Tag Archives: Finances

What is the sound of one Stan talking?

Mystery buyers seek to destabilize Arsenal’s owners ahead of North London Derby

The Telegraph are reporting tonight that unnamed Qatari and UAE investors are poised to launch an astonishing £1.5bn takeover of Arsenal FC. And make no mistake about it, this announcement has only one intention: create the talking points needed to destabilize the cub ahead of the biggest game of the season.

Tomorrow morning, millions of Arsenal supporters will be getting ready for the big game, a game which should just be about football but which we all know could do much to swing the club’s fortunes from feeding at the Champions League trough to “Being Liverpool.” Those fans should all be talking about how Wenger is going to stop Bale or how Theo Walcott is going to unlock Tottenham’s defense but instead they will almost certainly be arguing the finer points of ticket prices, whether Kroenke is the right owner of the club, stadium debt, and whether Arsenal could still remain compliant under UEFA’s Financial Fair Play rules should Arsenal fall into the hands of what Nick Hornby called the Sheikhigarchy.

The bidders carefully leaked out the plan; double Kroenke’s money, pay off the stadium debt, fire the board (especially Gazidis), fire Arsene Wenger, and give the new manager the money to invest heavily in the squad. The knock-on effects, they say, will be to keep homegrown players like Jack Wilshere, push Arsenal back into the elite of world football, and bring back the “true fans”.

Doubling Kroenke’s money is easy, they have said that they plan to offer to pay him £20k per share and as a result will put about £400m profit in his pocket. Paying off the stadium debt, also easy, just pay it off. Or so they say, but it’s a limited time offer, act now.

The timing of this announcement isn’t coincidence. The “bidders” know that by releasing this information on the evening of the North London Derby they will set the narrative about Arsenal for the next six months. They even reveal as much in their official quotes

We will not bid for Arsenal if they go into decline. Kroenke and Usmanov will not get this kind of valuation if Arsenal do not succeed and will not get this kind of valuation ever again.

“If they go into decline” = “if Arsenal lose tomorrow, you should be worried that we will not make another bid for this club”. It’s intended to quicken the mind, focus it on the main question; Kroenke, in or out?

I have no doubt my friends will be dipping toast points in their eggs tomorrow before the game and musing over whether they would rather have Kroenke or “anyone but Kroenke” as the owner. That is precisely what this statement is intended to do. It will plant the seed in the mind of the average fan who might be wary of Usmanov taking over but who can now look at this as an “unnamed” owner. Who would you rather have, Silent Stan or Mega Bill?

Who knows whether Mega Bill is a great guy, whether he would be good for the club, whether he is a fan of football, whether he would have tea with the Arsenal Supporter’s Trust, or even if Mega Bill isn’t just Usmanov in disguise? It’s not important right now, the important thing is that they get you thinking that Kroenke isn’t the right guy.

Along the way they throw out the populist bone and remind everyone that ticket prices at Arsenal are expensive. Their solution will be to lower ticket prices. How, exactly, they plan to do that and have further money to invest in the club and not run afoul of Financial Fair Play is not revealed. But they want to bring back the “North Bank feel” and some of the “true supporters” — buzz words, PR spin and wonderfully placed to hit two major points that have been under great media scrutiny all year.

They also make their intentions over Arsene Wenger’s future very clear:

No big club can go eight years without winning anything. No manager of a big club, not even Sir Alex Ferguson, would have survived eight years without winning.

As I said in my match preview, this game always has the rare ability in the season to set the narrative for Arsenal Football Club. In lean times Arsenal fans could feel good as long as they got one over on Spurs. In fat times Wenger went 11 years without losing to them and fourth place didn’t feel so bad as long as Arsenal finished the season above Spurs. We even coined a term “St. Totteringham’s Day” as an annual celebration of our dominance.

But this year follows on a season in which Arsenal were the closest they have ever come to being overtaken by Spurs in the League Table during Wenger’s tenure at the club. Spurs are above Arsenal in the table right now and tomorrow’s match is the proverbial “six pointer”: a platform on which they could build and overtake their rivals or which could see them seven points adrift.

