Wednesday, June 1st, 2011 « Untold Arsenal: Arsenal News. Supporting the Lord Wenger; coach of the decade

By Tony Attwood

The top four clubs in the Premier League have between them three different models of financing.

• Money from an established world-wide marketing scheme (Manchester United)
• Money from a very rich owner (Chelsea, Manchester City)
• Profit made from running the business (Arsenal)

This blatantly obvious fact is easily ignored when the debate rages over money that might be spent on players, but it is worth considering a little further.

Arsenal’s profit is different from the financial sources of the other three clubs, firstly because it is much lower than the money the other clubs have, and because in the case of Chelsea and Manchester City the finances are to all intents and purposes unlimited.  Secondly, Arsenal’s finance is different because it is less assured than the finances of its rivals.

This second point needs some explanation.   Firstly, I mean to say that Chelsea and the Manchester clubs could lose much of their support in terms of those who go to matches, but they would still have their income.  If the threats about non-renewal of season tickets etc at Arsenal were ever to come to pass then the club would suffer in the way that the other three clubs could never suffer, and the collapse of Arsenal would be very rapid.

Mr Abramovich, for example, seems to have no desire other than to win everything including the Champions League – and whether there are people in the stadium or not is probably irrelevant to him.  Manchester United know that their finance comes from world-wide support – they don’t really have to worry about the stadium either.  For Arsenal, however, the matter is different.

In other words, the Anti-Arsenal groupings that want lots of money spent on players all the time until we win the league do have a potential to change Arsenal.  But a change brought about by encouraging people not to attend Arsenal matches would have such a huge impact that Arsenal could very quickly sink to mid-table or lower as a result of their actions.

What makes the position so difficult is that Arsenal is incredibly dependent upon their match day income (£94 million in fact).  Real Mad beat this income as does Manchester United, but no one else does.   Worse, (and this is the key point) is that this is over 40% of Arsenal’s income – far higher than any other club – is match day income.   Affect that, and you affect Arsenal.  Our income, it seems, is fragile.

Put another way, Arsenal might be the most profitable club in the Premier League (in fact one of only four profitable clubs in the EPL) but, there’s a problem.

Aside from match day income, a lot of Arsenal’s profit comes from  property and from selling players at more than they cost.   Take all that lot away, and we are still the most profitable club in the EPL, but we have far less profit (only £7m in fact).  And profit (as opposed to rich owner or world-wide marketing) is what Arsenal needs in order to grow.

Now we can overcome this in the short-term with the property developments, and these have been rather encouraging.  If you have seen the planning proposals for the Hornsey Road Arches development you will know about the 20 storey plus tower block – and that must surely be quite an earner when it is built.

But… there is a group of Arsenal supporters who are strongly against this development.  I don’t live in the area (in fact my round trip for home games is getting on for 200 miles) so it is not for me to comment on the rights and wrongs.  But if the supporters who don’t like the plans do have their way and block the development, then another source of Arsenal income goes away.  That’s what I mean when I speak of our sources of income being fragile.

So, if Arsenal are to develop and put in a real challenge what are we going to do?

Rather than scream “Wenger out” or “he’s get one more year, and if he can’t do it then he must go,” let’s actually try a sensible bit of debate here.

Whether the manager is Mr Wenger or someone else, the same issues apply: on the current business model there ain’t much money around.  True, if you have taken a look at the ground recently you will see all the cranes in place as the Queensland Road development hots up, but property development is not utterly sustainable as a source of income, even when planning permissions are gained.  Eventually you run out of property.

So what else is there to do?

First we could cut the wages bill.  Swiss Ramble recently summarised the top wages bills as…

• Chelsea £173 million
• Manchester City £133 million
• Manchester United £132 million
• Arsenal £111 million

Already quite a bit less than the rivals.  True the little clubs like Tottenham have lower wages bills, but they are trying to cut back, following the failure to get into the Champions League.  Chances are, if we cut the wages bill, we will drop like a Tottenham.

We could cut transfer fees – but then we are one of the very few larger clubs that already makes a profit on transfer fees, and there must be a doubt whether we can keep this up for much longer.  We might be able to, but the clamour for a trophy no matter what makes experimentation harder to maintain.

