Boston Red Sox v Liverpool FC

Boston Red Sox v Liverpool FC
August 20, 2012 Si Steers

By Simon Steers.

One of the unique selling points for Fenway Sports Group when they talk about a desire to ‘win trophies’ and get Liverpool back to where it belongs is that they have done it before with the Boston Red Sox.

There have been a lot of similarities drawn between the situation at the Red Sox when FSG took over and Liverpool.

The methodology and blueprint that FSG have used at the Red Sox can give us some insight into how the Liverpool journey may unfold. Whilst baseball is a very different sport to football, there are some business and sporting principles that can be integrated across sports.

I thought it would be interesting to look at the Red Sox journey under FSG and try and draw some parallels with how that might influence the direction of Liverpool. To help me understand and assess that journey, I have asked two Red Sox fans to give a view as to how successful FSG have been at the Red Sox – one of those is a Fulham fan as well, to give an ‘impartial’ view of the FSG model.

Background

Having recently celebrated 100 years at their famous home ‘FenwayPark’, the Boston Red Sox are one of the oldest baseball franchises in the US. The Red Sox have a rich heritage, but before the arrival of FSG had a reputation as ‘always the bridesmaid but never the bride’, fuelled by the failure to win a World Series since 1918.

NESV (New England Sports Ventures), fronted up by John Henry, arrived at the Red Sox in 2002, acquiring the franchise for around $600m in a deal that also included NESN (the real money maker in the FSG portfolio, generating around a billion dollars profits a year), Fenway Park itself and some other minor stuff. There was some initial controversy over the sale around a long standing relationship the previous owners – the Yawkey family – had with a Boston cancer charity ‘The Jimmy Fund’.

These issues were resolved quickly as Henry and co set up the Red Sox foundation (see later in article) which has kept the relationship between the Red Sox and the Jimmy Fund strong – with over $10m in donations and fundraising over the past four years alone.

The reaction to the new owners was initially one of caution and distrust recalls Russ Goldman, a lifelong Sox fan

“I think many Red Sox fans were very sceptical of John Henry and his partners. This group was not from Boston, and I think that bothered many fans. I feel Bostonians wanted owners that knew the history and the passion of the club.”

NESV were very clear from the outset that they wanted the Red Sox to win the World Series and to be competitive right at the top of the sport. But they were also pragmatic enough to recognise that the spending power of the Yankees meant that they would have to follow a different journey – one where money was invested wisely, and where a focus on youth and development would have to be the foundation of the blueprint.

Methodology

The Red Sox, when NESV acquired them, were a franchise with a great heritage and fanatical support. They were playing in a ball park that was steeped in history, but wasn’t fit for purpose in a modern game. They were also a distance behind the Yankees in terms of revenue and ability to compete financially.

With Henry and Werner at the helm the blueprint developed into three key areas which can probably be categorised as:

– Sporting

The Red Sox approach to the game is again nicely summed up by Russ:

“The blueprint I believe is a hybrid of moneyball that is based on statistical analysis to get the team built in a certain manner, and actually play a certain way.”

One of the qualities that NESV brought into the Red Sox was a strategic view and approach – everything was about planning for long term success. There was also a pragmatism that recognised innovation was going to be critical to beating the Yankees – so once a certain Billy Beane starting making waves over at the Oakland A’s it naturally attracted the attention of Henry. The Moneyball theory has a number of facets, but at its heart is excellent scouting and sourcing value, with a strong emphasis on statistical and data analysis to match player qualities with the requirements of the team.

But Moneyball can only get you so far. Matt Lyke, another lifelong Red Sox fan observes:

“Overall they have done a good job of buying established well known players as well as developing unknown talents in the farm system. The teams that won the World Series in 04 and 07 were a mix of big money free agents/trades and home grown talents.”

The ‘farm’ or ‘academy’ system is something that is absolutely critical to the success of the blueprint at the Red Sox. The development of youth has played a huge role in the two World Series wins under FSG’s ownership. The model that FSG have used at the Red Sox is a hybrid of developing youth with investment in established players.

