Money money money money... MONEY!

In a post-Abramovich world, could Arsenal adopt the Man U model and compete?

What if I told you that Chelsea spent £1.7bn on players between 2000/2001 and 2010/2011. Would that surprise you?

Would it surprise you if I told you that City spent £664.5m since the Sheik’s takeover and that Chelsea have effectively matched them in that arms race, spending £624.7m in the same period? For those of you not quick with math, that’s nearly £1.3bn between the two of them. In that same period, Arsenal spent just £311m, Man U £390m, and Liverpool £355m.

What if I told you that Arsenal’s average spending on salaries and transfers since the move from Highbury to the Emirates is almost exactly the promised £30m per annum? And that despite that increase by Arsenal, Chelsea and Man City effectively spend double the amount on players salary and transfers than the Gunners?

It’s all true, at least according to the data published by the Telegraph on September 1st 2012 in their Interactive Graphic titled Premier League transfer and wage spending from the 2000/01 season to 2011/12.

There are problems with that chart. Not the least of which is the presentation. Each of the bars in that chart have no relation to the numbers that they represent and are instead a linear function of ranking among the peers of that season in each category, stacked on top of one another. It’s just whack-a-doodle.

But the numbers themselves are actually interesting because taken out of the presentation they paint a damning picture of football finances in the Premier League and give some clues as to why Arsenal seem so eager for Financial Fair Play to go into effect.

Before I go forward, let me just say that quibblers abound. It’s the internet age and everyone seems to have not only their own opinions but now days everyone seems to have their own set of facts. For example, Arsenal’s salary numbers in that Telegraph graphic are taken directly from the Arsenal annual report. Which some people have a problem with, I know, because Arsenal’s annual report conflates player and staff salary. But, the fact is that no data set I choose would ever be agreed upon because there are too many people with agendas associated with the Arsenal right now. That’s a fact fact or maybe it’s just one of my own facts, I’m not quite sure.

I am sure that I have no agenda. I looked at the data in that chart and thought, “huh, that’s interesting.” Then spent 30 minutes staring at the numbers and stroking my beard in contemplation. I’m still agog at this data. I didn’t at any point think “huh, this bolsters my arguments” because I didn’t have any arguments. I looked at the data and let the arguments flow from them, not the other way around.

So, let the quibbling begin over how the data in that chart is wrong. You can argue over a few million pounds here and there, if that’s what you’re into, but the broader point is that Man City and Chelsea are spending massive, outrageous, sums of money on player transfers and salaries. Which I think everyone can agree to.

Taking the data from the Telegraph article, I created this chart of what each season’s (between 2000/2001 and 2010/2011) player salary and transfer spending added together looks like for Arsenal, Man U, Man City, Chelsea, and Liverpool.

Let me get a couple of quibble-points out of the way right now: Man City were relegated in 2001/2002 so they get a zero there because the Telegraph data I used for this article didn’t cover them that year; the figure used by the Telegraph are in £s for the year that they were spent, so yeah, there’s been inflation; there’s also been artificial inflation in the market place of player transfers and salary, yep; and yes, the delta of salary spend and predicting League outcomes shows a very strong correlation. None of those are my point.

My points are simply that according to the Telegraph data, it looks like Chelsea and Man City are effectively each paying double what Arsenal are able to pay for players. In that case, no amount of salary re-negotiations, shirt sponsorships, or ticket price increases will ever see Arsenal match them in outlay. However, Arsenal could get closer to Man U, who had a total player spend of just £35m more than Arsenal in 2010/2011. I also suspect that the enormous player spend by Chelsea and City is why Arsenal hang their hat on Financial Fair Play: Arsenal can’t double their outlay on players, so they have to hope that somehow UEFA will drag Chelsea’s and City’s spending down to a their level. And my final point is “HA HA! LIVERPOOL” which I won’t be covering because, seriously, HA HA LIVERPOOL!

The Telegraph’s data shows that Arsenal spent £131.2m on player transfers and salaries in 2010/2011. In the same season, Chelsea spent £276.8m and City spent the most with £290m. Man U, however, won the League that season and “only” spent £166.45m. The year on averages since Sheik Mansour took over City are staggering, £220m per year by City and £208m by Chelsea versus the £103m Arsenal spent and the £130m Man U spent on average per year. Sorry but the gap between Arsenal and Man City is never going to be bridged. £159m additional spend in a single season might be available but I don’t see any way that Arsenal can spend an additional £117m per year going forward.

