Tom Hicks in “On Her Majesty’s Secret Shitlist”

In January of 2007, when American investors Tom Hicks and George Gillett first emerged as the front-runners to assume ownership of Liverpool FC, I could hardly have been a more ardent supporter of the plan.  Following Roman Abramovich’s takeover of Chelsea FC and Malcolm Glazer’s acquisition of Manchester United, the face of English football changed dramatically.  Gone was any semblance of parity throughout the league; clubs without strong global marketing strategies and huge transfer funds could not be expected to compete for the title.  Despite Mr. Glazer’s vilification by the Man U faithful for turning their sporting club into a business venture, it seemed abundantly clear that Liverpool needed to follow the same route.

Liverpool, after all, have a reputation as the most successful club in England.  They have won the top division of English soccer eighteen times and scaled the heights of continental glory, having been crowned the best team in Europe on no less than five occasions.  Certainly times have not always been so rosy, a point which the two consecutive decades of domestic underachievement (with not a single league title won) have driven home.  However, given the club’s pedigree and the impending construction of a shiny new 60,000 seat stadium, it only made sense to turn the club into a money-making enterprise capable of generating the funds necessary to compete with its world-beating rivals – teams like Chelsea, Barcelona, AC Milan, and Man U.  Besides, Hicks seemed to have done a fine job of running Dallas’ NHL franchise (the near-and-dear to my heart Stars) since acquiring the club a decade earlier.  Admittedly my view was more optimistic than most, but as a die-hard Liverpool fan, I happily threw my red-blooded support behind the changing of the guard.

Over the intervening months, however, my feelings made the slow transition from being squarely onboard the Hicks/Gillett bandwagon to the somewhat less optimistic “GETMEOFFGETMEOFF!! OH LORD NOW I’M OFF AND THE BANDWAGON IS RUNNING ME OVER AND TOM HICKS IS PISSING ON MY DREAMS!”

Hyperbole, you say?  If only it were.  In fact, the recent backlash against Hicks has been so vehement and vitriolic that his son was recently attacked when attempting to visit a local pub post-match.  Thanks to the quick work of his “handlers”, Tom Jr. was spared a fate any worse than a few pints in the face and the undoubtedly sharp sting of the Scousers’ verbal barbs.  Still, this begs the question: how did things go so wrong so quickly?

 For starters, Britons as a whole took an immediate disliking to the sudden influx of foreign investors.  Exiled Russian billionaire Roman Abramovich had set the tone in 2003, drawing the ire of many soccer fans with his purchase of Chelsea FC (though his impossibly deep pockets ensured the support of the Chelsea faithful).  Mr. Glazer’s subsequent foray into ‘proper’ football in 2005 was met largely with unease as the nation lamented the transformation of a beloved cultural touchstone into a new type of asset for the portfolios of foreign billionaires.  Fans protested en masse, holding angry demonstrations and bombarding local papers with Glazer hate-mail.  After ticket prices were raised, some even formed a new semi-professional club, FC United of Manchester, in a show of spite.

Glazer’s cause was not aided by the fact that his takeover saddled Man U with nearly $1 billion in debts, but his willingness to assume personal responsibility for fully half of that amount was a mark of his dedication.  Additionally, shrewd marketing strategies designed around Man U’s already global brand helped defer interest costs which might otherwise have hiked already inflated ticket prices to absurd levels and alienated even more the club’s predominately blue-collar local supporters.

Perhaps most importantly Glazer took a backseat in club affairs, declining a seat on the board and extending the contracts of CEO David Gill and manager Sir Alex Ferguson, luminaries who had been instrumental in guiding the club through numerous recent successes.  While his tenure has seen its share of bumps in the road, Glazer has turned Man U into one of the world’s richest clubs and continued their tradition of on-field success.

Given the difficulties encountered by their compatriot, one would think that Hicks and Gillett might have entered into their $450 million investment with an air of caution … or at least a bit of tact.  Though the immediate response to the takeover was not exactly supportive, early signs — such as a willingness to repay $80 million in club debts and spend $50 million on record signing Fernando Torres — were encouraging.  Then everything started to come apart at the seams.

