dedicated apps). This would raise average revenue per seat. Beyond the stadium, new technologies and media platforms offer exciting opportunities in facilitating new ways of following football, fostering fan loyalty and fan engagement with the game. In the future, and as the economy improves over the mid to longer-term, consumers will demand greater engagement, and at the same time be prepared to pay for that. Some leading clubs are innovating with wireless content delivery (eg, Arsenal’s iPad match programme and Manchester City’s integration of Twitter activity into stadium broadcasts), but there is plenty of scope to go further (eg, developing mobile apps). Football fans increasingly seek an always-on connection with their favourite teams, and given the steady growth in smartphone and tablet ownership among fans, such devices can become the bedrock of improving fans’ experience, loyalty and relationship with clubs. New technologies and social media offer significant opportunities to both football clubs and their key sponsors. Digital versions of the traditional match programmes are paving the way for dynamic, live match apps that feed in everything from team updates to social media activity. Integration of match-related social media activity into the stadium product is opening up new ways of making fans around the globe feel closer to the game. Web traffic expressed as total unique users per month across all devices for the Premier League and its member clubs totalled 5.7 million in August 2012.

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New financial fair play regulations were introduced by UEFA in 2013, which threaten clubs with exclusion from European competitions if losses exceed £40 million annually, reducing to a figure of £28 million by 2019. The Premier League members are also currently exploring a similar model, to be introduced at a figure of £12 million reducing to £5 million by 2019. This is the catalyst that will drive the focus to match day and other commercial revenue streams. The game of football has global interest and the advent of new media and technologies has facilitated reaching global fans. The reach of the game now, and the appeal of Premier League clubs in international territories, have resulted in exposure in about 212 countries. The biggest audience distribution market outside the UK is Asia with 31%, followed by continental Europe with 23% and the Middle East/North Africa with 16%. North America equates to 4% only, but reports suggest that the next television rights deal for this massive territory should triple from its current rate of £80 million. Association football is truly a global business, offering significant opportunities for football clubs to target international fans using innovative sponsorship deals with local partners. The biggest growth in club revenues over the last five years has come from other commercial streams beyond match day. On average, Premier League clubs have enjoyed a near 20% increase from commercial sponsorship partnerships and merchandise sales. In the past four years alone, sponsorship income more than doubled from £72 million in 2009 to £147 million in 2013. In terms of key players in the football sector, the top four Premier League clubs as reflected in total revenue across all income streams, consist of Manchester United FC at £331 million, Arsenal FC at £227 million, Chelsea FC at £226 million and LFC at £183 million. Manchester United FC In revenue terms, Manchester United FC is the third largest club in the world, behind Spanish clubs Real Madrid and FC Barcelona. The club is valued at £1.5 billion and is traded on the New York Stock Exchange. Total revenues increased from £168 million in 2005 to £331 million in 2011.Total profits increased from £41 million in 2005 to £101 million in 2011, and total salaries/wages as a percentage of turnover fell from 51% to 46%. In 2011, broadcast revenues were £119 million, sponsorship revenue was £63 million and merchandising and other commercial income was £34 million. Interestingly the club reported a new revenue category stream of new media and mobile activity, totalling £5 million. The club is committed to a global marketing strategy which aims to capitalise on its popularity around the world, and it has the intention of opening an office on the US East Coast to target media, merchandising and sponsorship deals in the American market. The key aim of its sponsorship business is to continue to focus on international brands, with Chevrolet due to take over from Aon as shirt sponsor from 2014/15. The Chevrolet deal is worth a world record £334 million over seven seasons.

Arsenal FC Arsenal is the fifth largest club in the world by revenue. The club is valued at £1 billion and the majority shareholder (66.6%) is American billionaire Stan Kroenke. Total revenues increased from £133 million in 2005 to £227 million in 2011. Total profits increased from £11 million in 2005 to £34 million in 2011, and salaries/wages as a percentage of turnover were reduced from 62% to 55%. In 2011, match day revenues were £93 million and broadcast revenues were £88 million. Extended runs in domestic and European televised competitions boosted the broadcast revenues. Sponsorship, merchandising and other commercial revenue totalled £46 million. The club is run on extremely prudent and sound financial decision-making, and sees the next phase of its commercial growth to be centred on Asia, with China as a particular target.