That said, Arsenal did bump up their spending on players when they moved to the Emirates, according to this Telegraph data. The pre-Emirates per annum spending average was £66.42m and the post-Emirates average is £98.07m per annum. That’s a £31.65m per year on average increase in player spending.  I recall some promises to that effect when the stadium was being built and there are now promises being made that once the stadium is paid off and sponsorships renegotiated Arsenal will be spending even more on players. If I was a betting man, I would guess that number will be close to +£30m per year.

But £117m additional per year? There are no foreseeable methods to achieve that. Still, an additional spend of £30m per year would put Arsenal equal to Man U’s spend over those three years.

This has to be why Arsenal are so eager to see Financial Fair Play implemented. Since the club can never compete in an artificial market with player’s salaries and transfer fees bursting through every conceivable ceiling because of the Sheikhigarchy of City and Chelsea, combined with the fact that no amount of reworking the salary structure or extra advertising hoardings will add an additional £110m to spend on players, they must be hoping that UEFA can push Chelsea and City down to Arsenal’s level.

In the mean time, there is a model of spending with a proven track record of success on the field. A model which doesn’t require that the club get massive cash injections from a rich owner, which doesn’t spend obscene amounts (relative definition here) of money on players, and which only shows a modest increase on player spending of around £30m per year. That’s the Man U model.

With Arsenal’s board stating that they are changing the salary structure at the club and new deals with Adidas on the horizon, I wonder if that model’s future isn’t too far off?

EDIT:

Since some people conflate the words “Man U model” and “debt loaded onto the club by owners in a takeover” I want to be very clear: I am not suggesting that Kroenke loads Arsenal with debt. In fact, the word debt never once appeared in the article because it’s not an article about debt. “The Man U model” I am referring to is: spend some money on players, but don’t bother trying to compete with City and Chelsea pound for pound and instead maximize return on your spend. I’m saying that instead of spending £200m a year, spend £130m and get the maximum return on that money, like United do. In short, spend £30m more per year than Arsenal currently do, fix the wage problems that prevent Arsenal from paying top, top dollar, and get back on to winning. That’s it.

Qq

40 thoughts on “In a post-Abramovich world, could Arsenal adopt the Man U model and compete?

  1. +4 Vote -1 Vote +1Bunburyist

    Is beard a euphemism for penis?

    Also, does following the Man U model mean going into debt like they do? I’m confused about their finances. Well, I’m confused generally about finances, so it’s not surprising I’m confused about the finances of a club I don’t follow. However, people go on and on about how amazing they are with marketing and sponsorship deals, etc., but I also remember reading Guardian articles last year about how much the Glazers have fucked the club. So I’m just asking if anybody knows a little about this, and what it would mean to follow their model.

    I assume, though, that Tim means following their spending habits rather than their business model.

    1. +1 Vote -1 Vote +111cannons

      According to Tim’s chart, United have consistently outspent Arsenal in the region of +/-50%, since 2000, probably about the time United appreciated us as a genuine threat to their long term dominance, and 3 years before the Glazers took over, so I would imagine their debt doesn’t correlate.

      I suppose the whole point of Gazidis et al bleating on about FFP is that we CAN follow United’s lead by operating off of our commercial revenue. That the Glazers can continue to take out big chunks of United like an ATM, still outspend us by half, and still compete for/actually win titles suggests that is the case.

      The great unknown, and where I am seriously skeptical, is whether in fact FFP will be enforced in any way against the likes of City and Chelsea. I fear that it will more likely be used at the opposite end of the playing field to put more clubs like Portsmouth into administration.

      For me, just that boost in spending to go on par with United will be enough for us to become competitive again, providing Wenger can last long enough to see that money start to roll in.

      1. +3 Vote -1 Vote +1Bunburyist

        I get that Tim’s post was suggesting we up our spending to approximate United’s. I guess what I didn’t understand was whether we could that without going into further debt, since–and again, I have no clue about what’s available–with our current self-sustaining model and paying off the stadium, etc., that we have another 30-50m per transfer market on top of what’s actually been spent. So I’m not sure there’s a difference between talking about a model and a spending scheme.

