Monday, August 12, 2013

Arsenal - Money Don't Matter 2 Night

Arsenal’s transfer strategy this summer has left the vast majority of their fans perplexed. While the seemingly interminable Luis Suarez saga has grabbed most of the attention, allied with the failure to secure Gonzalo Higuain when the deal appeared done and dusted, the stark reality is that Arsenal have not bought anybody yet, let alone the marquee signing that the supporters crave. Yes, they have acquired the services of French U20 international, Yaya Sanogo, but he arrived on a free transfer from Auxerre in the French second division..

At the same time, there have been many departures from the Emirates, including the likes of Gervinho, Mannone, Arshavin, Djourou, Coquelin, Santos and Chamakh plus a veritable plethora of youth team players. Although most of these individuals did not feature a great deal in the first team last year, leading to the unfortunate “deadwood” label, it’s still a fair amount of experience for the squad to lose with no replacements coming in.

In fairness, Arsenal’s excellent run in the latter stages of last season was pretty encouraging, though the final Champions League spot was only secured in a nerve-jangling final game of the season, when Arsenal beat Newcastle 1-0 away from home (to the apparent astonishment of Lord Sugar, who, quite brilliantly, imagined a non-existent equalising goal from the Toon Army).

"I wanna dance with Koscielny"

Although Arsenal performed creditably, the fact is that they never threatened a challenge in the major competitions and were dumped unceremoniously out of the domestic cups by lower league opposition. Therefore, the need to strengthen was obvious to all and sundry. A couple of injuries to key players would highlight the threadbare nature of the squad, which would then have to rely on youngsters, who may well be talented, but are untested in the heat of battle, pre-season friendlies not being the best indicator.

As INXS once said, it’s enough to mystify me, especially given the bullish comments from Ivan Gazidis in June. Ah, those heady days of (early) summer, when Arsenal’s chief executive boasted, “This year we are beginning to see something we have been planning for some time, which is the escalation in our financial firepower.” He continued, “We have a certain amount of money which we’ve held in reserve. We also have new revenue streams coming on board and all of these things mean we can do some things which would excite you.”

But specifically what could this mean? For example, could Arsenal now pay a £25 million transfer fees and wages of £200,000 for one world class player? Gazidis pulled no punches, “Of course we could do that. We could do more than that.”

And he’s not kidding. When you look at the club’s cash balances – there in black and white in the accounts for all to see – Arsenal’s spending capacity is evident.

As at the end of the 2011/12 season (the latest year when football clubs have published their accounts), Arsenal had an incredible £154 million of cash, which is significantly higher than any of their competitors with Manchester United the closest with £71 million (less than half the Gunners’ cash pile). An even more amazing statistic is that Arsenal have almost as much cash as the rest of the Premier League’s other 19 clubs combined (£181 million).

The story is little different on the continent, where Europe’s leading clubs also retain less cash than Arsenal, preferring to invest most of their available funds into the squad. As might be expected, the financially astute Bayern Munich had £95 million, while, perhaps more surprisingly, Real Madrid had almost as much with £94 million – though both these clubs still held around £60 million less than Arsenal. Barcelona had much less cash at £31 million, while clubs with smaller revenue generation, like Borussia Dortmund and Juventus, were barely in the black with £4 million and £1 million respectively.

Although the club has only really started beating its chest about its financial strength this year, it has been obvious for a while that the club could have spent big. As far as back as 2005, former chief executive Keith Edelman observed, “There are sufficient funds available to the manger for transfers”, before upping the ante a couple of years later, “We have got plenty of financial firepower to make the transfers Arsène wants to make. We had over £70 million of cash at the end of the year and if Arsène wants to spend that money, we will make it available.” Sound familiar?

Gazidis has been singing from the same song sheet as his predecessor ever since his arrival, claiming that “The resources are there. We’ve got a substantial amount of money that we can invest”, before his now infamous comment about the club keeping its “powder dry” for future player investment. Although he made this sound like some sort of grand plan from the club, its cunning appeared to be of the variety that would only have been recognisable to those who appreciated Baldrick’s schemes in Blackadder.

