The Political Economy of Football V2

Arsenal recorded an overall loss of £17.7million ($22.3m) in the year ending May 2024, a considerable improvement on the previous year’s loss of £52.1m, while their spending on salaries increased by 40 per cent. Player trading has a significant impact on profitability and the restricted budgets of buying clubs had a negative impact:  https://www.bbc.co.uk/sport/football/articles/cly3n20xnmgo The club’s wage bill now stands at £328million, which though a big jump on the 2023 accounts, is still only the fifth-highest in the Premier League for 2023-24. There has been a huge jump in revenue from £466.7m to £616.6m which is partly attributed to on-field success, via the long-awaited return to the Champions League. Participation in Europe’s top competition brought in £80.4m — more than double what Arsenal earned from the Europa League in 2022-23. Matchday income has risen by 28 percent to £131.7m, taking them above neighbours Tottenham Hotspur and second in England only to Manchest...

The Premier League’s PSR rules may constrain activity by clubs in the January transfer window, although it is never easy to get value for money.   The calculations involved are very complex, reinforcing the view that success in football increasingly requires good accountants and lawyers. There is a wide divergence between individual clubs in the Premier League. Half of them have plenty of headroom, especially Brighton, Manchester City, West Ham, Liverpool and Tottenham, while Brentford and Arsenal are also pretty comfortable. Arsenal Despite making £111m pre-tax losses over the PSR 3-year monitoring period, Arsenal should still be fine, as they can make £125m allowable deductions (mainly depreciation, academy and women’s football), leading to a PSR profit of £14m, which is £119m better than the maximum £105m loss. Assuming the same level of allowable deductions in 2024/25 would suggest that Arsenal could post a massive £164m loss this season and still be compliant with...

Arsenal’s pre-tax loss increased from £45m to £52m, despite (football) revenue rising £96m (26%) from £369m to a new club record £465m, as profit from player sales halved from £22m to £11m and operating expenses shot up £89m (21%) from £432m to £521m. Net interest payable also slightly increased from £5m to £6m. The club was at pains to emphasise that the financial result was adversely impacted by an £18m impairment to write-down the value of certain player registrations, compared to just £2m the previous year.   Excluding impairment, the pre-tax loss improved from £43m to £34m, which is obviously better than the reported figures, but is still a sizeable deficit. Arsenal have now lost money five years in a row, adding up to an overall loss of £311m in this period, underlining how much the lack of Champions League football has hurt the club’s finances. Revenue All three of Arsenal’s main revenue streams saw good growth with both commercial and match day reaching new club hig...

Whether the concept of the 'Big Six' in the Premier League is quite what it was with the financial boost at Newcastle is an open question, but anyway here are some comparisons over the last five years from the Swiss Ramble. Manchester in the lead The Big Six Premier League clubs had a total of £18.2 bn of available funds in the last five years. Manchester City led the way with £3.4 bln, closely followed by Manchester United £3.3 bln. There were three other clubs around the £3 bln level, but there was then a big gap to Arsenal, who lagged the others with “only” £2.5 bn. Manchester United generated the most revenue in the last five years with £2.8 bn. They were just ahead of Manchester City £2.7 bn, even though they were overtaken by their rivals in the last two seasons. Four clubs increased their revenue by more than £100m in the last five years with the largest growth at Liverpool, whose income rose £230m (nearly two-thirds) from £364m to £594m. Manchester United’s revenue ...

Arsenal fans will be delighted with the team’s good start to the season, so are probably unconcerned about the financial implications of their player recruitment, but it is maybe worth looking at whether there will be any issues with Financial Fair Play (FFP) regulations.  The analysis is provided by the Swiss Ramble. As it stands, Arsenal have spent a hefty £270m gross on transfers in the last two seasons, only surpassed by Chelsea £288m, but ahead of the other top six clubs.   Even more incredibly, net transfer spend of £218m is the highest of the Big Six in the last two seasons, just ahead of Chelsea £217m. That is a fairly remarkable statistic for a club that has not competed in the lucrative Champions League since 2017. In fact, after many frugal years, Arsenal have been big spenders for a while. In the 5 years to 2021 (most recent published accounts), they had £626m gross transfer spend, which was almost double the preceding 5-year period and 4th highest in the Premi...

Undertaking his usual forensic analysis of the latest Arsenal accounts, the authoritative Swiss Ramble identifies a number of areas of concern from his Zurich fastness.   They are not just pandemic effects, which can be seen across Europe, even though Arsenal has been hit harder in some respects. The operating loss increased from £33m to £99m. Very few clubs make operating profits, but Arsenal now have the third highest loss in the Premier League, only surpassed by Everton £175m and Chelsea £112m. This is concerning if they cannot compensate with player sales (as Chelsea do). The £79m revenue fall in the last three years is the worst of the Big Six with only Manchester United also experiencing a decrease in that period. Despite the impact of the pandemic, all the others have significantly grown their revenue, most notably Liverpool £126m and Tottenham Hotspur £86m Commercial is the most important revenue stream at 41%, having overtaken broadcasting 35%, followed by match...

The authoritative Swiss Ramble reckons there may be more to play for than is generally realised.   As a reminder, in 2018/19 each club received equal shares for 50% of domestic TV £34m, overseas TV £43m and commercial income £5m. Each match broadcast live was worth £1.1m (on top of £12.2m for a minimum of 10 games), while each league position was worth £1.9m (merit payment). Total 2019-22 Premier League TV rights rose 8% (£0.7 bln) from £8.5 bln to £9.2 bln. UK domestic rights actually fell 7% (£0.4 bln) from £5.4 bln to £5.0 bln, but this decrease was more than offset by overseas rights increasing by 34% (£1.1 bln) from £3.1 bln to £4.2 bln. Overseas rights now average around £1.4 bln a year, up from £1.1 bln in the 2016-19 cycle, accounting for 45% of the total. As recently as 2007-10, these were only worth £200m a year.  Overseas TV rights were previously distributed as equal shares by the Premier League, but this was changed in the 2019-22 deal. Clubs will continue to...

The authoritative Swiss Ramble explains the background to the latest financial developments at Arsenal.  Writing from his Zurich fastness, he notes, ' Last week Arsenal announced that they will redeem their outstanding bonds, which had been part of the debt taken on to fund the construction of the Emirates Stadium. This will be financed by owner Stan Kroenke’s company KSE.' The first thing to appreciate is what this transaction does not mean. It will not make the club  debt-free, nor does it mean that Kroenke is finally investing into the club. Instead, it is simply a restructuring of the club’s current debt by changing the lender. The football finance guru explains, ' This is similar to where you take out a mortgage at a certain interest rate with one bank, but a few years later realise that interest rates on new mortgages are much lower, so decide to remortgage with another bank – even though you have to pay a penalty for early repayment.' Arsenal issued £260m of bond...