Interesting article on what kept Kraft from owning Liverpool soccer team

[MoLewisrocks]

It would appear, as many of us here have expounded over the last year or so, that it matters to Bob that he have a sound business environment and relatively level playing field in which to operate.

Robert Kraft, one of the most influential and successful men in North American professional sport, said yesterday that he had drawn back from buying Liverpool in 2005 because of the unregulated finances of top-level European football.

The owner of the New England Patriots, who have won the NFL’s Super Bowl three times this decade, and the New England Revolution of Major League Soccer, Kraft felt that the constant upward spiral of transfer fees and wages that favours a few wealthy clubs was a deal-breaker. A salary cap – common in American sport and an aim of Michel Platini, the Uefa president, would have changed his mind.

“I wanted to do it,” he said. “I met with David Moores [the former Liverpool owner], who is a fine gentlemen, and we came very close to buying it, very close. But in the end, my instinct was - not without a salary cap. If a salary cap come to the English Premier League, I’d buy a team in a minute.”

"If we’re playing by the same rules, then it’s not just about who has the most money,” he said. “Green Bay, Kansas City or Arizona – who went to the Super Bowl last year – have to believe that they can win. In the Premier League you can see that there will always be a few teams that are dominant, and I don’t know that it’s fair to the passionate fans in the other cities."

Robert Kraft turned down chance to buy Liverpool | Liverpool - Times Online

 

[PatsFanSince74]

It would appear, as many of us here have expounded over the last year or so, that it matters to Bob that he have a sound business environment and relatively level playing field in which to operate.






Robert Kraft turned down chance to buy Liverpool | Liverpool - Times Online

Yeah, I heard that this morning. Thanks for posting it! I wonder also if he isn't using that interview to send a message to his fellow owners and the Players Union that he'll be playing hardball on the new CBA. Thanks again.

 

[Mike the Brit]

It's Economics 101.

Open competition (no barriers to entry) will drive down profits to zero as competitors bid up the price of resources (players' wages). If there are side benefits to club ownership, then sports franchises will become rich men's toys -- not ways for very rich men to become even richer. This is the EPL.

Of course, with entry barriers (fixed number of franchises, no promotion or relegation) monopsony labour market (= the draft) and anti-trust law exemption -- i.e. the NFL -- owning a franchise is a license to print money.

Kraft (unlike the Glazers, Lerner) is smart enough to realize that his success isn't (just) about being smart.

 

[spacecrime]

Walk softly and carry a big stick.

He says a cap is necessary for the health of the game, but also said earlier that not having a cap might be necessary for the health of the game.

Translation: Salray cap is needed, but the current structure (salary distribution) is not acceptable.

I still kinda believe the players won't get the message and it will take an uncapped year to see if more than 2-3 owners will go nuts, or if there will be a general decline in average salary. Hopefully, they will get the message because I think the owners are serious about the percentage of money and tykpe of money going to the players, as evidenced when THEY activited the clause ending the contract with the CBA. Never forget, they chose to bow out.

Will there be an uncapped year? I think so, but only time will tell.

 

[spacecrime]

It's Economics 101.

Open competition (no barriers to entry) will drive down profits to zero.

Economics 101 says MacDonalds and Burger King have zero profits due to competition. Coke and Pepsi going bankrupt, are they?

History says otherwise. There were half a dozen robber-barons in the late 1800's, all fighting for the same resources (railroad rights and lumber rights and mineral rights) and I think they did pretty well for themselves. In fact, they did so well for themselves that labor laws became necessary because workers basically became slaves.

Maybe the Industrial Revolution in Britain was a major victory for the workers, but in this country, not so.

US players would do well to read history.

 

[matt9071]

If Kraft bought Liverpool I would probably become a fan over night.

 

[Mike the Brit]

Economics 101 says MacDonalds and Burger King have zero profits due to competition. Coke and Pepsi going bankrupt, are they?

History says otherwise. There were half a dozen robber-barons in the late 1800's, all fighting for the same resources (railroad rights and lumber rights and mineral rights) and I think they did pretty well for themselves. In fact, they did so well for themselves that labor laws became necessary because workers basically became slaves.

Maybe the Industrial Revolution in Britain was a major victory for the workers, but in this country, not so.

US players would do well to read history.

Umm... I don't come here to argue politics so I'll keep off that, but from what I can understand of what you say, your examples precisely confirm my point.