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Chelsea FC Chelsea FC is the world’s sixth largest club by revenue and is privately owned by Russian billionaire Roman Abramovitch, who acquired the club in 2003 for £140 million. The club is currently trying to secure a site for the construction of a new 60,000-seat capacity stadium. Total revenues increased from £153 million in 2005 to £226 million in 2011. Total losses increased from £16 million in 2005 to £49 million in 2011, and total salaries/wages as a percentage of turnover increased from 75% to 84%. Match day receipts are £68 million, broadcasting revenue is £101 million and total merchandising and other commercial revenues return £57 million. In September 2012, Chelsea FC extended its shirt sponsorship agreement with South Korean electronics company Samsung until May 2015, at a reported £18 million a season. Other notable commercial scenarios are at Tottenham Hotspur FC, which has a dual shirt sponsorship deal: one partner for Premier League and domestic competition, and one partner for European competitions. The club has also announced a secondary ticketing marketing partnership with StubHub as the exclusive ticket reseller over the next three years. Another example is from current Premier League champions Manchester City FC. The club has signed a shirt sponsorship deal with Ethihad Airways, which also includes the right to carry the stadium name (Ethihad Stadium), worth £400 million over the next ten years.

Liverpool Football Club Limited In terms of key performance indicators for the club, total income for the year 2011 was £183 million, with a revenue mix of £41 million match day receipts, £65 million broadcast receipts and revenues of £77 million from merchandising and other commercial activities. The average season ticket price is £763 and the average match day attendance is 45,555. The average attendance figure represents a capacity utilisation ratio of 98%. The average revenue per seat sold is £898. Turnover increased from £122 million in 2005 to £183 million in 2011. Total profits decreased from a £20 million surplus in 2005 to a £49 million loss in 2011, and the total percentage of salaries/wages to turnover has increased from 57% to 73%. The draft accounts for year ended 2012 show total income at £169 million, with a revenue mix of £42 million match day receipts, £63 million broadcast receipts and revenues of £64 million from commercial activities. The loss before taxation was £41 million. This represents a trading period of ten months, as a result of changing the company accounting dates to coincide with the end of the football league season in May.

The Revenue Streams and LFC Portfolio With little possibility of growing match day revenue by increasing ticket prices, the club needs to establish a strategic approach to maximising revenue per seat sold and enhancing the match day experience. Plans have been submitted to develop the existing Anfield stadium to increase capacity to 60,000, at a total investment required of £150 million. With broadcast distribution rights for Premier League, FA and European competitions centrally negotiated and controlled, the club needs to ensure that its strategic business planning going forward has a positive correlation with success in multiple televised events. Other independent broadcast opportunities need to be developed and exploited, to buffer the club against any regression in the competitive success of the team on the pitch. In terms of the big commercial sponsorship deals, business to date is improving significantly, and demonstrates an untapped value in brand partnership equity. A four-year shirt

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sponsorship deal was signed with Standard Chartered Bank, valued at £20 million per year. Furthermore a new six-year kit deal was signed with Warrior Sports, valued at another £25 million per year. The club has a wide and varied branded and sub-branded merchandise and commercial portfolio. Match day Hospitality LFC offer a range of match day hospitality packages for individuals, groups or corporate customers: Executive boxes, Executive club, Centenary club, No.7 Lounge, The Boot Room Sports Café, and Reds Bar. Each package offers a range of match day viewing options, along with food and drink, and other entertainment. There are other off-site venues available for LFC fans to enjoy pre-match.

The Anfield Stadium Tour and Museum Visitors gain exclusive access behind the scenes at Anfield and entrance to the museum. Official Club Membership LFC Official Membership offers a range of exclusive benefits and a choice of Memberships including Full Membership, Membership Light, Junior Membership and International Membership. Secondary Sponsorships Chevrolet is the official automotive partner. Carlsberg is the exclusive drinks supplier at the stadium. Thomas Cook Sport is the official ticket and match day package reseller and travel provider. Paddy Power is the official betting partner. Garuda Indonesia is the official air carrier for the Asian region. Jack Wolfskin is the official outdoor apparel supplier. Bank of America underwrites the official LFC credit card. Maxxis is the official automotive tyre supplier. Lucozade Sport is the exclusive rehydrating sports drink supplier. The Radisson Park Inn is the preferred national hotel accommodation provider. Stanley is the official construction products and services partner. Konica Minolta is the managed print services partner. Regional marketing partnerships are also in place with brands such as Courts Megastore for home appliances and entertainment in Singapore, and Honda Motorcycles in Thailand. Soccer School Franchises LFC offer players of all abilities around the world the opportunity to experience coaching. There are several packages available, from one-off sessions to football camps, to the International Football Academy. The Academy franchise packages can also provide the opportunity to develop an integrated brand presence by including the option to market LFC retail merchandising.