There has been a steady upward trend over the last few years in Arsenal’s cash balances, which have grown from £74 million in 2007 to £154 million in 2012. The figure of £123 million announced at the Interims in November 2012 was lower, but this merely reflects the seasonal nature of cash flows during the year, e.g. the May balance will always be high following the influx of money from season ticket renewals, while November is lower as annual expenses, notably wages, are paid. However, the rising trend can be seen by the fact that November 2012 figure was £8 million higher than the previous year.

However, this does highlight the fact that not all of Arsenal’s cash balance is available for transfers. It’s not quite that simple, due to many factors, including the need to pay those pesky expenses.

Of course, other money will also flow into the club during the season, such as TV distributions and merchandise sales, though not all of the reported revenue is necessarily converted into cash, e.g. all of the £55 million from Nike’s initial seven-year kit supply deal from 2004 to 2011 had been paid by July 2006 (to help with financing the construction of the Emirates Stadium).

The debt incurred for the new stadium continues to have an influence over Arsenal’s strategy. Although Gary Neville, amongst others, may believe that this is no longer an issue, it is clearly a factor with Arsenal’s gross debt standing at £253 million at the end of 2011/12, comprising long-term bonds that represent the “mortgage” on the stadium (£225 million) and the debentures held by supporters (£27 million). In fact, only Manchester United have a higher debt in the Premier League as a result of the Glazer family’s highly leveraged takeover.

Although this has come down significantly from the £411 million peak in 2008, it is still a heavy burden, requiring an annual payment of around £19 million, covering interest and repayment of the principal.

Despite the high interest charges, it is unlikely that Arsenal will pay off the outstanding debt early. The bonds mature between 2029 and 2031, but if the club were to repay them early, then they would have to pay off the present value of all the future cash flows, which is greater than the outstanding debt. In any case, the 2010 accounts clearly stated, “Further significant falls in debt are unlikely in the foreseeable future. The stadium finance bonds have a fixed repayment profile over the next 21 years and we currently expect to make repayments of debt in accordance with that profile.”

Importantly, as part of the bond agreements, Arsenal have to maintain a debt servicing reserve, which was £24 million in the Interims. In plain English, this portion of the cash balance is not available to spend on new players. Similarly, Arsenal also have to maintain a small reserve that is restricted to use for property development, but that is only £1 million.

Speaking of property development, Arsenal’s interims mentioned that they would be getting an additional £20 million of cash from Queensland Road, though this would be “receivable in instalments over a two year period.” There should also be more money from the two remaining “smaller projects” on Hornsey Road and Holloway Road, which could be worth another £20 million (estimate), depending on planning permission.

"We have a rather large German"

The amount of cash available is also influenced by outstanding transfer fees, though this is not a major issue for Arsenal at the moment: in the Interims Arsenal owed other clubs £31.6 million, but were in turn owed £31.4 million by other clubs, so this basically netted out.

In addition, the club has so-called contingent liabilities, where payments are made to a player’s former club based on certain conditions being met, e.g. number of first team appearances, trophies won, international caps, etc. These amounted to £7.8 million in the Interims, but are by no means certain to be paid – that’s why they are described as “contingent”.

Finally, at least in terms of transfer activity, we would have to add in the net funds from the last two windows, but again this is not a particularly large factor. This summer, Arsenal have raised around £10 million from the sales of Gervinho to Roma and Vito Mannone to Sunderland, but they paid out £8 million to Malaga in January for Nacho Monreal, producing a positive net impact of £2 million.

The new £150 million commercial deal with Emirates (shirt sponsorship and stadium naming rights) will have an impact, even though it does not commence until 2014, with talk of up to £30 million being frontloaded. Indeed, Gazidis explicitly stated, “We’ll have additional money this financial year, which will be available to invest in the summer.”

He added, “The deal is all about football, it’s all about giving us the resources to be able to invest in what we put on to the field for our fans.” To which, the response that comes to mind is “actions speak louder than words”.