Coke and Pepsi are two brands and brands (to cut a long story short) are ways of creating monopoly power (anyone can add sugar and CO2 to water; not everyone can sell Coke). Hence their profitability. MacDonalds and Burger King are brands too. But the important thing there is that they don't have to compete for scarce resources in the way that sports franchises do. If one burger-flipper asks for too much money, there are a hundred others out there you can employ. Not so with strikers or wide receivers!

 

[nabwong]

Competition doesn't drive profit down to zero, IF the competitors are profit driven. There are people like Chelsea owner Abramovich who really don't give a crap about profit. All he cares about is buying championships.

Being a Liverpool and Patriots fan, i'd have love it if Kraft had control of the club. I think Rafa Benitez is football's Bill Belichick.

 

[upstater1]

What Kraft says about Euro soccer overall is true, BUT...

The big clubs that can afford to plunder the small ones become international marketing brands that dwarf the value and revenues of the vast majority of NFL teams.

In other words, buying a club like Liverpool would have allowed Kraft to exploit the soccer system.

One thing that some very smart soccer owners have recently understood is that the UK market is relatively small by comparison. But the world market, and the Premier League's place within it, is HUGE. The fan loyalties that made Liverpool so expensive back in 2005 do NOT exist on a worldwide level, where international fans are much more interested in players and star power.

When I lived in Italy in the 80s, I became a fan of AC Milan for this reason. Then I lost interest. In the UK, you have loyalties. For world fans, those loyalties do not exist.

If I were Kraft, I would buy the Queens Park Rangers for a pittance and then I'd start buying players left and right. I guarantee you it would work. The only barrier to this is the idea that sports franchises are more ego boosts than anything else, and you're probably better off investing elsewhere. Nonetheless, I would buy QPR, then go on a Snyder-esque spending spree, before I ever plunked money down for, say, the Cleveland Browns.

 

[Mike the Brit]

If I were Kraft, I would buy the Queens Park Rangers for a pittance and then I'd start buying players left and right. I guarantee you it would work. The only barrier to this is the idea that sports franchises are more ego boosts than anything else, and you're probably better off investing elsewhere. Nonetheless, I would buy QPR, then go on a Snyder-esque spending spree, before I ever plunked money down for, say, the Cleveland Browns.

Actually, something similar has happened in Germany with a club called 1899 Hoffenheim. They just finished seventh in their first season in the Bundesliga, having been in the fifth division in 2000. In fact, they were at the top of the table half-way through the season, but lost their best player with an ACL injury (sound familiar?)

The guy who put the money in made a fortune from SAP (and, apparently, used to be a player for the club) -- so he isn't looking to make a profit.

TSG 1899 Hoffenheim - Wikipedia, the free encyclopedia

 

[NumenorBlader]

Competition doesn't drive profit down to zero, IF the competitors are profit driven. There are people like Chelsea owner Abramovich who really don't give a crap about profit. All he cares about is buying championships.

Being a Liverpool and Patriots fan, i'd have love it if Kraft had control of the club. I think Rafa Benitez is football's Bill Belichick.

I would probably be sick if Kraft took over Liverpool...
And Sir Alex Ferguson is closer to BB then Rafa is... both media whizzes, hard to please managers, and winners essentially

Nah concerning the actual story, the thing with Soccer is that the market is dominated by a few, and you have to pick the right team to actually get returns on your investment. Even United being bought by the Glazers has given us such a big backlog of debt which is luckily being paid off due to the team winnings. I wonder what would have happened if we hadn't won. With Liverpool, the past few seasons (bar 08/09 season) have been pretty rocky... any long standing debt would have not only set Liverpool back, but unless Kraft wanted a long term investment would have crippled him and the Patriots organisation.

The "problem" in Soccer is its greatest "strength" - it is a worldwide, global game. Soccer isn't closed off like the NFL with owners meetings, limiting player transactions to within one nation... this is why by its nature soccer has those trophy monopolies... which is why buying any team whilst already owning another is always a risky, volatile move with careful consideration, something I doubt Kraft would have undertaken if he thought the team he was buying wouldn't give him the same returns and some profit. As Chelsea, Man City et al. have shown, you can't win trophies with a massive pot of money, you need careful work all around the club.

Blader.

 

[Liverpool_Patriot]

If Kraft bought Liverpool I would probably become a fan over night.

You should become a fan anyway. We're winning the league this year and the Champion's League. We are the best team in the Premier League now that Ronaldo has went to Madrid

 

[Seymour93]

A salary cap would never happen in the Premier League or in the rest of Europe for that matter. There would have to be a consensus to make this massive change to the system and the big clubs which win the trophies would never agree to it.