Russ points out that The Red Sox do spend a tremendous amount of money, and are just behind the Yankees in payroll.” So there is a real financial commitment from the owners – where the profits that the franchise makes are reinvested back into the team.

One of the things that the owners have also demonstrated at the Red Sox is that they are not afraid to make risky or unpopular decisions. In the first year they were at the Red Sox they installed Theo Epstein as GM – at 28 years old. The sacking of Terry Francona in 2011 is clear evidence that they will take unpopular decisions if they feel it is in the long term interests of the team.

Another important area of the approach FSG took at the Red Sox is also summarised by Russ: The owners certainly know how to delegate and surround themselves with the best people in sports.”  This is a critical point – listening to experts is the only way that you will make the right decisions to see success on the field.

– Commercial

One of the things that NESV recognised at an early stage is the potential of the Red Sox to increase its revenue streams. This is the key strength of Henry and Werner – and both bring a great deal of business and media acumen to the table. Increasing revenue is the key to competing.

The commercial side of sport doesn’t always sit easy for supporters – as Russ notes:

“I don’t like everything they do as they market everything under the sun with the Red Sox logo on it. But, they do put it back into the team, so I try to look over all the ads at Fenway Park along with the other ideas they have come up with to build up the Red Sox brand.”

But the key point is that increasing commercial income can increase the team’s ability to compete. FSG have done an excellent job of leveraging the Red Sox ‘brand’ (like I say – the commercial side doesn’t always ‘sit easy’) – and they now sit second behind the Yankees in terms of the revenue they generate ($272m).

One of the methods that FSG have used successfully at the Red Sox is to work with subsidiary sponsors. The Red Sox have a staggering 95 commercial partners – all of whom contribute to the bottom line. Whilst baseball is a huge sport in the US, it doesn’t have the global footprint of football, so leveraging revenue from sponsorships has been a big part of the Red Sox approach.

Another area where FSG have added value to the Red Sox brand is through digital and media. Werner has a strong background in this area, and FSG’s ownership of NESN has enabled them to use this channel to take the Red Sox ‘product to market’.

– The ball park

One of NESV’s biggest challenges on acquiring the Red Sox was Fenway Park. Many observers felt that a new ball park was the only long term solution – but FSG took a different view.

Russ sums up the Red Sox stadium issue as:

“Before NESV became owners, the Red Sox were in discussions regarding building a new ballpark. If I can remember correctly it was after a few seasons of ownership when they made it known that The Red Sox would be staying at Fenway Park. I was actually against this, and wanted them to build a new ballpark. I haven’t changed my stance on this at all. However, to their credit they have done a wonderful job with the re-development of Fenway. The Park is now 100 years old, and FSG have done what they can to modernize it.

But instead of building a new ball park, $285m has been spent on re-developing Fenway Park, the spiritual home of the Red Sox. This has included installing extra seats and a complete renovation of a ball park that was in decay. In 2011, team president Larry Lucchino announced that after ten years of investment, the renovations were complete.

The approach that the owners look to have taken was to assess all options before making a decision. The renovation of Fenway was a decision that will have been weighed up against the economic challenges of building a new ball park.

Whilst prices have gone up at Fenway, the game day experience has been improved by the renovations to the ball park.

The comparisons with Liverpool FC

One of the most important comparisons to make is the cultures between Liverpool and the Red Sox. Russ gives a fantastic insight into this:

“The culture is a crazy passionate fan-base that is very similar to Liverpool. Many fans analyze and dissect almost every move the team makes. The fans are extremely knowledgeable about the team and the game. It is a place that a player should want to come to because the fans care. They will let you know when you have done well, and when you have not. The players have to take the good and the bad if they want to play in Boston. Many players that leave Boston often miss it a great deal, and the fans have so much to do with it I feel.”

Both Boston and Liverpool are port cities, and sport is a key part of the identity of both cultures. As Russ points out, there are real similarities between the supporters, which should act as a good foundation for FSG at Liverpool, having been through similar scepticism in the early days at the Red Sox.

In terms of the methodology that FSG used at the Red Sox – the ‘blueprint’ – there are obvious similarities that jump out. Indeed Henry himself noted  “A number of parallels emerged with the situation that existed in Boston when we arrived.”