        But what do I know? I don’t do stats, Econ, or even basic arithmetic.

        However, I do know how to stroke my “beard” while gazing at a computer screen.

      2. +2 Vote -1 Vote +1Tim Post author

        It’s the board who are suggesting there will be an extra £30m soon.

        There’s a rumor that Arsenal are going to get an extra £13m a year from Adidas. They are working hard to develop the commercial side with more deals than you can stroke a beard to.

        There are debts that will fall off in a few years, freeing up an additional £15m.

        Even without the parity of increased revenue from TV rights I see Arsenal realistically able to add somewhere between £20m and £40m to the squad value per year. Starting next year.

      3. Vote -1 Vote +1Bunburyist

        Ah.

        You probably brought up those numbers in your post. But it’s so nice to be able to have them condensed for me right here in the comments section. I may not be the most careful reader, but it’s because I read carefully all day at work, and I read your blog and Arseblog’s…uh…blog for a bit of eye candy.

        So, no matter what you think about your message getting across, be sure to know that at least one of your readers is stroking his beard to your prose, if not actually understanding it.

      4. Vote -1 Vote +1Zeddington

        Maybe I’m being an old fart about this, but don’t Liverpool and Spurs get more than 25m a year for their shirts? I may be wrong, I just thought we’d get more once we ultimately renegotiated. If I’m right, then someone is getting screwed over – again (i.e. everyone at AFC). But I’m probably wrong.

      5. Vote -1 Vote +1santori

        Re-negotiated sponsorship deals will help.

        But do remember that our opponents will not stay static either.

        Our weak commercial side and potential loss of branding from constant underachievement is a worry.

        We have to punch above our weight and there is currently (financially anyway) no better person to ensure that we do so than Wenger/Gazidis.
        at the moment.

  2. Vote -1 Vote +1T-Town

    Tim, can you please add a cumulative year-over-year chart as well? I think that will show with hockey stick visuals the overall investment in a given squad and how the gap widens with each year…

  3. Vote -1 Vote +1D1

    The last thing we need to see is for Arsenal to incur the debt that MU has. Even with the lucrative shirt sponsorships (even on training kits!), they have a ton of debt. It’s a house of cards and who knows where that could lead over the coming years.

    1. +1 Vote -1 Vote +111cannons

      United has been yoked with that debt for 9 years. In that time they have won the PL 4 times, the League Cup 3 times, the Champions League once, and managed to prise one of the few world class players we have had in that time period at the first time of asking.

      They also just bought back the training kit contract, so certain are they that it can be improved upon. They can do this, because they won those aforementioned shiny things, which they did by outspending us [but importantly not City or Chelsea] by roughly half year on year.

  4. Vote -1 Vote +1Tim Post author

    Hmmm.. where did I suggest that Arsenal add £500m worth of owner-debt? The word “debt” doesn’t even show up at all.

    “The Man U model” is: spend some money on players, but don’t bother trying to compete with City and Chelsea pound for pound. In short, spend £30m more per year than Arsenal currently are, fix the wage problems that prevent Arsenal from paying top, top dollar, and get back on to winning. That’s it.

    1. +1 Vote -1 Vote +1santori

      Fix the wage problem.

      I think that is what we are doing, but it won’t happen overnight.

      Spending on players is one thing but can you get rid of players on the periphery? It’s not so cut and dry.

  5. +6 Vote -1 Vote +1Ian

    I’m a united fan but I have to say I always find Arsenal blogs a good read. Usually very level headed and none of the stupid slagging off and general hatred you get with City and Liverpool blogs. Credit where it’s due, eh. On the subject mater I’m not surprised at the graph; Utd bobbing along the spend chart just above the rest of the top clubs and then suddenly Chelsea and City come along and outspend everyone else by 2 or 3 to 1. I agree with the author though. Fergie has just about got the right balance between buying cheap (Van der Saar, Park, Chicharito, Evra, Vidic, Rafael), home growns (Welbeck, Evans, Cleverley, Fletcher), and a few stars like RvP (oops sorry!).

    1. +6 Vote -1 Vote +111cannons

      Fair play. I have no idea what it’s like to read City, Liverpool or United blogs so I can’t really relate.

