Today Arsenal announced a £150m deal to continue their relationship with corporate sponsors Emirates. The terms of the deal include an extension of the shirt sponsorship and training kit sponsorship until summer 2019 and an extension of the naming rights to The Grove for an additional 7 years giving Emirates the name of the stadium until 2028. By which time all current Arsenal fans will have died from stress.
Additionally, Ivan Gazidis revealed that there are some “front loaded” terms to the contract which will put a chunk of the money into Arsenal’s “war chest” for this summer and which the club is insisting that Arsenal will spend on players. “We have been able to talk to Emirates about the payment terms and bring some of them forwards, so that we will have additional money in this financial year which we will be able to invest in the summer.”
Gazidis sought to assure fans that “The deal is all about football. It is all about giving us the resources in what we believe is a responsible and well managed way, to be able to invest in what we put onto the pitch for our fans.” Presumably that means Arsenal won’t spend the money on Arsenalization, bonuses, or dividends to shareholders.
As for who will be in charge of spending the money, Gazidis gave his backing to Arsene Wenger stating, “Those decisions on investment are made by our manager, and he has done an outstanding job of managing the resources of the club over time, and we expect that to continue, but he will have more resources available.”
Divided by the terms of the shirt sponsorship the deal is worth £30m a year and puts Arsenal in rarified air among the elite teams in world football. Manchest Untied signed a £350m 7 year deal with Chevy which averages £50m a year, however, it starts next season at just £43m and grows as the contract goes on. United also receive £10m a year for DHL to have a spot on their practice jerseys, bringing their total to £60m a year for shirt sponsors. Barcelona’s shirt deal is worth just £25m a year, kings of corporate sponsorship Bayern Munich’s deal is worth £16.8, and the European Champions Chelsea receive the paltry sum of £14m a year to wear Samsung whilst racially abusing black colleagues.
When divided by the terms of just the shirt, Arsenal’s deal looks fairly good especially as the Gunners haven’t won a trophy in a dog’s age. One must also consider that the terms of the current Arsenal shirt deal is around £6m a year marking this as a massive increase in corporate revenue for the Arsenal.
One could look at the first deal with Emirates and get a perspective of how much Arsenal have gained. In order to build the new stadium Arsenal took a deal worth £90m from Emirates, with £42m going to the naming rights of the stadium for 15 years and £48m going toward the name on the front of the shirt for 8 years. That works out to £2.8m a year for the stadium and £6m a year for the shirt.
Arsenal are not disclosing how they divided the £150m new contract with Emirates. But we do know that under the new deal, Arsenal threw in 7 years of naming rights to the Emirates stadium which we also know, under the terms of the current deal, is worth around £3m a year. Since we don’t know how much they actually got for the deal we can make up any number we want that suits our agenda. If you’re wont to complain about the deal, leave it at £3m and complain that you know for a fact that Arsenal could have sold the naming rights for more in 2021.
On the other hand, if you wanted to make something up you could double the initial contract. Then Arsenal are getting £42m for 7 years of renegotiated naming rights on a contract that wasn’t set to expire for 9 more years. There aren’t too many examples of stadiums having their naming rights renegotiated and none where they were extended so far out. The closest example is Gillette stadium in Foxboro Mass. which was worth £5m a year and runs until 2031. Thus, £6m a year for naming rights on a property that didn’t come up for negotiation until 2021 is a pretty damn good deal. But like I said, I made that number up, just like people complaining about the deal are making numbers up.
There’s also the issue of where the front loaded payment is coming from and I bet you dollars to doughnuts it’s from the naming rights. If I’m right about that and about the amount, then that means Arsenal will have an additional £42m to invest in the squad this summer.
If we continue with my imaginary positive contract, that leaves a shirt deal worth £108m over 5 years. If United, who have won every single Premier League title since the beginning of time and are the most valuable club in the world, received £10m a year for their practice kit then Arsenal, who haven’t won a trophy in 7 years, would do well to get a deal in the range of £5m per. That reduces the shirt sponsorship deal to £83m over 5 years, or £16.6m per year.
All totaled in my feel-good world, that means Arsenal got a lump payment of £42m for stadium naming rights that weren’t set to expire for 9 years, an increase of £10.6m per year on their shirt deal, and a new £5m per year payment for their practice shirts. £42m to spend on transfers and £15.6m per year to spend on salaries.
Or you could do what the official site is doing and claim it’s a £30m per year, five year deal. If you do that then it’s an increase of £21m per year over Arsenal’s current deal. That is the most positive spin to put on the whole thing.
Arsenal are spinning the deal positively, almost bragging that they will have a lump sum to buy players with this summer, and they are claiming that the club is going to spend the money on players. There’s also the matter of the very large amount of cash on hand that has many Arsenal fans angry. So, announcements from Peter Hill-Wood about “not pulling a Rangers” are going to sound mighty foolish indeed if the club doesn’t buy several big names this summer. Sorry, but that’s the bed they are making with today’s announcement. In a sense, they are now forcing themselves to “spend some fucking money”.
Now, how do you spend that money?
Well, Arsenal normally amortize transfer fees which is why the lump sum up front investment is a bit strange. But let’s pretend that they continue with business as usual and that means if they pay £30m for a player like Falcao, they mark it down in the books as £6m a year over the five years of his contract. Top players like Falcao demand top salaries and while he won’t get what Zlatan earns at PSG (£1m a month NET) he could easily command £5.2m a year. If we take our super-positive £21m extra per year figure and use it to buy Falcao, that leaves just £10m per year remaining. With that £10m, Arsenal could buy a £20m player (amortized!) and pay him £5m a year over five years as well.
And that’s how a £150m deal is now worth just two additional top quality players.
Of course, Arsenal are in a better position than that. If the club can slough off the salaries of certain players and get leaner in that regard they could realize another £10-15m a year in savings (10% off the current wage bill would be a great deal). Which is another top level player per year. And now we are up to three players in the Falcao category.
In addition, Arsenal have the new shirt manufacturer contract to announce. The amount there is rumored to be whopping £25m a year, an increase of £17m a year if true (again, borrowing from Swiss Ramble’s post where he claims Arsenal receive £8m a season from Nike). That’s a huge increase in commercial deals for the club and gives Arsenal the buying power to add a fourth Falcao to the team and another player in the range of, say, Cazorla.
All totaled, if we take the most positive spin on the sponsorship announced and the one ready to be announced, mix in a little salary savings which will happen automatically when certain players’ contracts expire, leave the cash on hand untouched, and Arsenal could be looking at four Falcao’s next season. Maybe more!
I am holding out hope that Arsenal find a way to start at least three of those Falcao’s with Cazorla in the hole.