The major difference between the NFL and European soccer is that there is no promotion and relegation over here. If they introducted a salary cap in Europe then that would mean that clubs with literally hundreds of millions of fans worldwide, such as Manchester United, Liverpool, Real Madrid, Barcelona, AC Milan, etc., could easily suffer relegation to a lower division if they have a bad season (they would be more likely to have a poor season if there was a salary cap obviously). There are no Detroit Lions in Europe. The teams that are bad get punished on the field and financially by being relegated to a lower quality division at the end of season.

For more: Promotion and relegation - Wikipedia, the free encyclopedia

Another difference between our sports and theirs' is that instead of going to universities and then going through the process of the draft, in Europe they sign kids younger (and older) than 10 years old to join their soccer schools (academies). Instead of going to junior high and high school, these kids spend their entire adolescence with their respective soccer clubs. Now all of the first team are not required to come from their academies, but it's certainly more advantageous from a financial perspective for the club to develop youngsters through their academies than it is to sign free agents who cost millions. Big clubs with traditionally good academies, such as Manchester United and Barcelona, I believe would be able to cope with the salary cap if it were put in place (which is unlikely as previously stated), but other high profile clubs who totally rely on trading for or signing multi-million dollar veteran players would fiercely resist a salary cap.

It would be fascinating to see a salary cap in Europe. No doubt more American billionaires like Kraft would get in on the game over there if there was one. But there is a backlash brewing towards these foreign billionares who are buying clubs left and right (and it's not just Americans who are buying them, Arab and Russian billionaires are heavily involved). The heads of UEFA and FIFA have warned against them, the fans are weary, and the clubs are in danger of being straddled with debt through the takeover process (as has happened with the club I support, Manchester United). And what happens when the billionaire wants out (like the club he's bought hasn'[t lived up to on-field expectations and worse yet, suffered relegation)? Unlike in America, there is not a long history of individual businessmen owning entire clubs in Europe. They were run more in the fashion of charitable organizations, by and for the local communities.

I think Kraft was smart to stay away. As Mike said, he basically has a license to print money by owning an NFL franchise. Why risk this mini-sports empire he's built? For prestige? He would've had to spent hundreds of millions just buying Liverpool, then hundreds of millions more on players (every summer and winter he would be expected to cough out major cash). Liverpool have been on the decline for the past 20 years anyway.

 

[NumenorBlader]

...

Listen to Seymour... he knows what he's talkin about...

Blader.

 

[SeymourTrophies]

One thing that I think most American sports fans don't get is that in soccer, most transactions are like the one where the Red Sox got Daisuke except it's an open auction as opposed to the silent auction for Daisuke.

There is still free agency, but you have to send the team a dump truck full of money to even negotiate with a player that is under contract with a team. Has anyone seen the latest figures Real Madrid (the yankees of soccer) have spent to turn their club around? 170 or something like that Euros have been sent to AC Milan and Manchester to even allow Kaka and Ronaldo to leave their clubs. That doesn't include the ridiculous contracts the players get. In the end, it is more money out of the owners' pockets.

I don't necessarily think Kraft's actions back then reflect his thoughts on a salary cap. They certainly reflect how he feels about spending ******ed money for one player.

The EPL is so freakin' saturated with wealth now (I realize that he was interested in 05) it would make sense for people to go elsewhere if they wanted to make money. Spain (less so because there are two clear cash cows), Germany, and Italy would be the places to go. Italy especially because if you build a new stadium in the country where stadiums are 30 years old, you're gonna rake it in.

 

[spacecrime]

Umm... I don't come here to argue politics so I'll keep off that, but from what I can understand of what you say, your examples precisely confirm my point.

Coke and Pepsi are two brands and brands (to cut a long story short) are ways of creating monopoly power (anyone can add sugar and CO2 to water; not everyone can sell Coke). Hence their profitability. MacDonalds and Burger King are brands too. But the important thing there is that they don't have to compete for scarce resources in the way that sports franchises do. If one burger-flipper asks for too much money, there are a hundred others out there you can employ. Not so with strikers or wide receivers!

Totally off the point. I was only doubting that free competition result for resources results in zero profits is basic Economics 101.

Strikers have nothing to do with it, nor are WRs scarce. There are enough to fill rosters now, about 150 NFL-quality WRs, and there will not be a need for more that 150 next year.