Gazidis also said, “Our revenues will grow to put us into the top five revenue clubs in the world”, which was somewhat confusing, given that Arsenal have been fifth highest in the Deloitte Money League in four out of the last six years, ever since the move to the Emirates stadium. They were overtaken by Chelsea last season, mainly due to their fellow Londoners’ Champions League triumph, i.e. a direct result of success on the pitch.

In truth, Arsenal have benefited from higher revenues than the vast majority of other clubs for many years. Their £235 million turnover was the third highest in England in 2011/12 and is likely to rise to more than £300 million in two years time. The aforementioned Emirates sponsorship is more than £20 million higher than the current deal, as is the new Puma kit 2014 supply deal (widely reported, though not yet officially confirmed), while the astounding new Premier League 2013/14 TV deal should generate at least £30 million more for a top four club.

In addition, most transfers are funded by stage payments, so Arsenal would not necessarily need to find all the cash upfront – though other clubs, aware of the North Londoners’ resources, may insist on most being paid immediately. In that sense, Arsenal are victims of their own financial success.

Furthermore, Arsenal could always “speculate to accumulate” by taking on some additional short-term borrowing, which should be no problem, given the strength of the balance sheet and future cash flows. I’m not saying that this would be advisable (or even necessary), but it would be a possibility.

So, what is the magic figure Arsenal have as a transfer fund? Given all of the variables described above, it's safest to quote David Bowie, "It ain't easy", when trying to pin this down, but the oft-quoted £70 million is a reasonable estimate. If funds from property development and future commercial deals are also made available, then it could be as high as £100 million.

Arsenal have long been considered the poster child for financial success, consistently reporting large profits. Not only did they register the highest profit before tax (£37 million) in the Premier League in 2011/12, but they have also made an incredible £190 million of profits in the last five years. In fact, the last time that the club made a loss was a decade ago in 2002. This is virtually unparalleled in the cutthroat world of professional football.

However, the headline figures do not tell the whole story, as much of this excellent performance has been down to profits from player sales (e.g. £65 million in 2011/12) and property development (e.g. £13 million in 2010/11). Excluding those once-off factors would mean that Arsenal actually made losses in the last two years: £4 million in 2010/11 and an apparently worrying £31 million in 2011/12.

In fact, the operating profit from the football business has been steadily declining since 2009 with the club actually reporting an operating loss of £16 million last season.

So that explains Arsenal’s reluctance to splash the cash?

Not so fast, big boy, there’s another layer of complexity to add here, as the accounting profit includes non-cash items, such as player amortisation, depreciation and impairment of player values. Without wishing to get overly technical, we need to add these back to the operating profit and then make an adjustment for working capital movements to get the cash profit.

Once we do that, Arsenal’s cash flow from operating activities was an impressive £28 million in 2011/12, a figure that was only bettered by two clubs in the Premier League. The problem is that Arsenal have spent very little of this on improving their squad: that season the net expenditure on player purchases was just £2 million – with only four clubs spending less than the Gunners.

Most of the available funds instead went towards financing the Emirates Stadium: £13 interest and £6 million on debt repayments. A further £9 million was invested in fixed assets for enhancements to Club Level, more “Arsenalisation” of the stadium and new medical facilities and pitches at the London Colney training ground.

Since 2007 Arsenal have generated a very healthy £376 million operating cash flow. Although they had a small negative cash flow of £7 million in 2011/12, this followed many years of positive cash flow, e.g. 2010/11 £33 million, 2009/10 £28 million, 2008/09 £6 million, 2007/08 £19 million and 2006/07 £38 million.

However, it’s instructive how Arsenal have used this spare cash. They have spent £71 million on capital expenditure, £110 million on loan interest and £64 million on net debt repayments. Astonishingly, only 1% (one per cent) of the available cash flow has been spent in the transfer market. Although Arsenal have laid out a fair bit of cash on buying players in the last couple of seasons (over £100 million), this has been more than compensated by big money sales, leaving a negative net spend.

The other notable “use” of cash in that period is, er, nothing, as cash balances have risen by £118 million.