Conference Facilities Anfield is available for meetings, conferences, events and weddings. Official Club Stores Branded merchandise is available from retail outlets currently located at Anfield, Liverpool City Centre (two stores), Chester City Centre and Belfast City Centre in Northern Ireland. The stores’ main sales come from replica kit and branded football accessory purchases to include football boots and reproduction photos and memorabilia.

LFC Wholesale Wholesale and retail trading partners can apply to become official suppliers of LFC branded merchandise.

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Liverpool Ladies FC Liverpool Ladies are a founder member of the Football Association Women’s Super League, which began in April 2011. The club was formed as Newton Ladies in 1989, changing to become Knowsley Women’s Football Club in 1991. The club's association with LFC started in the 1994/95 season. Since then Liverpool Ladies have been proud to wear the red of LFC. In 2013, Liverpool Ladies became fully integrated into LFC. Liverpool Ladies also run a reserve side in the Premier League Reserve Mid/North Division One and a Centre of Excellence that has under-9, under-11, under-13, under-15 and under-17 teams.

LFC TV, Web and Mobile This is a broadcast subscription service for online and digital consumers. The LFC TV channel is also available on some UK pay-tv packages. Annual revenues from this source are in excess of £5 million. The liverpoolfc.com website has monthly traffic volumes of 675,000. The greatest percentage growth in web traffic in a recent three-month period was from India (up 58%) and South Africa (up 52%). Outside the UK, Ireland has more registered users on liverpoolfc.com than any other country in the world. After UK fans, Australian fans spend the most in the official online store. The club has 12 million fans on Facebook and 1.5 million followers on Twitter. The largest number of Facebook friends and likes are from Indonesia. Friends and likes are increasing from Thailand at an aggregated rate of 17.5% every three months. The second highest growing Facebook region is US. The club has 12 official LFC feeds and 18 international feeds, 13 of which are local language accounts. LFC is officially the world’s most globally active sports brand on social media platforms and networks. The official LFC YouTube channel has 130,000 subscribers and over 18 million video views. The club is currently fine-tuning its international digital marketing strategy further, but closer to home it is rolling out a wireless network at Anfield stadium for the 2013/14 season.

LFC Corporate Social Responsibility (CSR) Initiatives The vision of LFC's work in communities is to use the power of the club's equity to create positive change, not just in its local area, but also in communities throughout the world. Liverpool Football Club achieved Business in the Community's CommunityMark in 2009. The CommunityMark is a national standard that recognises companies that are the best investors in their communities. It is a robust, strategic and independently assessed standard only achieved by 38 companies in the UK. The club benchmarks all of its community activities by this standard of excellence and seeks to fulfill the CommunityMark standards in all of its programmes. The five areas that are the focus of the community department are: education, health, social inclusion, physical activity and charity support, both home and overseas. LFC coaches football and other sports in mainstream and special schools and community centres throughout the year. All sessions are free and open access, even the summer and half-term football camps. In 2010/11, community coaches gave free football camps in impoverished areas of Northern Ireland, the Sudan and South Africa. The disability football work is called Respect 4 All. The disability awareness sessions are delivered in mainstream schools, colleges and universities to provide football sessions in which participants take part without using a particular sense, such as hearing. The award-winning Kickz programme engages with young people to offer a positive influence in their life through football.

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The LFC Action for Health programme encompasses community health and lifestyle initiatives managed by the club and delivered in partnership with local community agencies, Liverpool Primary Care Trust and Liverpool City Council. LFC's education programmes are extensive. The Truth 4 Youth presentations are delivered in schools in the local area. The programmes deliver social messages such as: Drop the Drugs, Shoot Goals not Guns, Ban the Bully, Rule out the Racist, Say No to Knife Crime, Love is Infectious, We is Better than Me and You'll Never Walk Alone. The Tactics 4 Families initiative is aimed specifically at supporting positive family relationships. The programme is targeted at children in school years 4, 5 and 6 and their families, and is designed using the principles of football to cover key messages such as: Work as a Team, Talk a good Game, Play by the Rules, Get off the Bench, Sing your Support and Get up don't Give up. In 2010, the club launched Goals 4 All, an exciting project that brings together several already established community department projects to create a day's experience for local school children and community groups. The Goals 4 Girls project is aimed towards the girls and young women of Liverpool. It delivers female-specific social messages and workshops which focus on sexual health, peer pressure, diet, image consciousness, bullying, substance and alcohol misuse, and other issues. In addition to this, the project offers coaching in a variety of sports and activities, such as football, cheerleading, dancing, zumba and health and fitness. LFC supports and works alongside organisations such as Kick It Out, in order to tackle the issues surrounding discrimination in football. LFC has a strict anti-tolerance policy against any form of discrimination, whether on the grounds of race, age, gender, religion, disability or sexual orientation. The club co-ordinates a European-funded 'Action for Health' programme for North Liverpool, working with local and regional organisations to provide information and educational programmes, health checks and schools programmes to tackle poor health and promote healthy living.