      I know it’s hard to resist bringing up van Persie. And cold comfort though it is, I enjoy confirmation of all those years arguing with United supporters [on Arsenal blogs, mind] saying he’d walk into the United side. And it’s worth pointing out that not only does he walk right in, but he carries it. I’ll happily pass my previous anxiety about his potential injuries onto United supporters. Have fun with that.

      1. +1 Vote -1 Vote +1Tim Post author

        I don’t read them regularly, but if they come up in a search I don’t not read them just because they are all cunts.

    2. +7 Vote -1 Vote +1Bunburyist

      Hey, thanks Ian. You know, Arsenal blogs invariably win annual blog awards. We’re a club supported by the erudite.

      A blog award is the new fourth-place trophy.

      Congrats on luring the “little boy” inside van Persie. You’re a one-boy team, now, it seems. Van Persie has even made your former top scorer, Own Goal, look average.

      1. +4 Vote -1 Vote +1Bunburyist

        That’s true. How I long for the days when we were called a one-man team.

        Remember when van Persie called us “you guys”? Yeah. I thought he was my best friend and everything.

      2. Vote -1 Vote +1santori

        To put it starkly, RVP gets paid 180K per week at United versus say 120K offered by us. Let’s be generous and say we offer him a bit of a bonus for his service over 8 years (particularly the last season) and bump our offer up to 130K.

        He is still making 50K extra per week at United. Over a month that is a round 200K. Extrapolated to a year, it’s 2.4m quid. Over say 3-4 years contract…well.

        Now you ask someone with an injury history at 29 not to consider signing that sort of contract and take 50K less a week? I’d say he’d be absolutely daft. I wouldn’t turn it down would you?

  6. +3 Vote -1 Vote +11NilToTheArsenal

    I hate Man U like I hate the NY Yankees. I don’t EVER want to emulate anything they do, even if it means repeatedly going back to the “16 Levels of Losing” to look for commiseration as we lose essential matches season after season. A few words to those who are interested in following the link: Firstly, I think this is a classic piece of sports journalism but it’s not for those who are so serious that they can’t laugh at their own misery. Secondly, if you don’t follow North American sports the examples he gives are all be meaningless but the sentiments are universal, hence the reason to share this with you. We can certainly though unfortunately come with our own Arsenal examples for many of these levels. For those so inclined, please do enjoy this classic bit:

    http://sports.espn.go.com/espn/page2/story?page=simmons/071001

    1. +1 Vote -1 Vote +1Eurazian

      I despise them too, but cannot overlook the fact that they are the benchmark.

      As Tim mentioned in the post, it’s about getting the maximum return for what you spend. And that’s where we are falling short. Wenger at this stage of his career is still good at nurturing individual talents but he seems to have lost any ability to motivate them as a unit. It’s not a problem that Man U have.

      1. +1 Vote -1 Vote +111cannons

        To be honest I don’t hate United the club. For the most part it is their supporters that piss me off, and one or two players [Rooney, Evra, Fletcher come to mind]. Not even mad at Fergie, even if I do think he’s a prick.

      2. Vote -1 Vote +11NilToTheArsenal

        You have a good point. There’s a difference between hating a club and respecting their legacy, history and achievements. I have never insulted Ferguson, at least not seriously. He’s a gum-chewing martinet, a dictator a sometime clown and buffoon, but no one has been able to do what he does and has done. He’s actually quite brilliant I hate to admit.

  7. +5 Vote -1 Vote +1Tee Song

    It seems to me that people are confusing ManUre’s business model and their ownership model. ManUre’s business model is exactly the same as ours. Maximize revenue utilizing match day income at Old Trafford, media viewership revenue through television deals and streaming services, and commercial sponsorship revenue through kit sponsorship and the like. Spend the revenue that you make for on pitch performance through player acquisition, development and retention as well as managerial staff, etc.

    ManUre’s ownership model is that the Glazer’s bought the team via a leveraged buyout. They put up a small amount of capital, borrowed the rest and then used the revenues of the club itself to secure and repay the loans. For all intents and purposes, it’s like a home mortgage where a homeowner, who doesn’t have the cash on hand to buy a home (what middle class person does?), obtains a loan which uses the home itself as the collateral. If the homeowner defaults, the bank then owns the home.

