The authoritative Swiss Ramble has taken a look at the financial challenges facing Arsenal. He has apologised to the club's fans for such depressing reading, but they are probably well aware of the hurdles they face under the regime of 'silent' Stan Kroenke.
The Swiss Ramble notes, 'The challenges could probably be simplified to Arsenal needing to get back into the Champions League as soon as possible. However, this is by no means an easy task, especially when their rivals are outpacing them off the pitch.'
On the face of it, Arsenal are doing fine, having reported profits for 16 consecutive years, adding up to a grand total of £393m, averaging £25m a year. Furthermore, Arsenal’s profits in the last two years were a healthy £70m in 2017/18 and £45m in 2016/17.
In fact, the club's £70m profit before tax in 2017/18 was actually the fifth highest ever registered in the Premier League, though it is worth noting that this was comfortably surpassed by two rivals that season (a Haringey club and Liverpool). However, this profit was driven by £120m from player sales, so the club actually made a hefty £42m operating loss in 2017/18 – a £94m decline from the previous season’s £52m operating profit. This was due to the “double whammy” of no Champions League and a surging wage bill.
In fact, given that there were no major player sales in 2018/19 (only Perez, Campbell and Akpom), it is highly likely that Arsenal will report a large loss before tax for last season – the first time the club will have slipped into the red since 2002.
Arsenal were the only club in England’s Big Six to see revenue fall in 2018. In fact, their £38m growth since 2016 is miles lower than their main rivals, four of whom had revenue growth above £100m. Most painfully, in this time another North London club have closed the gap from £141m to just £10m.
In 2010 Arsenal's revenue of £223m was second only to United, but they have slipped to 5th place in 2018 with £389m. They are now at least £50m behind the top four clubs: United £201m, City £114m, Liverpool £66m and Chelsea £59m. The swing to Liverpool over this period is more than £100m. Looking at the 2018 Money League, it is striking to see that Arsenal had the worst revenue performance of all the clubs in the Top 20, falling by £30m compared to the previous year.
Chief executive Ivan Gazidis had boasted, “We should be able to compete at a level like a club such as Bayern Munich”. However, in 2009 the club were only £23m behind Bayern, in 4th place in the Money League, but this had risen to £168m in 2018, as Arsenal fell from 5th to 9th place.
The failure to qualify for the Champions League has really hurt Arsenal revenues. Despite reaching the Europa League final in 2018/19, this was only worth £32m, at least £50m below the English clubs in the competition. In the last two years the club has earned by far the least of the Big Six in Europe.
Commercial revenue has barely grown at all in the last three years, up by just £4m since 2015. Commercial revenue has long been the club's Achilles’ heel, but the shortfall against the top four has significantly widened in the last three years. The Swiss Ramble asks, 'Where exactly was Gazidis’ supposed commercial expertise?' He got over £22m for his expertise during his 10 years at the club.
In fairness, better sponsorships will come on line in 2019/20 at the Emirates with new Emirates and Adidas deals adding an extra £40m a year (plus sleeve sponsor Visit Rwanda £10m from 18/19). The problem is that the other clubs are not standing still, so their deals will also increase.
The Gooners still enjoy an advantage over their rivals in terms of match day revenue, but this has been steadily eroded, so the difference is now much smaller, especially in relation to their North London rivals with their new stadium.
As the Swiss Ramble points out, although Arsenal have spent more money, they haven't spent it very well. They have hardly got much value for a half a billion pound outlay since 2013.
Arsenal's ability to outspend others has diminished. In 2012 they had almost as much cash (£154m) as the rest of the Premier League combined (£181m), but in 2018 other clubs have seen their cash boosted by new PL TV deals, so they now have £686m compared to Arsenal £231m.
They have no FFP issues at the moment (either Premier League or UEFA), mainly thanks to the high profits on player sales in 2017/18, but this will become more of a concern going forward, despite the large exclusions for academy, infrastructure, women’s football and community.
What could silent Stan do, apart from going away? That is unlikely given that he sees it as a valuable franchise, particularly as he has put nothing in unlike other owners. It is evident that some clubs have benefited from substantial owner financing, especially Chelsea and City who have received over £300m in the last five years. In addition, Liverpool received £93m, partly for the Anfield expansion.
As part of a longer-term strategy, Kroenke could invest significantly in the Academy, resulting in a pool of talented players that would either enrich the first team squad or be sold profitably as is the practice down the Kings Road. Given the ineptitude demonstrated by the club's executives, it is debatable whether any Kroenke money would be used wisely, but there are things that he could do: (a) refinancing of debt (though high penalty payments); (b) Walmart sponsorship (at, say, £20m “market value”).
My view is that Arsenal fans for too long saw Wenger as the sole problem. Although he had reached his sell by date as a coach, the problems are much wider and deeper and their resolution requires more committed and focused leadership from the owner. I don't like the way things are going at this great club.
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