The obvious similarities are the stadium and commercial opportunities at Liverpool. Whilst the Red Sox are a cherished institution in the US, they do not have the global footprint or opportunity that Liverpool presents. The commercial potential at Liverpool is enormous – but it also has constraints with TV rights being a barrier to fully realising the club’s potential.

The Liverpool ‘blueprint’ has undoubtedly been influenced by the approach that FSG took at the Red Sox. The appointment of Comolli in a ‘GM’ type role had a similar feel to the appointment of Epstein at the Red Sox.

But as Henry points out when he says “Choosing players in any sport is an imperfect science. We certainly have been guilty of overspending on some players and that can be tied to an analytical approach that hasn’t worked well enough”, the Moneyball theory is a more difficult concept to apply in football.

My view is that when FSG came into Liverpool, the belief was that the model that they have used so successfully in Boston could be applied directly to football. But football is a very different game, with different dynamics, and it has become clear that whilst there are sporting parallels between Liverpool and the Red Sox, the ‘blueprint’ needs tweaking if it is going to work in football.

Some of the principles remain the same – such as a focus on the academy, development of youth and investing big money in the right players. The structure at the club has also moved away from the baseball ‘GM’ model as things stand – although there may still be a longer term role for a ‘Sporting Director’ that will bring Liverpool’s ideology closer to the Red Sox.

Whilst it is disappointing that Pep Segura is leaving the club, there is a commitment from the owners that the club will progress towards a continental structure. I think they are giving Rodgers some time before making the long term structural decisions that will provide continuity.

As Russ pointed out, FSG have historically surrounded themselves with experts to help inform decision-making; and it is reported that FSG were advised by both David Dein and Johan Cryuff when reviewing the Liverpool structure, both of whom were at the heart of restructuring Arsenal and Barcelona; clubs that have robust, sustainable models that can influence long-term success.

The biggest elephant in the room for Liverpool at the moment is the stadium. And it is clear that FSG are keen on taking an almost identical route to the Red Sox with a redevelopment of Anfield the favoured option. But as with the Red Sox, they will not be rushed into a decision that will require huge investment. There are also political complexities to be overcome, and a process that requires support from Anfield residents.

By looking at the approach FSG took with the renovation of FenwayPark, you can perhaps begin to see how they may approach the issue of redevelopment at Anfield. I think they will add additional capacity and upgrade the facilities over a period of time – so it could be that the ‘stadium solution’ is a gradual process – the same as the renovation of Fenway Park.

On the commercial side we are seeing a number of new partnerships – Warrior, Chevrolet and other smaller deals. The Fox documentary is a mechanism for taking the Liverpool brand’ to market. The appointment of Billy Hogan will give Liverpool the expertise and insight as to how the Red Sox have grown revenues, and with Ayre’s understanding of the Asian market and Chang’s understanding of digital and media, this is a team well equipped to leverage our global footprint.

On the pitch FSG have recognised that the ‘blueprint’ has to be tweaked – but off it the journeyLiverpool are following looks to be very similar to that of the Red Sox.

The Red Sox and Liverpool foundations

Another important initiative that FSG take seriously in Boston is the Red Sox foundation; the RSF is a charity and community programme that was set up in 2002 once FSG acquired the Red Sox. Henry’s wife, Linda Pizzuti, is a Director of the RSF.

On arrival in Liverpool, FSG also created the Liverpool foundation, which has a very similar structure to the Red Sox foundation. Linda Pizzuti is a Trustee and has been heavily involved in its development. Recently Liverpool has appointed a Foundation Director to take this work forward, and in Liverpool’s recent trip to Boston there were some joint initiatives where Liverpool had the opportunity to get involved in local communities.

The Red Sox and Liverpool foundations are an important part of retaining the identity of both institutions. And it is encouraging to see that the Red Sox foundation has been made a real difference in Boston since its inauguration.

What the future may hold

Nobody can see what the future holds for FSG’s ownership of Liverpool, but if you look closely at how they have managed the Red Sox, the signs are promising.