    ManUre and Arsenal differ in two ways, at least for the purposes of this discussion. Firstly, ManUre’s revenue streams are substantially greater than ours. That’s not surprising since they have a big head start on us. One thing the Glazers recognized was that the income potential from commercial sponsorship was not being exploited fully and they proceeded to increase that. Second, and perhaps more importantly, because the Glazers leveraged the club, some of ManUre’s revenues are diverted to make payments on the debt incurred from the purchase of the club. As far as I know, the Glazers have also taken money out of the club directly. Say what you want about Silent Stan, but in purchasing shares of the club, he didn’t put any debt onto Arsenal and has not taken money out in the form of share dividends.

    So we don’t need to adopt ManUre’s business model, it’s been ours all along. We just need to get better at it.

    1. +1 Vote -1 Vote +1Tee Song

      Quite frankly, it’s a testament to how popular ManUre are that they can generate a revenue stream which can still compete on the pitch with likes of petrodollar fueled Chelski and Shitty, despite being saddled with debt from the Glazers LBO. The magnitude of the debt the Glazers put on their books dwarfs the debt we’ve taken on with Ashburton Grove and yet they can still spend substantially more on transfer fees and player wages. Like it or not, ManUre are probably the pinnacle of the self sustaining modus operandi, not us. Their debts weren’t incurred to finance football operations but to finance the Glazers purchase of the club. Their ability to generate such a substantial income is actually a perverse ray of hope for Arsenal fans and shows that self-sustaining clubs can generate the income necessary to compete with billionaire backed clubs.

      1. Vote -1 Vote +111cannons

        Is their wage structure that much higher than ours? I am under the impression that there isn’t much difference. The way I understand it your Wellbecks and Cleverleys are on much lower wages to say a Wilshere or Walcott, which makes it easier for them to drop 200K a week on Rooney & van Persie.

      2. +1 Vote -1 Vote +1Tee Song

        Check out this link.

        http://www.guardian.co.uk/football/2012/may/23/premier-league-accounts-profit-debt

        During 2010-11, United’s wage bill was £29M or 23% higher than ours. That’s a very substantial percentage. I think that difference is exacerbated by our wage structure but the fact of the matter is that it’s still a huge difference. Even if we followed United’s wage structure exactly it would mean that if say their top earners are at £200k/wk, the best we could offer would be 23% less or £154k/wk. Which, when you add the signing bonus we were supposedly offering, was pretty much what we offered RvP. Plus, what we actually pay our players might be even less if it’s true that Arsenal report total wages to all employees (as I’ve been frequently told) as opposed to player wages only, as other clubs do.

      3. +1 Vote -1 Vote +1santori

        Excellent point.

        And they can also afford it as they pull in more than us. We on the other hand have had to resort to the dubious ploy of selling off our top asset to stay competitive because of our weak commercial side (not to mention the high ticket prices, or the fish and chips)

  8. +3 Vote -1 Vote +1TopGun

    Well, all that is fair Tim. But what is the reason preventing Manu to increase their salary spendings further by the time we reach to their level? Say in a couple of years even. Even Manu are worried about the good players being lured away by the kind of money City, Chelsea and PSG could offer, so they should be thinking of a way up too.
    I don’t think reaching Manu’s current level would be enough. We would need to be at their level at the time, and I daresay even better, because unfortunately we have been a little short of filling up the trophy case in recent years like them.

    1. +3 Vote -1 Vote +1Tee Song

      I’ve read that for a club to be financially healthy, it shouldn’t exceed a wage to turnover ratio of 50%. Don’t ask me why that magic number is critical but better football related financial minds like Swiss Ramble have thrown that figure out. From my link above, ManUre were at 46% two seasons ago which doesn’t give them much wiggle room. They have to increase their revenues in order to do that and they are much closer to maximizing their commercial revenues than us. The recent NYSE stock flotation was, I believe a rather desperate attempt to raise capital. Plus, their debt burden and interest payments are three times what ours are, a financial burden resulting from the Glazers leveraged buyout.

      In fact, the only reason FFP will develop any traction at all is not because Arsenal want it. ManUre, AC Milan, Juventus, Bayern (another financial beacon), and even the Spanish giants Barca and Real Mad are looking at trying to outspend entire Arab countries. AC Milan was forced, against their will, to sell their two biggest starts to f***ing PSG, a club which until now would have been ignored by the likes of Ibra and Silva. Now that those clubs are feeling the pinch, there is some faint hope that FFP might actually have some teeth.

