Arsenal News » 2010 » January » 29

By Phil Gregory

I read a great book over Christmas, Michael Lewis’s Moneyball.

Despite my total lack of knowledge on the sport it is concerned with, I was fascinated because it’s actually a baseball book which follows a particular American team that consistently outperforms its rivals  despite severe financial constraints (see where I’m going with this now?).

The basic theory behind the way the team (the Oakland Athletics, in case you know baseball) was ran was a  effectively exploiting the prejudices in the game. Certain types of players with certain qualities were discovered (via statistical analysis of the way the game is played) to be over-priced and avoided. Less “fashionable” players, who perhaps didn’t fit the traditional profile for a Major League Baseball star were bought, made into superstars and sold at a vast profit, funding the next generation.

While the methods are not exactly the same, the principles themselves are very similar to those extolled by our own Arsène Wenger. Ignoring prejudice and purely choosing players on merit, refusing to pay over the odds and knowing when to sell.

These principles are not simply idealism, they are the foundations of the next generation of future footballing success (Tony’s football 3.0). See how Barcelona have swept aside all before them with a home-grown team while playing an exhilarating brand of the beautiful game for all the evidence you need!

Clubs such as Bolton are Blackburn are victims of a vicious circle. Poor football is played due to a lack of finance, and so the team can only play a certain style (apparently). This leads to falling attendances, less games sought for live television coverage and so on unto financial oblivion.

Wenger’s financial principles actually ensure we remain competitive (and not the Frenchman tying one arm behind his back as the D and G brigade would try to argue). Arsène refuses to pay over the odds, going as far as to drop our interest, regardless of the “need” for the player.

This refusal to overpay is most evident if you examine the nationality of our squad. Manchester United paid a figure between £8-£12million (depending on your source) for Smalling. How much did we pay for Vermaelen? £12million. English players cost, and Wenger refuses to play this game. Other teams know this, and when Aaron Ramsey decided he wanted to come to the Emirates, it cost us a bargain £5million. If we had foolishly overpaid for domestic talent in the past, we would have paid far more for Ramsey.

Or there is the Berbatov case. Manchester United still “needed” a striker on the last day of the transfer window and paid vastly over the odds for a 28 year old, because they had “no choice” apparently. A friend of mine refers to it as “United mark-up” i.e. United pay more because they have the money (oh the irony!).

In fact, they pay more because Fergie consistently caves in to demands, meaning the selling party knows they can drive a harder bargain.

This doesn’t work with our Lord Arsène, who walked away from the Arshavin deal for an entire summer and even during January, and voila, we get a Russian genius for £12million, or, to put it another way, half a Lescott or one third of a Robinho. Arsène’s refusal to bend his principles may lead us to not getting a midfielder when it was needed in 08/09, but he was thinking of the long term, knowing that a reputation to bend to the will of selling clubs will only lead to constantly paying over the odds in the future.

And while I’m on the subject of Manchester United, I think a little financial update is in order. The Americans have pulled off the bond issue, but only because they offered a high rate of interest: 9%. In terms of interest payments, the bond issue won’t therefore save them very much money, as the average payment on their debt beforehand was around 10%.

Assuming they can use part of the £500million to pay off the high-interest PIK debt, they could lower their average interest bill a little more but not significantly. Paying off the hedge fund’s PIK debt is not even a given: the banks want their money back too and are dictating the terms, not the Glazers.

Really want to laugh? The fees costs of this bond issue was roughly equal to a year’s interest payments – so even though they are saving a little bit every year, the bond issue will take time to pay for itself.

The end result is United have delayed when the debts are due, but they are only delaying the inevitable. Their operating profit is almost entirely eliminated by the interest bill, so I really don’t see how they will pay it off when it is due. They end result in the short term? They need to sell to buy.

Want another laugh?

Read Making the Arsenal.   If you buy it from the publisher, don’t laugh within the first 30 pages, and then return it in decent condition within a month of buying it, I will apologise.  Can’t say fairer than that.   Signed Honest Tony.

(c) Untold Arsenal.  You know it makes sense.  Sometimes.