That begs the rather obvious question: why not spend the cash? There’s no one magic answer to this, but let’s take a look at the usual arguments:

(a) Impact of new signings on the wage bill

One point that people often raise when discussing the transfer fund is that it would also have to fund a new signing’s wages, so if the club bought a player for £25 million on a five-year contract at £100,000 a week, that would represent a commitment of £50 million. That is undoubtedly true, but it is a little disingenuous, as it ignores the fact that this could be at least partially offset by the departure of existing players. This is particularly true this summer, when Arsenal have offloaded so many players.

There is no doubt that the rising wage bill has been a cause for concern at Arsenal. Since 2009 wages have grown by 38% to £143 million, while revenue has only increased by 5% in the same period – though this is where the commercial department could be justifiably criticised for their failure to add secondary sponsors. The wage bill will have increased again in 2012/13 following revised contracts for the “Brit Pack” (Wilshere, Walcott, Gibbs, Oxlade-Chamberlain, Ramsey and Jenkinson) to over £150 million.

On the other hand, there will be plenty of room going forward, as the growth in revenue to £300 million implies a sustainable wage bill of £180 million (representing a safe 60% wages to turnover ratio). To place that into context, Chelsea’s current wage bill is £176 million, while Manchester United’s is £162 million, leaving only Manchester City out of sight at £202 million.

However, these clubs might be impacted by the new Premier League regulations, which have restricted the amount of money clubs can spend from the new TV deal on wages. Specifically, clubs whose total wage bill is more than £52 million will only be allowed to increase their wages by £4 million per season for the next three years. However this restriction only applies to the income from TV money, so Arsenal’s additional money from the new sponsorship deals can still be spent on wages.

(b) Cover a potential failure to qualify for the Champions League

Many have speculated that Arsenal may be holding cash back as a “rainy day” fund to cover a revenue shortfall from any failure to qualify for the Champions League. This has been a lucrative source of funds for Arsenal, who earned €31 million in 2012/13 from the TV distribution alone, but Gazidis himself has quashed this theory many times, most recently in June, “The Champions League qualifier in August won’t affect our plans. It’s never been an issue when we’ve discussed with players before and it doesn’t affect our planning.”

(c) Players not available

One of the most fundamental laws of economics is the one relating to supply and demand and that is relevant here. In other words, it does not matter if you have money, if there aren’t any quality players to buy. Gazidis referred to this in his June interview, “It doesn't only require our decision, it requires the player’s decision and other clubs' decisions, so there is a market that has to move not just dependant on one party, but dependant on a number of parties and many of those parties have been in a period of uncertainty.”

That’s perfectly valid, but has not prevented other clubs doing business, e.g. Manchester City have already bought Stevan Jovetic, Fernandinho, Jesus Navas and Alvaro Negredo, while Spurs have acquired Paulinho, Roberto Soldado and Nacer Chadli.

Less justifiable was Wenger’s complaint that “Some clubs acted very early so the choices were reduced”, as if the transfer window were some kind of handicap race and those clubs had been given a head start.

"Cavani - the price is not right"

(d) Valuations are too high

Nobody wants to over-pay, but this is where Arsenal’s cash-rich position should work to their advantage. There’s no point in having more money than most other clubs if you don’t make it work for you. As an analogy, Arsenal may not have quite enough funds to buy in Harrods, but they could comfortably afford to shop in Waitrose, instead of wasting time haggling in Aldi.

Some have argued that Gazidis did Arsenal no favours with his “loadsamoney” speech, but, while this might have weakened the club’s negotiating stance, it is difficult to believe that executives at other clubs were not already aware of the Gunners’ financial position.

"Olivier's Army"

(e) Other clubs willing to spend more

Even if Arsenal are well positioned, some clubs still have more cash to spend. As Gazidis said, “I can’t compete with somebody who has an unlimited budget.” This echoed the thoughts of former chairman Peter Hill-Wood, who lamented, “At a certain level, we can’t compete.”

Fair enough, that’s certainly true, especially with the arrival of Paris Saint-Germain and Monaco on the scene – “more competition coming from France”, as Wenger drily observed. However, that still does not explain why the likes of Manchester United, Liverpool and Tottenham have outspent Arsenal in recent years.