Wages of the top 5 or 6 may rise or they may fall. Ditto, the next 30-40 great WRs, and the remaining 100 interchangable WRs. We will have to wait and

I don't know and neither do you. But this

It's Economics 101.

Open competition (no barriers to entry) will drive down profits to zero as competitors bid up the price of resources (players' wages)..

is not economics 101.

That no cap will result in the owners making no profit is not science nor is it a fact. It is merely your opinion of what will happen.

Not sure now why I even bothered; my only comment was that you were confusing what you think will happen with basic economics.

If you want to believe otherwise, be my guest.

 

[NE_Paddy]

I would probably be sick if Kraft took over Liverpool...
And Sir Alex Ferguson is closer to BB then Rafa is... both media whizzes, hard to please managers, and winners essentially

Nah concerning the actual story, the thing with Soccer is that the market is dominated by a few, and you have to pick the right team to actually get returns on your investment. Even United being bought by the Glazers has given us such a big backlog of debt which is luckily being paid off due to the team winnings. I wonder what would have happened if we hadn't won. With Liverpool, the past few seasons (bar 08/09 season) have been pretty rocky... any long standing debt would have not only set Liverpool back, but unless Kraft wanted a long term investment would have crippled him and the Patriots organisation.

The "problem" in Soccer is its greatest "strength" - it is a worldwide, global game. Soccer isn't closed off like the NFL with owners meetings, limiting player transactions to within one nation... this is why by its nature soccer has those trophy monopolies... which is why buying any team whilst already owning another is always a risky, volatile move with careful consideration, something I doubt Kraft would have undertaken if he thought the team he was buying wouldn't give him the same returns and some profit. As Chelsea, Man City et al. have shown, you can't win trophies with a massive pot of money, you need careful work all around the club.

Blader.

Of course you're a Utd fan... you're from London.

 

[nabwong]

And Sir Alex Ferguson is closer to BB then Rafa is... both media whizzes, hard to please managers, and winners essentially

As Chelsea, Man City et al. have shown, you can't win trophies with a massive pot of money, you need careful work all around the club.

Blader.

1. Erm... no... Ferguson has been spending money like crazy...Nistelrooy, Veron, Nani, Rooney, Berbatov, Ferdinand, Carrick etc. I believe these players cost upwards of 15m. By contrast, Benitez has bought 2 players over 15m (Torres and Mascherano). 3, if you count Keane but was quickly sold when it clearly didn't work out. Most of Rafa's signings are below 10m. That's more in line with what BB is doing, getting more B+ players...Basically, Rafa has had to produce more with less. Ferguson won only an FA cup (or was it league cup) his first 6 years and then finally a league trophy in the 7th year. I still respect the guy, but he's more like Tony Dungy than BB.

2. Chelsea have clearly shown that they could buy championships. Bought the best coach (Mourinho) and the best players. (Cech, Drogba, Essien etc)

 

[Mike the Brit]

Totally off the point. I was only doubting that free competition result for resources results in zero profits is basic Economics 101.

Strikers have nothing to do with it, nor are WRs scarce. There are enough to fill rosters now, about 150 NFL-quality WRs, and there will not be a need for more that 150 next year.

Wages of the top 5 or 6 may rise or they may fall. Ditto, the next 30-40 great WRs, and the remaining 100 interchangable WRs. We will have to wait and

I don't know and neither do you. But this is not economics 101.

That no cap will result in the owners making no profit is not science nor is it a fact. It is merely your opinion of what will happen.

Not sure now why I even bothered; my only comment was that you were confusing what you think will happen with basic economics.

If you want to believe otherwise, be my guest.

Economics 101, as you may recall, starts with "perfect competition". In perfect competition, products are homogenous (no Coke, no brands), resources are not scarce (no Tom Bradys) and there are no barriers to entry (no Detroit Lions). In consequence, profits fall to zero (that is, firms that stay in business make only "normal" profits, those that cover the cost of capital and pay a wage to the managers).

How like this is football in Europe? Very. Although resources are not limitless, there is a free market for them (no draft, full free agency, no anti-trust exemption for clubs). There are also no barriers to entry (promotion and relegation -- see Seymour93's post).