LFC International Markets In terms of fan bases there are already quite a few mature markets dotted around the world. South-east Asia is hugely important, with big supporter networks in Thailand and one million fans based in Indonesia alone. South Africa, Australia and US are also key, as are other strong markets closer to home, such as Ireland and the Scandinavian nations. Maintaining equilibrium between domestic and international interests is a difficult balancing act, but growth in international markets is paramount in terms of a sustainable brand and business development strategy over the next five to ten years.

The brand needs to have a local presence in all of its target markets in order to maximise all local commercial opportunities, while at the same time creating a disciplined structure that allows the business to grow from the inside out. Standardised approaches to international markets still remain by nature of existing strategic partnerships with sponsor brands such as Carlsberg, which retain branding rights in all markets. However, the newest alliances create global cheerleaders in the form of kit supplier Warrior, which is partnered exclusively with LFC in the football market. This relationship-based approach has in itself produced double-digit growth in replica shirt sales globally in a recent 12-month period. Increasingly, though, the strategy is moving to a more geo-targeted regional approach that looks to create large numbers of partners in each region. This consequently creates a brand

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protection mechanism whereby the partners assume emotional equity in the LFC brand, because it is in their commercial interest to develop the association as broadly and deeply as possible within those areas, where they have the rights to do so. For example, the club has an arrangement with Honda in Thailand whereby there are thousands of LFC branded motorcycles on the roads of Bangkok, where the fan base in that city is close to 400,000. A flexible approach to branding partnerships dictates that associations and relationships will look and feel different to this example in somewhere like New York, for instance. Alongside this partnership approach comes what the club refers to as its ‘permanent infrastructure’ for international marketing. This includes retail, first team tours and soccer schools. In other initiatives driven and supported by lead sponsor Standard Chartered Bank, LFC has been able to reach further beyond a traditional football team’s activities into developing markets such as India, Kenya and Nigeria. New product development is imperative within this sphere, and the club is actively looking to engage with education institutions to deliver further and higher education programmes in leadership, management, language and sports marketing. The benchmark international project has Asia at its centre and concentrates on Thailand, Indonesia and China. LFC is actively engaged in developing its core business and income streams in the short to medium-term, while planning in the medium to long-term around new product development and additional strategic partnerships. The club’s own analysis into the fan bases in these regions quantify volume at 14 million fans in Thailand, 16 million in Indonesia and 60 million in China. Around the globe, estimated total fan numbers are in the region of 250 million. LFC has now embarked upon a ten-year mission to globalise its brand. LFC LTD – Managing Director – Ian Ayre When Ian Ayre arrived at LFC as Commercial Director in 2007, his instant assessment was that the club was not achieving all it could. It had not geared up for revenue growth, and consequently lost out against other competing outfits in terms of commercial activities and income generation and maximisation. There was no business management structure, and a total lack of key commercial people in prominent commercial roles, throughout the fabric of the organisation. Sponsorship, retail, media and even catering had been outsourced and were consequently diluting the possibilities for global branding. There were multiple opportunities to connect with a global fan base on a number of different platforms at any given period in time, and those engagement opportunities were not being managed or captured, and therefore were not creating any options to mine and manipulate all sorts of rich data. The first change that Ayre instigated was to bring every commercial aspect of the organisation back in-house as and when the opportunity arose, so as to create the strategic scenario that put LFC back in charge of its own destiny as a profitable and sustainable business. Since this has taken shape, all aspects of LFC’s commercial activities have delivered growth, with revenue up 85% in the period 2007-2012. One of the biggest shirt sponsorship deals has been secured with Standard Chartered Bank, worth in the region of £100 million over five years. In this period, the brand equity in the business has increased by 14% to £250 million. When asked to define the brand proposition, the Managing Director states that LFC is all about inclusiveness, society, community and respect. In fact, he believes that the club’s international expansion plans are guided by these principles and propositions, because they totally resonate with the sense of family and values that define the majority of Asian cultures. The real issue with a global branding strategy is how engagement on a local level can deliver competitive advantage and strategic value, while simultaneously monetising such

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engagement on a number of levels, without commercial overkill and equity erosion. The keys are technology, content and customer lifetime value.