If we are to we need to continue to bring in youth players who are sold on, or avoid paying out fees by focussing on the youth team as now.  More of the same in fact.

We could put up the cost of going into the ground – but then there were cries from the Simplistics who led the chant of “6.5% the club was “having a laugh”.  (Of course I know that all chants are simple – one can hardly respond to “What do we want?” with a cry of “A 20 goal a season forward and a couple of defenders all with a wage demand of no more than we are currently paying, and at no cost in terms of transfer fees”.  Doesn’t quite work in a crowd.

So if we need more money to make a bid for honours, what on earth can we do?  Cut salaries – probably not.  Increase prices – up to a point but it gets a lot of flack.  Stop buying new players – not really.  Cut the youth project.  That means no more Jack Wilshere’s coming through.

Only two areas remain.  One is to find a rich owner who will put money into the club.  Yet we have a rich owner – but his history is not of putting money into the club.  So again probably not.

Which leaves just one avenue – increasing marketing revenue while hoping that the property market keeps helping us out for a bit longer.

At present the commercial income of Arsenal is £44 million, which compares poorly with Bayern Munich who get £142 million and Real Madrid who notch up £123 million each year.  Manchester United who have made commercialisation the centre of their world-wide approach are getting over twice what we get.

Arsenal have a problem in this area since most of our marketing deals were sorted some years ago and front loaded, so that we had the money to build the stadium.  I have heard it said that this was clearly a stupid plan developed by people with no marketing experience, but if Arsenal had not done this, then they would not have had the Emirates.  “Fine,” say the Simplistics, “we should have stayed at Highbury”.

That’s ok, but then we would not have had the money from the match day revenue which keeps us going.  We may not have much marketing income, but add marketing income to match day income, and we are better off than we would have been.  So the front loaded deals have worked at that level.

But there is another thought.  The situation can get better.  We might be tied into long term contracts with the Emirates etc, but there are all sorts of new markets opening up.  In fact our lack of penetration in India and the Far East means that we have areas to exploit.  And gradually those front loaded deals are coming to an end.

Indeed it is here that our sheer “Arsenal-ness” is a virtue.  While there are a number of Simplistics who abhor Mr Wenger, the reality is that in much of the world he is seen as a total genius.   The reason is that many people recognise that he has taken a club without the world-wide marketing of Manchester U and the endless finance of Manchester C and Chelsea, and kept Arsenal close to these clubs.  This is something that no other manager is ever likely to have been able to achieve.   Arsenal + Wenger is a highly marketable product in certain parts of the world, and by holding back while Manchester City and Chelsea have tried their luck around the globe, we have learned a huge amount about had club marketing can work.

Of course that is a personal opinion on my part.  But as I look at the problem I wonder more and more what alternative mechanism could have been used to achieve success in the face of the onslaught of finances from these other clubs.  The solution that Mr Wenger brought us – world-wide scouting, which in turn has brought the incredible profits from selling players on, is a miracle in its own right.  (If it were easy, all the other clubs would be making money from player transfers – they are not, and they cannot).  The development of the Ems and the sale of Highbury, financed to a large degree by the marketing deals at the time, gave us a sensational stadium, and the chance of later growth.

But using world-wide scouting comes at a price – some of the players brought in are not going to make it.  Working out who will and who won’t make it is easy with hindsight, but up front is nigh impossible.  Football is littered with players who look like they ought to be brilliant, but who don’t quite get there.  Even more confusing some get there for a year (from Martin Hayes to Chris Wreh from Reyes to Hleb to Flamini) and then don’t go on and build on that achievement, and fade almost as quickly as they rose.

But my piece here is not about who we should have bought or sold, but rather, how we could have raised any further finances in order to bring in more players, without risking bankrupting the club.  If there is a way, please do comment.

The point, “if you can’t see that player X is a total failure, then you know nothing about football” tells us nothing.  The answer, within the context of what Arsenal is, has to be much more complex than that.

How every book and article gets the name of Arsenal’s second manager wrong.

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