After a torrid start to the season, questions began to arise regarding the future of manager Rafa Benitez.  Benitez — a fan-favorite since guiding the club to a famous Champion’s League comeback in 2005 — had come under fire for the team’s failure to perform on the domestic stage.  In December it was revealed that Hicks and Gillett had gone behind Benitez’s back a month earlier, entering into discussions with ex-German international coach Jurgen Klinsmann about assuming managerial duties at Liverpool.  The Americans were either rebuffed by Klinsmann or realized their error in judgment, but by the time the press got wind of the meeting the damage had been done.

Hicks and Gillett would go on to claim that Klinsmann was simply an insurance policy in the case of Rafa’s consensual departure, but word of a second meeting between Hicks and Klinsmann dispelled that notion.  They then further infuriated the Benitez by initially refusing to fund the team’s desperate search for a backup defender in the January transfer window.  In so dong, they demonstrated their lack of understanding of the modern, global game.

Their relationship with the manager in tatters, the owners then leveled more bad news on their club’s fans.  While they had repaid millions of dollars of debt on behalf of Liverpool, neither had nearly enough fiscal firepower to fund the forthcoming stadium and the necessary loans were about to saddle the club with $700 million in debt and annual interest payments of over $70 million.  Hicks and Gillett began a desperate search for investors willing to throw their support behind the club, but the glaring cracks already evident in the façade of their ownership made this goal a near impossibility.  They completed the refinancing package amid a chorus of angry calls for their departure, leaving the club mired in further instability.

The frustration over their financial negligence was exacerbated by the fact that they had initially purchased the club from under the noses of Dubai International Capital, a UAE based consortium (run by a lifelong Liverpool fan) which could have supported the club with minimal outside funding.  Fans were so enraged that they started Share Liverpool FC, a worldwide fund with the stated aim of purchasing the club out from under the Americans and putting it in the hands of supporters.  To even the most jaded observers this represented the nadir of Liverpool’s public image.

Shockingly, the situation grew far worse in the following months.  In February, DIC launched a new bid to take control of Liverpool.  Faced with an uncertain future and incensed fans, and with the long-term financial prospects of his investment declining precipitously, Gillett was prepared to jump ship and seemed to acknowledge the mismanagement that he had been party to.  He and Hicks could have proceeded with the sale at a tidy profit of $60 million apiece, but Hicks balked and started digging in for the impending battle.

With Gillett’s fifty percent share, DIC would have gained a substantial foothold in the club and the leverage necessary to drive Hicks out.  Hicks, ever the alpha dog, had no intention of capitulating.  He made public the existence of a clause which would allow him to block any attempt by Gillett to sell and, in an effort to assume full control, began angling to purchase Gillett’s shares himself.  The relationship between Hicks and Gillett quickly deteriorated to an extent that all verbal communication between the two ceased, with Gillett labeling their partnership “unworkable.”

“Unworkable” will do, but perhaps “fiasco” would be a more apt description. With Liverpool riding their best form of the season – and perhaps the past three – life at the club had apparently become a bit too dull for Mr. Hicks.  This past week he issued a communiqué to the board of directors — with copies to Sky News and the BBC — which formally requested the resignation of long-standing club chairman Rick Parry, a Gillett supporter.  Parry rebuffed the request, but Hicks pressed forward by opening old wounds.  He twisted the knife he had recently planted in his manager’s back by informing Benitez that Parry had also been present at the November meeting with Klinsmann.  The relationship between Benitez and Parry had always been a bit contentious, but these new developments rocked it to its foundations.

Benitez now seems precariously close to resigning his post only a week after the tremendous feat of guiding his team to the Champions League semi-final for the third time in four years.  Given his already rocky relationship with the owners, Benitez has few friends in the boardroom — a fact that cannot bode well for his tenure.  Further complicating the issue, Benitez must now communicate with his employers exclusively via e-mail thanks to their respective vows of silence.