The Future is Red The Reds, as LFC is affectionately known, has a massive opportunity as a business to double brand equity and deliver sustainable profitability and growth over the next ten years. The opportunities are immense, and the global marketplace has the capacity to allow this objective to be realised. It will not be without risk, and constraint will invariably be linked with success on the field of play. The new ownership has been key in the turnaround over the last three years, and Fenway Sports Group (FSG) has a proven track record in sports marketing, asset maximisation, stadium regeneration, contra branding fertilisation, strategic management and investment, and international business development. This is a perfect fit with LFC, its development as a business and its global branding ambitions. The business of LFC has only made a profit in one year (2008) over the past five, which was as a direct effect of player trading and a net surplus of £8 million in transfer activities. As for any football club, domestic and international television and broadcast revenues are a significant slice of the three-way income model that includes match day receipts and commercial activities. Income from commercial activities shows impressive growth of 68% over the last five years, while match day has increased by around £10 million. However, with the plans to refurbish and regenerate the existing stadium, this income will remain stagnant and flat. In addition, beyond the collective agreement that is the English Premier League global television rights deal, opportunities exist to leverage international broadcast opportunities at an organisational business level. As with any business, the solutions to growth and sustainability must be delivered from within, and the current business structure and model are not sustainable. A number of issues need wholesale attention in order to formalise and discipline the business going forward. The management team states that the business strategy of LFC is fourfold, namely improving football performance through a positive playing style and strategic player investment, young player development, improving the fan experience and interaction with the club, and leveraging the club’s global following to deliver revenue growth. Football success is the key success factor. However, the mission, vision and value proposition of the business is at worst, non-existent and at best, difficult to decipher. The strategic intention is inherent but at the same time superficial. There is a lack of strategic clarity, and it is not apparent that the business has the strategic systems and processes in place to leverage data, interaction, engagement and value. Core strategy, in terms of consumption, positioning, competitive advantage and value creation, is unclear and the whole area of strategic marketing management seems to have been overlooked or under-employed. The financial model is also suffering as a legacy of previous ownership regimes, with the necessity for capital injections in the region of £50 million, and the club’s failure to qualify for the lucrative European competitions stifling match day and television revenues for 2013/14. However, FSG places a current value on the LFC business of £375 million, representing an equity increase of £30 million over the past three years. This is a group comprising skilled and experienced business people with proven expertise and a very good record in the management of sports assets. Even though FSG has equity interests valued in the region of £3 billion, significant funds will need to be sourced over the next five years for player acquisition (£100 million), stadium refurbishment (£150 million) and international business development (£50 million). Can the future remain Red?

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Shirt sponsorship and kit deals deliver additional revenues. These deals were early indicators of the business synergies that FSG can leverage, as both the partners were already associated with the Boston Red Sox baseball business, which is also within the group’s portfolio. LFC has the sixth-highest gross commercial revenues globally, and is the fourth-highest merchandiser of replica shirts. Domestic broadcast revenues will increase by a minimum of £10 million per year as a result of the even distribution model. The potential to increase European broadcast revenue via qualification for competitions is £35 million annually. With a stadium capacity of only 45,000, match day income remains flat at £43 million, which is less than half Manchester United’s £100 million from 76,000 capacity. Arsenal FC generates £94 million from a capacity of 60,000, while Chelsea generates £67 million from 42,000. By refurbishing the iconic Boston Red Sox stadium Fenway Park, FSG increased match day revenues by 50% via concessions, merchandising, corporate hospitality and advertising. Stadium naming rights can add a further revenue stream of £10 million per year. In the interim, the strategic management of entry-level price could be significant. LFC operates an equal opportunities policy and the club endeavours to keep staff at all levels informed of matters that affect the progress and growth of business and are of interest to them as employees.

Risk and Strategic Uncertainty The owners realise that there are risks in the development of all businesses. There is risk associated with the player transfer market and player values, wage control, match day attendances, and revenues from broadcasting contracts and football competitions. Liquidity and cash flow are precarious, global trading and supply are subject to currency and interest rate fluctuation and volatility. Credit remains difficult in a depressed and distressed financial services environment, and UK planning regulations are stalling stadium development. One of the biggest constraints in the short term is UEFA’s financial fair play regulations (FFP). These came into force in 2013, and prohibit clubs from spending more than they earn in any accounting period. This was introduced because 50% of all European football clubs were losing money as a result of over-spending and getting into real financial difficulties that was not sustainable. Now the books must balance annually. Sanctions for non-compliance include fines, withholding prize money, broadcast revenues, player transfer bans and ultimately disqualification from European competitions. The English Premier League will introduce a similar financial regulation regime from 2015.