(f) Implications for Financial Fair Play

Under FFFP, UEFA will look at aggregate losses, initially over two years for the first monitoring period in 2013/14 and then over three years, so Arsenal’s recent record of large profits would hold them in good stead, even if they were to temporarily slip into losses before the new revenue streams came on board. In addition, certain costs such as depreciation on fixed assets, stadium investment and youth development can be excluded from the break-even calculation, so this should not be a problem.

In fact, Arsenal hope that UEFA’s FFP regulations will reward their prudent approach, as these aim to force clubs to live within their means, thus restricting the ability of benefactor-funded clubs to spend big on players. Indeed, Gazidis stated that the advent of FFP meant that “football is moving powerfully in our direction.”

"You make me feel (mighty Monreal)"

(g) Lack of a proper transfer structure

As Monaco’s former chief executive, Tor-Kristian Karlsen, noted, when commenting on Manchester City and Tottenham’s transfer activity this summer: “I for one doubt it's a coincidence that the only two teams in the Premier League with genuine sporting directors (or technical directors or directors of football, if you like) are the ones who have appeared the most prepared, structured and with clear strategies in their work in the summer transfer market.”

If there is a modern, coherent transfer structure in place at Arsenal, then it seems remarkably well hidden. There may well be a great deal of activity behind the scenes, but the results speak for themselves.

(h) Will be used to pay dividends to the owner

Although the club’s owner, Stan Kroenke, has no record of taking dividends from his numerous sports clubs, there is still suspicion among some sections of the support that his game plan for Arsenal includes this possibility. When Kroenke was asked at the 2012 Annual General Meeting whether he intended to take dividends out of Arsenal, his response was hardly unequivocal, as he merely said that it was a decision for the board.

He added, “I have never said in any meeting that money wasn't available” and “our goal is to win trophies”, but the feeling remains that he is content with the status quo of fourth place in the Premier League, while topping the unofficial table for cash balances.

"Kroenke - the sound of silence"

(i) Makes it easier to sell the club

Having such a high cash balance obviously strengthens the balance sheet, but the club would arguably fetch a bigger price if it were successful. Moreover, most investors in football teams do not appear to be greatly interested in a financial return. Kroenke himself has said, “The reason I am involved in sport is to win. It's what it's all about. Everything else is a footnote.”

Indeed, if we look at this purely from the financial perspective, there is also the opportunity cost of not investing, as this reduces the chance of success on the pitch. As the presentation of the bond prospectus in 2006 put it, “the move to the Emirates Stadium should increase revenues and the ability to sustain a better playing squad – a virtuous circle.”

Gazidis echoed these thoughts in the summer, “you need the financial platform in order to create the sporting success, but you need the sporting success in order to supply the financial platform as well.”

This is why the bond structure includes a Transfer Proceeds Account, which had the objective of ensuring a high quality playing squad. This states that 70% of net player sales proceeds must be reinvested in players, but (crucially) also “other football assets or prepayment of debt”.

Regardless of how that account has been used, Arsenal’s cautious approach has cost them money. The TV distribution in the Premier League is relatively egalitarian with each place only worth an additional £0.8 million, but there is a significant upside in the Champions League, best seen in the 2011/12 season when Arsenal received €28 million for reaching the last 16, while Chelsea earned €60m for winning the competition.

In addition, a relative lack of success on the pitch cannot have helped Arsenal’s commercial team when they have tried to secure new deals. We already know that the new shirt sponsorship deal contains a number of clauses relating to performance, e.g. if Arsenal were to fail to qualify for the Champions League, the £150 million headline figure (over five years) would be somewhat less.

"Gazidis - brave boys keep their promises"

The other logical result of Arsenal’s many years of reported profits is that they are one of the few Premier League clubs that pay corporation tax: £4.6 million last season (the highest in the league). From a community aspect, this is a noble thing, but it is money that could have helped fund a new striker.

This is not a question of whether Arsenal have under-performed or not. Most neutral observers would agree with Gazidis’ assertion that “We have outperformed our spend, in virtually any metric you can look at, consistently for the last 15 years.” You can agree with that opinion, while still being unhappy that the club has not made the best use of its resources.

