Arsenal announced today that American based Kroenke Sports Enterprise (KSE) has purchased the shares of Lady Nina and optioned the shares of Danny Fiszman bringing KSEs potential ownership of Arsenal PLC, the parent company of Arsenal Football Club, to 63%. As expected there’s a lot of misinformation and speculation about Mr. Kroenke, what to expect next, and the future of Arsenal that needs to be cleared up.
What has actually changed?
The simple answer is almost nothing. Lady Nina was previously ousted by the board, Usmanov will only ever find himself a seat at the board if he buys the whole club, and Danny Fiszman isn’t in good health. KSE is promising to keep the board arrangement the same and crucially not to load the club with debt during the takeover.
Moreover, taking a cue from Kroenke’s other sports enterprises and from their statements in the link above the club will continue to be run as a self-sustaining enterprise. If you have spent the last 6 months hoping for an owner who would come in and buy fan loyalty with the £300m purchase of Gary Cahill and 12 other English players, which is secretly financed by debt instruments loaded into the club, Stan Kroenke will disappoint you.
If, on the other hand, you believe in the self-sustaining model of the football club which looks poised to start generating moderate income that will be put back into the club, then Stan Kroenke won’t disappoint you and might even excite you a bit.
What will Stan Kroenke do for Arsenal?
The first and most important thing is to keep his promise not to load the club with debt. According to Forbes’ latest Rich List, Stan Kroenke is ‘only’ worth $2.9 billion but the Swiss Ramble reported that he took some time to pay off the shares he’d previously purchased from Danny Fiszman which indicates that either he might be cash shy.There’s also the careful language in the statement issued by the dot com that KSE has “optioned” Fiszman’s shares instead of purchased them outright as he has done with Lady Nina.
He’s also just purchased the St. Louis Rams for $450m in August and for him to buy out the remainder of Arsenal he’d have to find an additional $650m or so. Again, I can’t stress enough that the most important thing that Stan Kroenke can do for Arsenal is to NOT load the club with debt.
The second thing he could do is increase Arsenal’s profits through a combination of things such as stadium utilization and foreign tours. Some of this has already started as Young Guns Blog reported that Arsenal are sending a U-19 team to participate in the Dallas Cup here in the States. There have been rumors for the last year or so that the board are finally going to break Arsene’s resistance to taking the club further than Austria during pre-season. Just to put that in perspective, a tour of the USA would bring the money to buy one Gary Cahill or two actually good center halves.
The other thing that Stan Kroenke is well known for is exploiting opportunities to make money across his businesses. As owner of the Rams (NFL) and the Colorado Rapids (MLS) and now as owner of Arsenal I would fully expect him to host tours of those American clubs at the Emirates Stadium. That might seem like a wild prediction and maybe it is, but the point is that he will be looking for cross-partnerships and ways to use the Emirates stadium in order to generate more profits.
And finally, there is a lot of money to be made off the broadcast rights for Arsenal’s games. Right now the model is dominated by old media like television rights but the future is in networked content. I expect him to exploit that as well.
So it’s all about the money?
Well… sort of. Kroenke’s recent purchase of the Rams has generated a bit of controversy because there’s a strong feeling that he wants to move the team to LA. That feeling is driven by the fact that he’s on the LA Stadium Working Group committee and that there are many more opportunities to generate income in LA than in St. Louis.
Enos Stanley Kroenke was named after two very famous St. Louis baseball players and has roots in Missouri. He was also the guy who tried to bring a new NFL franchise back to St. Louis before the Rams relocated. If there was ever an owner who should want to keep the Rams in St. Louis it would be Stan Kroenke. Watching how that drama plays out will give us insight into what Stan will do with Arsenal: will he go for profit over traditions?
The other thing that’s a bit troubling is the sporting aspect of his ownership. Yes, the Colorado Rapids won the MLS Cup last year. Yes, the Rams won the Superbowl in 1999, and the Denver Nuggets are in the playoffs this year but since 2001 the Rams have been dreadful and it’s important to note that the Nuggets haven’t exactly lit the NBA up.
Kroenke isn’t going to be like Abramovich. He won’t spend £300m next season, fire Arsene Wenger, clear out the locker room and buy 16 new players. But what I hope is that he understands the differences between American sports franchises and Arsenal football club.
In the USA there is no relegation, there is profit sharing, there are salary caps, and you have the ability to move a team from St. Louis to LA in order to increase the brand name and stadium revenue. In the USA you can get away with fielding a team of players who might make the fans a bit hopeful but have no real chance of winning a title.
Despite the fact that some folks would argue Arsenal have been doing something similar for 6 years I would argue that in England you can’t do that with a club. For example, the Rams would have been relegated last season if the NFL had a system similar to the EPL.
In England and with so much now dependent on building foreign viewers I would argue that the success of the business side of the club is hugely dependent on the success of the football team.
The obvious and immediate effect is if Arsenal were to slip out of the Champions League places, it would cost them £30m a year (or more). But the less obvious effect is if Arsenal are a mid table team the growth of the global brand will be severely curtailed.
Stan Kroenke has to know this and I doubt he would want to pay £750m in order to lose money. He’s a shrewd businessman, Arsenal are run like a business, and more so than any league I can think of the English Premier League only generates profits for successful teams. Given that and Stan Kroenke’s long history of finding ways to uncover hidden or underutilized revenue streams, I fully expect Kroenke will put money into the club and make it better both on the field and off.