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APPENDIX 1 LFC and Warrior announcement LFC Website News, 18 January 2012 Warrior Sports Inc. and Liverpool Football Club today announced a deal which sees Warrior become the Club's Official Kit Supplier. Anon (2012) Warrior Sports Inc. and Liverpool Football Club today announced a deal which sees Warrior become the Club's Official Kit Supplier. Liverpool FC, 18 January. http://www.liverpoolfc.com/news/latest-news/lfc-and-warrior-announcement [Accessed August 2014]

APPENDIX 2 Chelsea FC: the green team? Green Futures Magazine, 14 July 2011, Anna Simpson The blue football club is emerging as the unlikely leader of a green wave in sports and adventure. Simpson, A. (2011) Chelsea FC: the green team? Green Futures, 14 July. http://www.forumforthefuture.org/greenfutures/articles/chelsea-fc-green-team [Accessed August 2014]

APPENDIX 3

Beer and football: A game of four brands

Marketing Magazine, 1 July 2011, by John Reynolds and Gemma Charles

Will Budweiser be able to stand out from the crowd of beers sponsoring domestic

football competitions?

Reynolds, J. and Charles, G. (2011) Beer and football: a game of four brands. Marketing, 1

July.

http://www.marketingmagazine.co.uk/article/1077289/beer-football-game-four-brands

[Accessed August 2014]

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APPENDIX 4 Sports sponsorship moves into the fast lane Marketing Week, 19 January 2012, by Michael Barnett Barnett, M. (2012) Sport sponsorship moves into the fast lane. Marketing Week, 19 January. http://www.marketingweek.co.uk/analysis/essential-reads/sports-sponsorship-moves-into-the-fast-lane/3033351.article [Accessed August 2014]

APPENDIX 5 Man Utd’s tactics a whole new ball game Financial Times Online, 16 April 2012, by Andrew Bounds Amid the maelstrom of managerial sackings, player bust-ups and fans’ protests, one club has sailed serenely to the top of the football’s most lucrative and combustible league – yet again. Bounds, A. (2012) Man Utd’s tactics a whole new ball game. Financial Times, 16 April. http://www.ft.com/cms/s/0/7eb0685e-86fa-11e1-ad68-00144feab49a.html [Accessed August 2014 - registration (free) required]

APPENDIX 6 Sponsorship: Associations with football do no harm to marketing Financial Times Online, 8 June 2012, by Robin Swithinbank Keeping track of sports stars and their endorsements is nigh on impossible. Valued at an estimated $50 billion globally, sport sponsorship is a huge and growing business. Swithinbank, R. (2012) Sponsorship: Associations with football do no harm to marketing. Financial Times,8 June. http://www.ft.com/cms/s/0/99147746-a3f4-11e1-8878-00144feabdc0.html#axzz3CAOL4thn [Accessed August 2014 - registration (free) required]

APPENDIX 7 Fenway Sports Management and LRMR Marketing & Branding Announce a Strategic Business Partnership Fenway Sports Management, 6 April 2011 LRMR Principals LeBron James and Maverick Carter Team up with FSM Owners John Henry and Tom Werner to Expand Sports Marketing Enterprise James and Carter to Acquire an Interest in Liverpool FC

http://www.businesswire.com/smp/FSM-LRMR-Partnership/ [Accessed August 2014]

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APPENDIX 8 Has the beautiful game dropped the ball? Marketing Week, 27 Feb 2013, by Jonathan Bacon Football is being shown the red card from fans and pundits for its on and off-pitch performance. Sponsors and clubs must offer more sophisticated engagement opportunities to score positive attention - and help the sport clean up its act. Bacon, J. (2013) Has the beautiful game dropped the ball? Marketing Week, 27 February. http://www.marketingweek.co.uk/analysis/essential-reads/kicking-off/4005756.article [Accessed August 2014]