Arsenal are by no means a poor side, as they have shown in some encouraging pre-season displays, including a win against Manchester City, but they will find it difficult to maintain any sort of title challenge without strengthening. Obviously, there is still time to make important signings before the transfer window closes, but that’s not really the point, as the season will be well underway before Jim White embarrasses himself on Sky Sports News, including two Champions League qualifiers and the North London derby.

"Oh, Mickey, you're so fine"

No Arsenal supporter in his right mind would want the club to “do a Leeds”, but they are a considerable distance from that nightmare scenario. Equally, nobody should expect the promised big spending to guarantee an end to the recent trophy drought, but it would give the club the best opportunity to compete for honours, especially at a time when their main rivals have all gone through various degrees of management upheaval: nothing ventured, nothing gained.

At the very least, it would provide some substance to Gazidis’ statements that Arsenal are “extraordinarily ambitious” and “ready to compete with any club in the world”. As the well-known Arsenal fan, Spike Lee, once said, it’s time to “Do the right thing.”


  1. Always worth the wait. Pretty much required reading for Arsenal fan's of all persuasions (WOB, AKB, and in-betweeners).

  2. Wow..just wow..I am a gooner but first and foremost I am a finance professional so your analysis and time you have given to research impressed me. Awesome.

  3. Very good article regarding the state of our finances, do you have any feel of the impact of this year's player cull on our wages. With only the overpaid Bendtner left and Park Chu Young this would allow us space to bring in big signings too at higher wages.
    Didn't quite understand how Chelsea have earnt more from the TV pool when they didn't make the last 16, surely we would have received the same as Man Utd.
    Have you considered the impact on many of our players being released on frees and next year's profit?

    1. Drop in wages after GREAT CULL is estimated to be around 25 million at least however this is an educated guess.

      Re your question on Chelsea tv pool money, this related to last years financial results when they actually won the CL, this years financial results will be announced in October

    2. The percentage of the EPL cash pool within the CL will be weighted based on the clubs position in their domestic league when qualifying for the tournament. As the Chavs were defending champions, they were given 30% of last years pool along with Man U - so even though we got as far as Man U last season, we will probably get the smallest share again (at best on a par with City). The EPL's prize pot is also far smaller than the Italian league, based on to value of the respective TV rights.

  4. Excellent analysis as always. Much appreciated from Norway, specially with a quote from Mr Tor K. Karlsen.

    One wonders where the club would have been today if they had a strong Director of football for the last couple of seasons with a clear strategy in the transfer market. But I guess that will never happen as long as Mr Wenger is the manager of this great football club

  5. Great post. Though I was expecting something on the impact a £40m+ player (Suarez) would have.

  6. Excellent article but maybe 3 weeks too early? Just some observations though. How relevant is it that Liverpool and Tottenham have higher gross transfer spending than Arsenal? Arsenal's gross transfer spending isn't exactly low by PL standards and doesn't net transfer spending just tell us how well the club has bought? The observation that £10m received for Gervinho somehow nets out the £8m spent on Monreal isn't really correct in the context of a review of the clubs accounts. It can only spend the profits it makes and the £10m received would counts as current income and the £8m paid shows as an increase in intangible assets. The profit made in any one season would be the income received less the amortisation charge on the £8m of intangibles. Finally, how can the deal to buy Higuain have been 'done and dusted' when according to Real no bid was ever made by Arsenal for the player? It seems far more likely that Arsenal expressed an interest and were used by the players agents and the club to get the best deal they could out of Napoli knowing that they were in the process of selling Cavani.

  7. One word - Brilliant!
    A must read for every intelligent Arsenal supporter, if only so you can counter the headline writers claims.

  8. A superb read as always! Would love to see a similar analysis of Spurs.

  9. Excellent blog as usual well written and the detail and insight is as always exquisitely well researched.

    Unfortunately of course it still doesn't answer the question it poses and the one which captivates the media and fans alike. Why are we not spending the money?