Do clubs make profits? Overall, in fact, no. Like a casino, some come out ahead for a time, but some come out even further behind, and you'd have to be a great optimist to think that you could come out consistently ahead -- although one or two may manage it (Arsenal, perhaps?). If you look at the figures from Deloitte's, overall, the clubs don't even seem to make "normal" profits. There is an explanation for this. There are intrinsic benefits to owning clubs -- rich men (especially rich men with dodgy reputations -- think Berlusconi, Robert Maxwell, Mohammed Fayed) want them, so, when a big club is about to go bankrupt, there is usually a shady sheik or mafia-linked Russian oligarch waiting round the corner to pump in money.

Is this all my opinion of what will happen? No, it's my opinion of why what does happen, happens.

(On one thing at least we're agreed: I have no idea why you even bothered.)

 

[BritPat]

Well, a subject close to my heart. There's been plenty of buzz about Kraft's potential ownership of the club over here, many fans taking exception to his use of the word Franchise, although the intelligent ones are also aware of just exactly what he's accomplished with the Pats.

If Kraft bought Liverpool I would probably become a fan over night.

You should do anyway, we have football's Tom Brady (Steven Gerrard), and in Fernando Torres, something akin to Randy Moss (although possibly closer to Larry Fitzgerald/Calvin Johnson). The manager (who I'll talk about shortly) is da man, and the history of the club is amazing. I've seen more than one American sports journalist compare us to the Red Sox as well.

One thing that some very smart soccer owners have recently understood is that the UK market is relatively small by comparison. But the world market, and the Premier League's place within it, is HUGE. The fan loyalties that made Liverpool so expensive back in 2005 do NOT exist on a worldwide level, where international fans are much more interested in players and star power.

Not entirely true. England is the only country in the world that supports 4 professional football leagues, and the Championship (basically division 2) is something like the second or third highest attended league in Europe. You have teams in League 2 (division 4), getting crowds of 10,000+

When I lived in Italy in the 80s, I became a fan of AC Milan for this reason. Then I lost interest. In the UK, you have loyalties. For world fans, those loyalties do not exist.

If I were Kraft, I would buy the Queens Park Rangers for a pittance and then I'd start buying players left and right. I guarantee you it would work. The only barrier to this is the idea that sports franchises are more ego boosts than anything else, and you're probably better off investing elsewhere. Nonetheless, I would buy QPR, then go on a Snyder-esque spending spree, before I ever plunked money down for, say, the Cleveland Browns.

QPR are now owned by a couple of billionaires - Formula 1 moguls Bernie Ecclestone and Flavio Briatore, who are trying to do what you suggest, so you're late with your suggestion

I would probably be sick if Kraft took over Liverpool...
And Sir Alex Ferguson is closer to BB then Rafa is... both media whizzes, hard to please managers, and winners essentially

Is he balls. Ferguson is a scumbag, a cheat and a bully. And since when was Belichick a media whiz? Benitez is the most like Belichick in terms if his distrust of the media (he reveals nothing to them, and they constantly go out of his way to have a pop at him, mostly over nothing - sound like anyone?), and who constantly praises the opposition before games, giving them no reason to play the disrespect card. And he's a tactical genius. Ferguson simply used the "give it to Ronaldo" for the last few seasons.

Nah concerning the actual story, the thing with Soccer is that the market is dominated by a few, and you have to pick the right team to actually get returns on your investment. Even United being bought by the Glazers has given us such a big backlog of debt which is luckily being paid off due to the team winnings. I wonder what would have happened if we hadn't won. With Liverpool, the past few seasons (bar 08/09 season) have been pretty rocky... any long standing debt would have not only set Liverpool back, but unless Kraft wanted a long term investment would have crippled him and the Patriots organisation.

You don't invest in football 'expecting a return on your investment', it's been proven time and time and time again that it's a black hole in terms of that. There are probably only 5 clubs in the world that can do that for you.

The "problem" in Soccer is its greatest "strength" - it is a worldwide, global game. Soccer isn't closed off like the NFL with owners meetings, limiting player transactions to within one nation... this is why by its nature soccer has those trophy monopolies... which is why buying any team whilst already owning another is always a risky, volatile move with careful consideration, something I doubt Kraft would have undertaken if he thought the team he was buying wouldn't give him the same returns and some profit. As Chelsea, Man City et al. have shown, you can't win trophies with a massive pot of money, you need careful work all around the club.

Blader.

But Chelsea have won trophies thanks to a big wedge of cash, or am I imagining the two league titles and the FA Cups/League Cups? Agree with the rest though.

You should become a fan anyway. We're winning the league this year and the Champion's League. We are the best team in the Premier League now that Ronaldo has went to Madrid

A tad hasty We're not bad though.