Untold Arsenal: Arsenal News. Supporting the Lord Wenger in all he does » 2010 » May » 21

TODAY’S SPONSOR: Picklive the new football game that you play on your laptop while watching football on the telly launched its new look this week ahead of the Championship Play Off final and Champions League final at the weekend.

There will be free and pay-to-play versions of the game available for every match during the World Cup.

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Uefa ready to pass new rules next week which will limit entry to the Champions League to profitable clubs

By Tony Attwood

There are only five ways of running an EPL football club.  You pays your money and… probably lose it.  Here’s the list:

1.  Run it like a business, and make a profit.   Arsenal do this.

2.  Use the club as a way of making your own money and then get out when the going gets too tough, hopefully by selling to someone else who wants to do it again (Man U and Liverpool owners have adopted this approach very successfully, although Liverpool’s owners seem to have gone a bit too far by using the cash promised for new stadium, as part of their buy out.)

3.  Have a benefactor who puts money in

This breaks down into three subsets

3.1  Put in the money as an interest free loan so you can walk at any time (Chelsea)

3.2 Put in the money as a gift (I think Walker did this at Blackburn, and I know for sure Griggs of Doc Martens did this at one of my local clubs, Rushden and Diamonds.  Others may well have done so.)

3.3 Put in the money, and take interest on the loan from the club – in other words you lend at above market rates, have your money guaranteed by the club’s assets (the ground) and so do the best possible deal in the current financial climate (Aston Villa, Bolton etc)

4.  Go into the club in order to gain control of the ground, and then sell the ground for housing.  Typical asset stripping, clubs across the lower divisions and non-league have been suffering this for years.

5.  Borrow money from the banks. It is a traditional approach, but the problem is the banks don’t really want to know any more.  Indeed, this was part of Liverpool’s strategy and it has totally backfired.

The benefactor model of football (point 3 above) is the EPL model of football.  Indeed since the 19th century it has been the model of all English football.  In fact I think a lot of people assume it is the definitive model of a football club – forgetting that it is not so common in most other countries.

So, if you look at your history books you will see that from the early days English clubs were going bust almost as soon as the League got going.  Accrington were one of the first to go, and if you have followed events on the Woolwich Arsenal site, or in Making the Arsenal, you will know that in 1910 our club went into administration for the simple reason that the benefactor, Mr Leavey – a gentleman’s outfitter – ran out of money.

But you will also note that the bank to which Woolwich Arsenal owed a lot of cash was not pressing for repayment from Mr Leavey or from the club.  This is because in 1910 Woolwich Arsenal was a centre of the local community, as was the local bank.  If the bank had pulled the plug rather than be utterly sympathetic and understanding, the bank would have lost most of its customers.

Today it is not like this (as you may have noticed!)

Now I come back to this point of finances and models yet again (and sorry if this makes you yawn) because recently the Guardian (the paper I choose to read each day) said this about the new Uefa rules on financial doping…

“The rules, which look certain to be passed at Uefa’s summer congress on 27 May, require all clubs in European competitions to be living within their income, not funded by “benefactors”, from the start of the 2012-13 season.”

I have been arguing this point here for six months, although the consensus in English football is, “they won’t do it, it won’t happen.”

We shall see.  But consider this.  Chelsea won quite a lot this year, but made a £47m loss in 2008-09 due to spending on players.  As we know, Mr Abramovich paid up the money in the form of loans to the renamed holding company, and is now owed £726m.  It doesn’t look as if they will qualify unless they start turning in a profit.   They can do this by stopping the transfers, but only just – because of their high wage bill.

Our beloved Arsenal, however, made £46m profit. Actually to be fair  Manchester IOU also made a profit in that year because Cristiano Ronaldo was sold for £81m.  They also spent £69m interest on the £717m debts.  So unless they can find another Ronaldo to sell soon, they are going to get stuck.

The Tiny Totts also declared a profit, but we have not seen the Arry effect yet in the accounts, and we have no way of unravelling the way the finances of Joe Lewis who is a tax exile in the Bahamas and has wrapped up the club in perfectly legal but secret accounting systems in tax havens.  Goodness knows what ENIC are really up to.

Sheikh Yermoney of Abu Dhabi invested £395m as equity, and I don’t know what the Uefa deal will make of that – but I doubt that it will let him get away with it after the new regs come in.  He has the same problem as Chelsea – he can do it now, but he has to move to the Arsenal model in time for the new set up.

Chelsea and Man C can adjust their position and just about hold on – although without the ability to sign as many new players as they want each week.

But several other clubs are now in such a desperate position that they find that their auditors will only pass the accounts if they state they would not be solvent without the benefactor support every year.  Fulham and Sunderland,  are prime examples.  Liverpool’s auditors go one step beyond, stating  they find “the existence of a material uncertainty which may cast significant doubt on the [club’s] ability to continue as a going concern”.

Would you like that one again?

“the existence of a material uncertainty which may cast significant doubt on the [club’s] ability to continue as a going concern”.

It’s not that I have been saying this for several years on this site, long before others took up the story, its just that I have been saying this for several years, and I don’t mind people calling me a smart arse.

And before you tell me I am gloating – I am not gloating about the failure of clubs.  I don’t like seeing clubs go down, whether it is Salisbury (in trouble this week) or Portsmouth.  I am simply rather chuffed that this site is being proven right.

The total debt of the EPL in 2008-09 £3bn on a turnover of £2bn.

Richard Scudamore – head basket case in the case of baskets said, “”The benefactor model of investment is not one the Premier League wants to see outlawed. It is important that it is done in a sustainable way; however, we don’t want to discourage investment into our league, which has benefited clubs of all sizes.”

So what does any of this mean?

First, the nutters at the EPL don’t have a method for overcoming the Uefa rules, nor for controlling their clubs, and they are in total denial.

Second, instead of anyone bemoaning the fact that Arsenal have not won the league for five years, we should celebrate the fact that amazingly, and against all the odds, the club has stayed in the top four, and made a profit, during this period of insanity.

As the clubs start going bust (would you like that Liverpool auditors quote again? – oh well, maybe not) and start being refused entry into the Champs League, we are still there, still making money.

So far as I can see only these clubs will get into the Champs League…

Arsenal – no change

Chelsea – but very limited in the transfer market once the rule comes in

Man City – as Chelsea

Tottenham – providing overseas accounts are not considered

That’s it.  If you find any more, let me know.

So what will happen next?

1.  As clubs like Liverpool either go into liquidation or sink down the league, their players become available at a discount.

2. As clubs fail to make it into the Champs League the players with them who expected to play at the top level, want to leave.  (Can you imagine Cesc’s face if he does leave us and goes to Barca when he finds in 3 years he can’t play in the Champs League any more because they are barred because of their losses?)

3. The production line of youngsters is about to start.  You can always tell the supporters of other teams when they come on this site because they say, “we must admit the youth project has failed” – utterly ignorant of the fact that the eldest of the youth project kids are now 18/19.  But the youth project teams (the Academy sides) have won three major trophies in the last two years, and they are getting ready to step up.  Jack Wilshire and JET anyone?

This, to my mind, is the big moment.  The moment to remember.  Because in the future you will take your grandchildren on your knees and say, “I remember when the hounds of hell tried to get Wenger out, just at the moment when all his planning was coming to fruition, just as the other clubs were collapsing, and just as Uefa for once in their lives were going to get it all together.  But we held the nutters off, and we reached the greatest period in our history ever.

“Five years of planning it took, but my God it was worth it.”

Tony Attwood

Other Untold stories are here, there, and more or less everywhere else.