  11. Excellent article, cheers. It highlights just how little the tabloids understand football as a business

  12. Excellent post as always. Arsenal need to venture into the relative unknown (sign big name players) to reap footballing and subsequently commercial benefits. This is a virtuous circle. Hope the directors and the manager understand.

  13. Pure quality. Other than for the inflated transfer market (thanks to City, Chelsea, PSG and Monaco), there really isn't a good reason not to spend.
    I agree with your conclusion, it's time to push on. In Wenger we trust!

  14. I have been waiting for this article as the transfer window has been ramping up to a damp squib or a new years firework display. Even if a quality signing or more do not quite live up to expectation on the pitch they will certainly help in the goodwill for fans and sponsers.
    Great article as ever.

  15. That's really a first class analysis of the financial situation at the club, well done. Really cant fault it.

    would it be possible to do something similar for a Spud supporting mate, he's always going on about how secure their finances are???

  16. Excellent, as always. Thank you.

  17. Thanks SR - an excellent analysis as usual.

  18. Excellent, factual contribution to the most important debate involving the Arsenal at the moment. My concern is Wenger has lost confidence in his ability to recruit and manage top quality talent, preferring to work with more deferent younger footballers. Great point about City and Spurs having "sporting directors" and being more effective in the market because of this, I hadn't considered that.

    1. Mainly in the media when we read of sporting directors it was how they and the manager were at loggerheads over player selection/transfers etc. How many times wenger refused obscene money for henry or vieira. Would a director of football done the same? Levy has been responsible for a lot of instability at spurs over the years, much to our benefit, especially as we struggled for fourth over the last several. Personally I feel wenger misses deins support. Gazidis does not offer the same.

  19. Great article.Very good financial analysis .

  20. excellent as always. We appreciate you doing stuff like this Swizza.

  21. How do I praise you enough? It's incredible to put all the financial information into perspective. Fantastic piece. I need to come back and read it in full and understand it better.

    Great job.

  22. As always, another excellent and insightful piece SR.

    If I may ask, how much blame would you attribute to Arsene for our seemingly plan-less approach to the transfer market?

    Personally, I think he is just an employee and can not take all the blame for our inability to act decisively in the market.

    Should it not be the Board's responsibility to define the club's direction and strategy? If AW remains at the helm after 8 years of winning nada, does this not mean the club's hierarchy is okay with the status quo? Does this not imply that he meets the set objectives which seem to be ensuring the club stays profitable year after year?

    What exactly does Gazidis do? Does he leave Wenger to negotiate transfers?

    I do not know any other club where the manager is attributed with as much power as AW's at Arsenal.

  23. Great work as ever Swiss ... thanks.
    I'm very interested to see the impact of the clearout on the wages percentage. With an estimated average weekly salary for the 9 or so first team departures of 40k (conservative) plus maybe 10 kids on 8k (unknown) we should see c. 22mln drop in wages. Even with a ten mln increase to cover the Brit Pack our wage % drops into the mid 50s without an increase in revenue.
    These numbers are becoming too good and point towards a club ripe for a takeover or a club that needs to expand beyond soccer.

  24. A fantastic article im sure you went through great effort to produce this and I will be sure to forward it on.

    Great stuff..

  25. Excellent piece as usual Swiss Rambler. The opportunity loss is the key here - sitting on capital with low interest rates and inflation rather than investing in growing and developing the squad is obdurate.

  26. The real problem for me over recent years is more about how we do spend than how much investment is made. Peter Hill Wood said in 2010 "It is our policy that we give the manager a transfer budget, which includes the ability to use all the money from player sales... He will get the money no matter how much we got from selling a player," (talking to Soccernet.

    We made £44m from selling Adebayor, Toure and Eduardo, buying in Vermaelen, Koscielny (so poor in his first season), Squillaci, AOC and Gervinho for a similar total. That money should have gone on Schwarzer, Samba, Vertonghen and Mata. Same for the Arshavin money where we could have bought Alonso but for Wenger's penny pinching...