APPENDIX 9 Football clubs offset match-day revenues dip with real-time marketing Marketing Week, 5 July 2013, by Sebastian Joseph Premier League match-day revenues are set to stall in the coming seasons as clubs opt to freeze ticket prices to pep up attendances. For the likes of Manchester City, Liverpool FC, Celtic and Rangers the need to create new revenue streams has led to the rollout of high-density Wi-Fi networks in their stadiums that allow sponsors to target fans with real-time promotions during games. Joseph, S. (2013) Football clubs offset match-day revenues dip with real-time marketing. Marketing Week, 5 July. http://www.marketingweek.co.uk/news/football-clubs-offset-match-day-revenues-dip-with-real-time-marketing/4007254.article [Accessed August 2014]

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APPENDIX 10

Source: Mintel, Football - UK, November 2012

APPENDIX 11

FA Premier League television audience distribution, by continent, 2011/12

Continent Audience %

Asia 31

Europe (excluding UK) 23

UK 16

Middle East and North Africa 16

Africa 7

North America and Caribbean 4

South and Central America 2

Oceania 1

Source: Mintel, Adapted from FA premier league fan survey, 2012

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APPENDIX 12

Source: Mintel, Football - UK, November 2012

APPENDIX 13

Source: Mintel, Football - UK, November 2012

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APPENDIX 14

Source: Mintel, Football - UK, November 2012

APPENDIX 15

Source: Mintel, Football - UK, November 2012

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APPENDIX 16 Frequency of attending live football matches, July 2012 Base: 2,000 internet users aged 16+

Barclays Premier League %

Amateur/semi-professional games %

Other professional games %

Regularly (ie, once a month or more)

7 4 4

Occasionally (ie, less than once a month)

8 9 9

Have done but not in last 12 months

20 21 20

Have never done

65 67 66

Source: Mintel, Football - UK, November 2012

APPENDIX 17 Liverpool Football Club and Athletic Grounds Limited Balance Sheet for the period 1 August 2011 to 31 May 2012 2012 2011 £000 £000 Fixed assets Tangible 28,508 28,674 Intangible 120,910 160,210 Investments 15,890 15,890

Total fixed assets 165,308 204,774 Current assets Stocks 5,584 9,091 Debtors (including £13.3m (2011: £12m) due after more than one year)

48,574 57,633

Cash in hand and at bank 4,923 2,534

Total current assets 59,081 69,258 Creditors: amounts falling due within one year (113,165) (185,540)

Net current liabilities (54,084) (116,282)

Total assets less current liabilities 111,224 88,492

Creditors: amounts falling due after more than one year (105,966) (42,712)

Net (liabilities) 5,258 45,780

Shareholder’s funds 5,258 45,780

Source: Adapted from The Liverpool Football Club and Athletic Grounds Limited Director’s report and financial statements for the period from 1 August 2011 to 31 May 2012

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APPENDIX 18 Liverpool Football Club and Athletic Grounds Limited Profit and Loss Account for the period from 1 August 2011 For

the 10 month period ended 31 May 2012 £000

For the year ended 31 July 2011 £000

Turnover 168,998 183,640 Cost of sales (17,323) (21,239)

Gross Profit 151,675 162,401 Other operating income 40 50 Total administrative expenses (186,847) (252,121)

Operating profit/ (loss) (35,132) (89,670) (Loss)/profit on disposal of players’ registrations (1,1721) 43,291

Profit/(loss) before interest and taxation (36,853) (46,379) Source: Adapted from The Liverpool Football Club and Athletic Grounds Limited Director’s report and financial statements for the period from 1 August 2011 to 31 May 2012

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APPENDIX 19 Deloitte Football Money League 2011 (top 15)

Club Country Matchday

£million

Broadcasting

£million

Commercial

£million

Total Revenue £million

Real Madrid Spain 111.6 165.7 155.7 433

Barcelona Spain 100 165.9 141.1 407

Manchester United

England 108.6 119.4 103.4 331.4

Bayern Munich

Germany 65 64.8 160.5 290.3

Arsenal England 93.1 87.4 46.3 226.8

Chelsea England 67.5 101.4 56.7 225.6

AC Milan Italy 32.1 97.3 82.9 212.3

Internazionale Italy 29.7 112.3 48.9 190.9

Liverpool FC England 40.9 65.3 77.4 183.6

Schalke 04 Germany 33.6 67.1 82.1 182.8

Tottenham Hotspur

England 43.3 83.1 37.1 163.5

Manchester City

England 26.6 68.8 57.8 152.3

Juventus Italy 10.5 80.1 48.4 139

Olympique de Marseille

France 23.1 70.6 42.1 135.8

AS Roma Italy 15.9 82.3 31.4 129.6

Source: Redacted from Fan power: Football Money League (Deloitte February 2012)