Now Liverpool stands at the brink … of uncertainty, of collapse, and of becoming the laughing stock of the soccer world.  The boardroom is a shambles, and consequently the backroom is well on its way there. In their prior endeavors, the business acumen of Hicks and Gillett has proven unassailable.  Each has a net worth of over $1 billion — neither man could have amassed  their respecitve fortunes without intelligence, moxy, and an enterprising nature.  Both have even been successful in their prior forays into sports ownership.  Their failure at Liverpool has hinged on an incomplete knowledge of the team they acquired and the complexities of the sport.  A foreign — and particularly an American — influence on the English game will never be accepted with open arms, but Gillett and Hicks seem to have done themselves and their investment the greatest disservice by operating under the assumption that Liverpool could be run in the same manner as an American sports franchise.

This assumption is wrong on several levels.  It begins to derail when considering the soccer transfer market.  While players in most American sports leagues are traded between teams or signed only once contracts expire, soccer players across the globe are frequently purchased mid-contract for exorbitant fees before being signed to lucrative contracts.  This means that a team in England’s top league (or any top European club) can spend tens of millions of dollars just to acquire a player’s rights before paying the player’s signing bonus and salary (which can frequently exceed $100,000 / week for top players).  This system turns soccer clubs into a sinkhole for money if they are mismanaged.  Business plans for these clubs must be models of efficiency in order to turn a profit.

Turning that profit is even more of a challenge considering the marketing strategies of European clubs and leagues.  American franchises can afford to pursue aggressive local marketing plans while eschewing complex national and global strategies, in great part because the leagues they belong to actively market themselves on the larger stage.  By playing league games abroad, forming affiliations with small foreign clubs, and creating extensions leagues like (the now defunct) NFL Europe, the leagues increase their global recognition.  This greater league recognition filters down to the individual teams, providing them maximum exposure at minimal expense.

While the English Premier League has proposed increasing recognition for itself and its clubs by playing one week’s slate of games in various countries across the globe, the idea has been shouted down by English fans and UEFA, the organization which governs European soccer.  These teams may play “friendly” matches abroad in a bid to raise their profile, but without a competitive edge these games tend to lack dynamism and fail to find many converts.  This unwillingness to publicize the best example of the sport to foreign audiences speaks to a larger issue, namely the sanctity of the game in the eyes of English fans.

The public scrutiny on English soccer is incomparable to that placed upon any American sport.  The game is so intrinsically linked to the identity not only of each town or city, but of the nation as a whole, that its relative importance to the populous dwarfs that of any sport this side of the Atlantic.  Sure, baseball is our national pastime, but its popularity has waned in recent years, in great part because of the wealth of other sporting options available to the American public.  The MLB, NFL, NBA, NHL, NASCAR, etc. all have their own sizeable cross-sections of rabid supporters who may or may not have a vested interest in other sports.

By contrast, soccer’s only notable rivals for English sports audiences are the decidedly less popular rugby and cricket. Furthermore, the performance of England’s national soccer team is something that the entire nation rallies behind.  The lack of a US national sporting team of note (USA Basketball, Soccer and Hockey draw comparatively small audiences) indicates that there is not a sport capable of galvanizing Americans the way that soccer can the English.  Because of the cultural significance for the sport, English fans, and especially those of a club with Liverpool’s history, are reticent to allow their game to be tainted by foreign influence.

While sports teams in America tend to have strong local ties, most have been money-making enterprises for so long that few can remember a time when they were purely about the game and the community.  Hicks and Gillett dove into the deep end when they purchased Liverpool FC, a club which means more to its fans than they can fully appreciate.  When they realized they were in over their heads, their composure fled and they thrashed wildly about, pulling each other and the team farther under.

Even if Hicks and Gillett part ways, a continued stake in the ownership of Liverpool by either man is every bit as “unworkable” as their relationship has become.  To his credit, Gillett now seems to realize this.  Hopefully Hicks will come to his senses and consent to sell, rather than continuing to tarnish the reputation of an organization that he does not fully understand or respect.  He can bow out now (albeit less than gracefully) and still turn a profit on his investment.  It would be a wise move; much more than one man’s pride is at stake.