Arsenal released their interim financial results and the story hasn’t changed much from last year. The club are profitable once again thanks to a model which relies heavily on two seemingly juxtaposed positions: matchday revenue and player sales.
Of all the clubs in Deloitte’s Football Money List, Arsenal are the most reliant on matchday revenue. As of the last full accounting, 40.5% of the club’s total turnover was generated by fans at the game. Moreover, at €117m per year, Arsenal have the third highest matchday revenue in Europe, just behind Man U (€122m) and Real Madrid (€126m). The dream of Arsenal building the Emirates was to move the club into this elite group who generate enormous sums of money from their fans actually going to matches. And it has, until now, come true.
The new stadium paid off immediately and Arsenal have announced a steady increase in matchday revenue every season since moving from Highbury to the Emirates, except this one. We don’t know what the final amount will be this year (if Arsenal get past Bayern they will get at least one additional home match) but with four fewer home matches than the same period last term and getting past Bayern a bit of a dream (thus, no increased home games on the horizon), the club has already lost £7.5m in revenue from £113.5m last interim to £106m this interim.
This is because going to the match is important. In contrast, Milan’s San Siro seats 80,000 fans compared to Arsenal’s 60,000 and yet their matchday revenue is a paltry €33.8m per year. There are a lot of factors for why Milan can’t get people to games but the point isn’t to quibble over why the San Siro doesn’t generate money, the point is that just having the nice new big stadium and a club with a long history of winning European and domestic honors isn’t enough. You need to get people to the games and the best way to do that is to have a product that people are willing to pay to see on the field. Which is why Arsenal’s second business position doesn’t make any sense.
You can slice this fact in a number of different ways but the Swiss Ramble put it thus:
#AFC Interims results: excluding property profit £2m and profit from player sales £43m, AFC actually made a loss of £27m before tax.
— Swiss Ramble (@SwissRamble) February 25, 2013
I asked Swiss Ramble for some comment on this number and the financial results in general but owing to his health, he declined. I’m hoping that he can make at least one appearance on a big name podcast and/or perhaps a blog post on the topic but we shouldn’t count on it because, as someone who writes every day about the club, it’s very stressful writing about Arsenal and really it’s supposed to be “Arsenal until I die” and not “Arsenal until it kills me.”
It is important to note that this tweet is consistent with his findings last season where he stated that “In 2011/12, if we exclude the £2.5 million profit from property development and the £65.5 million profit from player sales, the football club would actually have made a sizeable loss of £31.3 million.”
This marks the second consecutive set of financial results, then, which show a clear reliance on a combination of player sales and a very dedicated fanbase attending matches to maintain a healthy balance sheet and that has to be a worry for the board. Player sales as a form of profit generation doesn’t seem sustainable to me and if the team isn’t good enough people will stop attending matches.
Selling players for a profit is dependent on quality (though some players like Andy Carroll buck that trend). And to create players with quality that other people want to buy you have to have a great academy (plus some luck, like Jack Wilshere who is a once in a lifetime talent) or you have to scout them very young and play them in the first team and give them experience (like Cesc). But the problem is that if you sell your players at their peak, then you’re never going to get the results on the pitch.
Meanwhile, poor results on the pitch always means a disgruntled fan base which we are seeing now grow in numbers at Arsenal. Already, the fans are starting to boo loudly at any result deemed “unworthy of Arsenal” and there have been numerous small, although very vocal, protests outside the grounds over a number of issues from ticket prices to the makeup of the board. I have friends who are season ticket holders and who go to every away game who are starting to get very vocal about needing a change in club policy. It’s getting so bad that there have even been fights among Arsenal fans at games.
Matchday income isn’t all generated from ticket sales. There are a lot of shirts, beers, and pies sold at these games and regardless of whether or not official attendance is 60,000 empty seats hurt the club’s bottom line. Empty seats like the ones in the last game between Arsenal and Aston Villa. I can also attest that there are more tickets available for more games than ever before and for the first time since I have been following Arsenal, fans are publicly offering their seats at a discount.
Arsenal are a club at a crossroads. The club have money in the bank to the tune of £120m. The club have also just announced a new deal with Emirate airlines which has some front-loaded money and other commercial income is set to be announced. There are also a large number of big money contracts which are set to expire and the manager is looking more ruthless with certain players, shipping out Andre Santos to Gremio after just a few appearances for the club. This is a club that looks like it could have the money available to spend several years building the squad back up to a level that could challenge Europe’s elite.
But the club are also looking at a tough fight for Champions League football next season, which if they miss out on will be a huge hit to the “sustainable” model. And the club’s reliance on fans paying the highest prices in Europe to see their favorite players play one or two good seasons, competing for fourth place and coming up short in all three knockout tournaments, only to then get poached away year after year is looking like it has worn thin.
But that story hasn’t changed much from last year. These are the same narratives from top to bottom that Arsenal fans have been discussing for 5+ years: players leaving, salaries, ticket prices, trophies, youth coming through the ranks, and the stadium. Some subplots have been amplified but really there has been no major shift in the overall story at Arsenal and I have to wonder how sustainable that plot line is. Personally, I think a team can’t keep selling their best players, not winning any trophies, and expect the fans to keep paying top dollar to go to games.