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APPENDIX 20

Deloitte Football Money League 2012 (top 15)

Club Country Matchday

£million

Broadcasting

£million

Commercial

£million

Total Revenue £million

Real Madrid Spain 102.1 161.2 151.4 414.7

Barcelona Spain 94.1 145.5 151.2 390.8

Manchester United

England 98.7 104 117.6 320.3

Bayern Munich

Germany 69.1 65.9 163.1 290.3

Chelsea England 77.7 112.8 70.5 261

Arsenal England 95.2 87.2 52.5 234.9

Manchester City

England 30.8 88.2 112.1 231.1

AC Milan Italy 27.4 102.2 78.3 207.9

Liverpool FC England 45.2 63.3 80.2 188.7

Juventus Italy 25.7 73.3 59.1 158.1

Borussia Dortmund

Germany 25.4 48.9 78.7 153

Internazionale Italy 18.8 90.9 40.7 150.4

Tottenham Hotspur

England 41.1 61.6 41.5 144.2

Schalke 04 Germany 34.9 30.7 75.6 141.2

Napoli Italy 19.9 69.5 30.7 120.1

Source: Redacted from Captains of Industry: Football Money League (Deloitte January 2013)

Chartered Postgraduate Diploma: Grade Descriptors Level 7

Concept 15%

Application 30%

Evaluation 45%

Presentation 10%

Grade A

This grade is given for work that meets all of the assessment criteria to secure at least 70% and demonstrates a candidate’s ability to:

identify relevant theoretical principles commensurate with postgraduate level and critically apply and evaluate these within a senior marketing management context using originality of thought

critically analyse complex, incomplete or contradictory areas of knowledge of a strategic nature and communicate the outcome effectively synthesise information, with critical awareness, in a manner which is innovative and original utilise knowledge, theories and concepts from the forefront of the discipline/practice, demonstrating a mature and analytical understanding and awareness of managing and working at a strategic level

produce reliable, valid and incisive conclusions and strategic recommendations based on findings critically evaluate marketing concepts, theories and methodologies, arguing alternative approaches, with evidence of an exceptional level of conceptual understanding of strategic issues apply initiative and originality of thought in problem solving and make decisions in complex and unpredictable situations

engage confidently in academic and professional communication, reporting on actions clearly, autonomously and competently

Grade B

This grade is given for work that meets all of the assessment criteria to secure at least 60% and demonstrates a candidate’s ability to:

identify relevant theoretical principles commensurate with postgraduate level and critically apply and evaluate these within a senior marketing management context

analyse complex, incomplete or contradictory areas of knowledge of a strategic nature and communicate the outcome appropriately synthesise information in an effective manner, utilising appropriate knowledge, theories and concepts apply relevant contemporary issues demonstrating a detailed understanding and awareness of managing and working at a strategic level

produce reliable and informative conclusions and strategic recommendations based on findings evaluate marketing concepts, theories and methodologies, arguing a range of approaches, with evidence of a high level of conceptual understanding of strategic issues apply initiative in problem solving and decision making

engage in academic and professional communication, reporting on actions clearly, autonomously and competently

Grade C

This grade is given for work that meets enough of the assessment criteria to secure at least 50% and demonstrates a candidate’s ability to:

identify relevant theoretical principles commensurate with postgraduate level and apply these within a senior marketing management context

analyse areas of knowledge of a strategic nature and communicate the outcome satisfactorily analyse information in an appropriate manner, utilising knowledge of theories and concepts include some contemporary issues demonstrating an awareness of managing and working at a strategic level

produce reliable conclusions and strategic recommendations based on findings evaluate marketing concepts, theories and methodologies, with evidence of a competent level of understanding of strategic issues apply techniques of problem solving and decision making

engage in academic and professional communication, reporting on actions clearly, autonomously and competently

Grade D

This grade is given for borderline work that does not meet enough of the assessment criteria to secure a pass and is within the band 45-49%. This may be due to:

repeating case material rather than evidencing knowledge of the marketing discipline at Postgraduate Diploma level

a lack of knowledge and understanding of a strategic nature limited analysis of information with limited reference to theories and concepts limited inclusion of contemporary issues and limited awareness or understanding of managing and working at a strategic level

superficial conclusions and strategic recommendations which lack depth insufficient evaluation of marketing concepts, theories and methodologies, evidencing a lack of understanding of strategic issues an inability to apply appropriate techniques for problem solving and decision making

inappropriate use of academic and professional communication

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