Football finance: a look at the AST’s financial analysis of Arsenal (part one of many) « Untold Arsenal: Arsenal News, supporting the club, the players and the manager

By Phil Gregory

Recently the Arsenal Supporters Trust issued a three page document in which they took a look at Arsenal’s books and posed a few questions based on their analysis. I’d advise readers to have a look at that document before continuing, seeing as my article is looking at parts of their work, though what follows will be a multi-part series of articles as I discuss various issues that have been thrown up by their report as I progress. Come the end of the series however, I will collate my ramblings into a single article that will critically assess their report, for clarity.

The document and analysis from the AST is very good, as would be expected from an organisation that has some very experienced and qualified people involved in it. However, from what I know of the AST from news reports derived from angry twittering, occasional columns and from knowing that certain shall we say “discontented” bloggers are part of their organisation, I felt it would be pertinent to have a look at what they did. To be frank, the AST aren’t very happy with the current Arsenal model –as is their right – and I wanted to have a look at their analysis to see whether they were simply confirming their bias – picking numbers and assumptions that prove the club is in jeopardy – or whether what they wrote was a fair and balanced analysis. Naturally they will argue it is, but if that is true then my conclusions should bear that out.

My general impression was that their document was generally excellent, but there were a few issues and conclusions that I would like to take issue with. Because it is pointless reproducing their article and writing “I agree”, the rest of this series of articles will be focusing on my disagreements with the AST’s work and the issues arising from that, but do not take that to mean that I disagree with everything they wrote: as I said, their base analysis is perfectly sound and I applaud the undoubted time that their members put into the report.

They start off by looking at player sales, which is perfectly logical for a report seeking to look at whether Arsène has money to spend. Analysis in this area is naturally tricky business, as the figures for transfers and wages aren’t disclosed so any analysis is based on an educated guess. In general I would agree that their figures are reasonable and a fine basis to analyse from. I’ve reproduced those figures below as they appeared in the AST’s document, though with a slight amendment so that Miyaichi’s name is spelt correctly:

£230k per week left the wage bill…     while £292.5k was added on.

The bolded transfer fees are the numbers provided in the AST document. They also drew the conclusion that the new arrivals’ wages would be greater than the departures, so I added approximate wage figures to check this assumption, as I initially disagreed with it. After some hunting around for data, I actually agreed with them and this is very surprising if you consider the calibre of departures. I’ll briefly justify my wage figures in the following paragraph: if you have any basis for arguing they are hugely unrealistic please do leave a comment with a link to some information; this is an ongoing process, and wage data will form a big part of a future article I plan on writing.

To briefly justify my wage figures: Cesc earns more than an equally good player such as Van Persie due to the latter’s frequent injury problems keeping other clubs from sniffing around. Barcelona’s interest likely meant Cesc was on big money, which is reflected. For the others (bar Traore), as they were all considered first eleven players, they earn similar wages. While not a first eleven player by the time he left, Eboue certainly was when he arrived and I doubt we wanted to try and cut his wages as his career developed as he was a solid professional and a well-respected member of the squad. Nasri’s wage is low relative to his “star” status when he left as he never got a new contract after upping his game, as we all well know. Hence bar the Cesc wage, the average level of the departure wages is actually relatively low, and indeed this surprised me. These numbers would generally fit the idea of a wage structure at Arsenal, a subject that I will come back to in the future.

As I said earlier, I initially disagreed with the AST that the incoming player wages would exceed the outgoing player wages. In fact, it seems probable that some of the new arrivals are on far more money than people actually anticipated, myself included. Even though Arteta took a wage cut to join us (my guesstimate is from £75kish at Everton to the given £65k), his wage is still high – likely he got fantastic money from Everton as he was the crux of their side, and given our need for a midfielder, we didn’t want to risk his transfer over saving of say 25k a week. Gervinho was a somewhat protracted transfer deal, with others interested, so we didn’t have much scope to offer a lower wage despite his relatively low salary at Lille. Chamberlain probably got a bigger wage than any of our academy prospects due to him being a much sought—after prospect, though recent performances probably justified the initial indulgence. Mertesacker’s hefty salary in Germany means he came in on a very high wage too, most likely. Santos is in a similar boat, given the high wages on offer from the top Turkish sides, though Park will have been relatively lowly paid due to being a “diamond in the rough” style signing. Kids such as Jenkinson, Miyaichi and Campbell will all have come relatively cheap, due to being largely unknown and us not facing much competition in general.

Now while I agree with the AST in how they envisage that last summer will raise the wage bill going forward – not to mention a new contract for Vermaelen and deals hopefully to be signed for Theo, Van Persie and Alex Song – it does make an interesting point: it’s generally bloody expensive to buy “established” players. Some players such as Arshavin are amongst our top earners, yet can barely get a game when a kid like Chamberlain is on a fraction of the money and performing brilliantly. Or take a Wilshere: granted, since he started playing week in week out, Jack got a pay rise to circa £50k per week if reports are to be believed, but if Wenger had taken advice from the terraces and bought an established, Premier League player capable of playing in midfield like Wilshere was prior to his injury, I imagine we’d be looking at a salary of at least £80k, more if the player was English.

The myth of the ease of “just buy a bloody defender” becomes further complicated, given this. As we all know, Wenger has said many times something along the lines of “it isn’t like going into a supermarket for a tin of beans” and if top players from the very best leagues are earning high wages, they become much less appealing. In wage terms, I bet we could get a Vermaelen and a Koscielny for the same money Mertesacker is earning – which means that the squad as a whole benefits from Wenger’s “diamond in the rough” style dealings. We do, after all, have a finite amount of money to spend, so buying undervalued unknown players and kids will mean that the money will go further than giving in to demand and splashing a fortune on the “obvious” (but expensive) option. Food for thought, certainly.

As an additional thought, buying players generally is probably a very expensive business. Leaving aside all the “X factors” at play that make signing any player a very hit-and-miss business in general (will he settle in the squad, will he adapt to the country/league/language etc) it’s also quite an inefficient way of doing business from a purely monetary point of view. In general, if you sign a player they want a raise, so an already well-paid player such as Per becomes even more expensive. I imagine this relative expense that results from the transfer market explains we often look within the club rather than using the market at the drop of a hat like everyone else.

Even if our youngsters like Ramsey and Chamberlain are relatively well paid for their age, buying a player of similar quality who was 24-28 (and thus didn’t have as much future resale value and scope for improvement) would cost you more in wages in my view: players at their peak will be more demanding over salary than a kid who is still cutting their teeth. Granted, as a player such a Jack breaks through they get salary increases, but if Wilshere played for Chelsea and we bought him on the open market, we’d be paying him more than £50kish per week, I am sure of it. In this regard then, a small part of the AST’s document that forecasts costs going forward actually vindicates the Wenger approach of buying rough diamonds and developing kids. This will be a theme that I will come back to later in this series of articles: namely, how much financial room is there for Arsenal to sustainably spend more on wages?

I’ll leave this article there for now. Unfortunately I’ve only scratched the surface of The AST’s report before going on a huge tangent in regards to Arsène’s approach in the transfer market and player wages, but I will return to the AST’s work in future articles, and feel that digressing and discussing the issues as they present themselves makes for a much more interesting article anyway!