But sadly, before and after this game I suspect that the fans won’t be talking much about the actual football. Instead we will all be debating Financial Fair Play, stadium debt, Wenger’s future, and whether Kroenke is the right owner.

It is a perfectly crafted leak from start to finish and it hits all the major points at just the exact right moment laying out all of the talking points for everyone to mull over before and after the game. Van Persie is mentioned, ticket prices, Gazidis, lack of trophies, Kroenke’s supposed greed… on and on every point is hit perfectly.

Make no mistake about it, this is the first shot in a hostile corporate takeover. Should Arsenal falter in the North London Derby I expect to see stickers with “Kroenke Out! Nameless Rich Benefactor In!”, “We want our North Bank back!”, “Save Jack Wilshere”, and the ironic “Kick Greed out of Football” litter North London.

Qq

Where can I watch Arsenal on television?

How the £30m in increased television revenue is shrinking by the minute

Back in the Fall of 2012 the Premier League announced a bumper new television contract that was set to top £5bn for the first time ever. This new contract included huge revenues from domestic television rights and crazy new money from overseas television rights. My American readers, for example, will be happy to learn that the Premier League has finally outgrown the shackles of Fox Soccer Channel and will now be part of the NBC Sports family.

The reason I break both of those domestic and overseas rights out as different contracts is because they are divided among the 20 teams (minus parachute payments for relegated teams) in two different ways. The domestic rights are divided on a 50:25:25 scale with top teams taking more money and bottom teams less based on appearances while the foreign rights are divided evenly among the 20 teams. What this means in practical terms is that the winners of the Premier League will be earning £26m more from the domestic rights and the losers will only earn £13m more. But when you add in the additional £7m for foreign rights that every team gets (us bloody Yanks!) the League winners still “only” earn that same £13m more than the bottom team. That means that the worst team in the Premier League is now guaranteed an additional £20m per year. And… the relegation teams also get a kicker to their parachute payments of about £8m the first year £6m the second, and £2m the third.

From an Arsenal standpoint this means about an additional £30m per year or about £10m more than the League losers. But this fact that suddenly every team in the Premier League gets at least an additional £20m in television revenue every year had me wondering. Is that actually additional revenue or is it just inflationary? Let me put that another way. Santi Cazorla cost Arsenal £16m in transfer fees and starting next year every team in the Premier League will be able to buy their very own Santi Cazorla, but there’s only one Santi Cazorla, what happens to the price of Cazorla in that situation?

Granted, not every team will want a Cazorla. Also, not every team starts in the same financial situation. And further, some teams will not really be competitive for players like Cazorla because they can’t give him the higher profile (read: more endorsement money) that a club like Arsenal can offer. And finally, of course there is the additional £10m in TV money that Arsenal get. So, there’s still a competitive advantage for the big clubs like Man U and Arsenal.

Where can I watch Arsenal on television? GREAT MOMENTS IN GUNNER’S HISTORY: Vassiriki Abou Diaby nearly kicks John Terry’s head clean off.

I warned of something similar before when the Premier League introduced their foolish “25 man rule”; that such a change would only drive up the price of English players. And of course what we have seen is an explosion in prices teams are willing to pay for that all important “homegrown” passport. And I’m saying something similar now: this so-called “extra” money from television revenue is only going to drive up the prices for the types of second tier players that Arsenal shop for.

Cazorla at £16m already looks like a good deal but in two year’s time, £16m for a player like Cazorla will look like an absolutely genius buy. And Michu at £7.5m will look like some kind of mastermind.

So while Arsenal fans are all excited by our “extra” £30m, the rest of Europe is quietly stocking up on caviar and champers. Because with all of the analytics, the cash, and the exposure of the Premier League to the global market, uncovering the next Cazorla is going to be increasingly more difficult. And uncovering the next Vieira will be impossible. Well, it won’t be impossible, everyone will know exactly who he is and the big, big money clubs will be ready with the big, big money offers. Getting the next Vieira for next to nothing is what will be impossible.

Qq

Arsenal’s reliance on matchday revenue and player sales can’t go on forever

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:

 

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.

Qq