FSG may well be at both the Red Sox and Liverpool for a financial return, but they are not afraid of the long-term. They have been in Boston for ten years already, during which time their $600m investment has increased to a $912m valuation (Forbes). This has been based on a model of self-sufficiency, solid business acumen – but most importantly – sporting success.

In recent interviews Werner has confirmed that FSG are at Liverpool for the “long haul” with Henry stating that the are “just getting started”.

Although the Red Sox are currently going through a turbulent period, the majority of FSG’s ownership has been a success, cemented by two World Series titles. The current issues at the Red Sox are a direct result of the owners taking action after a season where the team failed to perform. As Russ says

“Lately, it has been about how they have spent their money that has been an issue.”

Owning two sports institutions the size of Liverpool and the Red Sox is a challenge – and the owners are reliant on the teams that run both organisations to perform. The owners do take a hand’s on approach when needed – and employees are left in no doubt that they expect high standards. They will back you with whatever resources they can leverage from the business – but they expect results.

There has been some noise in the Boston media lately about FSG’s interests in Liverpool. The key point with FSG’s interests in the Red Sox and Liverpool is that there are more opportunities than risks. FSG do take an active interest in both – but they also rely on the people they employ to manage day to day operations.

The commercial opportunities provide access to two passionate sets of fans – taking the Red Sox product worldwide through the Liverpool fan base, and taking Liverpool into the US market. This can translate itself into revenue that can be re-invested onto the pitch. I don’t think it is a case of the owners having more of an interest in Liverpool or Boston – they want the very best for both.

Whilst there are ‘sporting’ issues in Boston at the moment; the foundations are in place for success. Liverpool is trying to build those same foundations – so that will translate itself into time and resources being diverted towards that goal. That is against the backdrop of trying to understand a different sport and culture.

Liverpool’s recent trip to Boston was an opportunity for both the Red Sox and Liverpool FC to start building a relationship that can provide long term benefit to both organisations.

Essentially, what FSG do well is to build a sports franchise (forgive the phrase!) business from the bottom up, increasing revenue and driving growth to invest back into the product ‘on the pitch’. They aim for the top on the business side – and expect that to translate into winning on the sporting side.

FSG do not on the face of it look to be in the business of sport just for a big return – as two World Series titles with the Red Sox demonstrate. They are competitive, and they want to win. As Russ sums up:

“In the end they are great owners because it is about winning, and they have done that. I have always said that Liverpool will win the EPL soon, and the Champions League because FSG will not stand for anything less.”

There will always be short-term decisions that do not sit well with supporters, such as managers or players leaving the club. But the judgement on FSG will come not now, but in 5-10 years when they have realised the vision they have for Liverpool.

If they can translate the success the have had in Boston into football, then Liverpool are in good hands. It maybe a big ‘if’ – and the decisions they make will always rightly be scrutinised – but they have shown at the Red Sox the ambition, investment, and methodology is there. The trick is getting it to work for Liverpool.

The logical conclusion to this piece is to put the question to Liverpool’s new commercial director, Billy Hogan, on how FSG’s experience at the Red Sox might influence Liverpool’s journey. Billy said.

“We are focused on significant commercial growth over the next several seasons. We know that driving increased revenues will allow ownership to invest in the football side.   Ownership has shown a willingness to invest in players – in both Boston and Liverpool, and our job is to generate income to help that process.

 While there are a number of similarities between the Red Sox and Liverpool, one significant difference at Liverpool is that we control our rights globally – the Red Sox don’t control their club rights/marks outside of New England, those rights are held by Major League Baseball.  The Liverpool fanbase is global in nature and our commercial business will be as well. We are intent on establishing partnerships on a worldwide basis, for example our two newest club partnerships with Chevy & Garuda show the global appeal of an association with LFC. Another example of our growth globally is our recently opened online store for China serving our fans in China, Macau and Taiwan. “

Big thanks to Russ Goldman and Matthew Lyke for the contributions to this article. Russ is a lifelong Red Sox fan who lives in the Boston area and has supported them for over 40 years. Russ is also a Fulham fan. Mike is a lifelong Red Sox and Liverpool fan.

Also thanks to Jen Chang and Billy Hogan for providing an LFC perspective.