      1. +1 Vote -1 Vote +1santori

        Yes. Wage to turnover is key.

        To see the figures as is without such other factors is selective viewing IMO.

        We have increased our wages with pressure on our turnover ratio where as United have kept relatively stable because of their strong income.

        It’s a tricky issue because without success on the pitch, it will affect the commercial revenue to some extend. But push too hard and it will affect our ability to possibly bring players in down the line.

        We don’t know how much of an affect FFP will have on the clubs. There is a palpable effect as is with City not spending as highly this summer because of their debt level.

        Some caution on our part is not a bad thing.

  9. Vote -1 Vote +1shotta

    One significant difference between ManU and us is their expenditures on wages is theirs has been on relatively mature players who are ready from day one. Unlike Arsene who had to break up the Invincibles pretty quickly, in concert with the board, so they could not only finance the debt but meet those pesky loan ratios that are part and parcel of any serious loan agreement. Violate them and any commercial borrower will tell you how much you are up shit street. Project youth was essential but it wasn’t cheap and we sure had a lot of inconsistencies along the way.

  10. -1 Vote -1 Vote +1santori

    1) I don’t think you need to look at a chart to realise that City and CHelsea are spending slightly more than us. ;)

    2) Whilst you are correct that 30m extra spending will make us that much more competitive, and that there is no reason to believe we cannot win the title simply because we can’t match the teams in blue (Ask United), also remember that United make more money than us.

    What is equally important to factor in is the wage to turnover ratio. I believe 1.55 was what was considered healthy by Uefa. United are about there. We were there to but have gone up slightly to 1.8 (still acceptable) because of pressure to compete in terms of wages.

    Therefore whilst there is a fair amount of truth that an extra 30m will afford us better competition particularly since Wenger has been nominally excellent in bringing players in with efficient pricing, it is a bit disingenuous to consider financials without looking at what we do bring in (regardless of profits from selling off our top assets). Simply put, in that repesct, United are still way ahead of us.

    3) Conversely, the other side of the coin which you may consider is the effects of the rise in salaries on players sales (or lack thereof). Whilst it is less difficult to sell on our top assets, the market place has changed considerably with regards disposal of fringe players in the squad.

    Primarily there is the soft market on the continent but also many clubs that would nominally grab some of the players we put on market are struggling to keep up with the wage race. Also IN EFFECT as is is FFP whereby teams on the continent such as AC Milan have been forced to sell their own top assets and take players like Bendtner on loan instead.

    Thereby, considering the fact that we have still a number of peripheral players on our books, I think Wenger has erred on prudence with regards bringing on a striker for instance until we can move the existing unwanted player(s) – Chamakh, Bendtner and Park. Permanently.

    4) That is not to say we should not be spending a bit more to cover a couple of key areas but I think you can also look at the numbers provided by the chart in a different way. In that, United have remained competitive (perhaps with 30m more which you say does not make much difference when compared against Chelsea and City)

    But if you look at the United squad over recent seasons (Ronaldo apart), they have not that much more quality in the team.

    The difference is quantified beyond mere player purchases. There is also a tactical element that should come to play in discerning the combative gap between the Mancs and us.

  11. Vote -1 Vote +1nycgunner

    Honestly I think we’ll need more than 30mm per year to be competitive with United. There are some intangibles which isn’t shown by any data but you can see it week in week out. The most obvious is the league bias in favor of Utd. Arsenal is on the other end of the spectrum of this bias. You all know at some level this is true. We’ll need to spend more to compensate for this.

    Another intangible is the Fergusson factor. I loathe the sight of him but red nose is tactically astute and gets more out of shit eating gobs like Carrick, Fletcher and Anderson. Wenger actually needs real talent to carry out his game plan. He doesn’t usually buy shit kickers, something which Fergusson seems pretty happy to do. Talent costs more.

    Slightly off topic but related to player expenditures, another thing we need to do is revamp our scouting network (or at least, rethink our strategies for player acquisition). I’m not sure who is recommending players like Santos, Park & Chamakh but they seriously need a kicking. I feel we are still stuck in the 90s and picking up players from the French league where the talent pool had depreciated quite significantly. I’m happy we finally bought a German and a Spanish international. It’s about time. We need to forget about the French league and focus on Bundesliga and La Liga.

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