    It seems to me there are perhaps three main things that have seen such a lack of investment: 1) Gazidis always says we're prepared to spend money early summer, probably to get season ticket renewals sorted! 2) Wenger doesn't want to put pressure on himself by spending high, or with any 'metric' spend that would require high achievement- though the league is so much weaker than it used to be this is a bit of a non sequitur 3) Wenger can't conclude deals- Schwarzer, Mata, Alonso, Higuain, Cahill etc. (just the ones we know about). We need a David Dein type figure who can get deals done quickly.

    Swiss, it would be really helpful if you could clear up the operating losses of recent years. I was under the impression that since 2009 operating losses were £20-30m each year, covered over by property and player sales. How significant has it been paying high wages to players like Bendtner, Squillaci, Denilson etc.?

    1. Samba had a terrible season there and vertonghen turned us down for football reasons. Not sure alonso would have picked us over madrid if it was entirely his choice either. Your point 2 about wenger not wanting to put pressure on himself I really strongly disagree with. Wenger is a champion and arsenals recent non competiveness at the business end of the season I'm sure causes hom great pain and frustration.

    2. Have to disagree with your reply. Samba was described by George Graham as the "perfect partner" for Vermaelen and I think his understanding of defence is pretty good looking at that famous back five... Vertonghen: '(Arsenal's interest) was concrete, but they wanted me to be a controller in the midfield, an Emmanuel Petit-type,' I advocated him being a CB (which he wants/wanted). Alonso was happy to join Arsenal because Fabregas was there according to good sources and Liverpool wanted Gareth Barry. There were no other suitors.

      As for whether Wenger deliberately spends low to avoid pressure: if Gazidis cites relative spend as evidence of Wenger's acumen but also says there's money there and we could fund £250,000 a week wages, it's possible.

  27. Was guided here from Arseblog. Great read buddy, honestly... Very good article.

  28. Thank you sir. Wonderful article, as always.

    Can I ask, with the large cash balance, does it mean that Arsenal earns a lot of interest as well? Hence the opportunity cost of spending money on players could be lower interest earnings?

    I'm a bit naive when it comes to such financial matters, will appreciate any answer.

    Thank you

    1. No - the current interest rate is so low that little interest has been earned (only £0.8m in 2012).

  29. I can see where Kroenke and Gazidis are coming from. If I were a football chairman and I was faced with the option of signing a piece of paper that would oblige me to give someone like Rooney Nasri Terry Suarez Ronaldo Balotelli Ibrahimovich etc etc two hundred thousand pounds of my money - EVERY CHUFFING WEEK FOR THE NEXT FIVE YEARS - I don't think I'd be able to do it. The merest glimpse of them on the TV makes me wretch. I wouldn't want any of them anywhere near my team.

    Quite frankly, I'd rather have a trophy dought...

  30. An exelent profile
    an built on strong foundations Now the work
    now must comence for an exiting andstrong and progressive team

  31. Thank you very much for this analysis. Bringing up the former monaco chief executives point about directors of football, I'd definitely concur that there's a feeling at the Emirates that since David Deins departure the club has struggled to 'seal the deal' when it comes to the bigger transfers. Although I know his job title was vice-chairman he was responsible for completing the signatures of our biggest names in recent years. Perhaps arsenal should consider bringing someone else in in this sort of capacity, as quite frankly I don't think we would have got into this suarez situation with Dein still onboard. Thanks again for this excellent analysis I found it most insightful

  32. This is incredible, thank you so much for putting it together.


  33. I suppose I could work out the answer for myself but it would be nice if there was an answer to the question, how much could Arsenal spend?

    1. An estimate is included in the article - though it is a range (£70-100m).

  34. Fantastic write-up. Concise and well thought-out. Kudos.

  35. (You got 5 groans from me with the picture captions.)

    This is so thorough I bet even the printers are whirring in the marbled, leather upholstered luxury offices at Ashburton Grove.

  36. Another amazing article... brilliant as ever. Really miss these, please more!

    I'd love to see a review on Monaco and PSG with an eye on FFP... interesting.

  37. Its an excellent compilation and I have only one issue. Its often reported in the media and here too that Arsenal is showing positive results because of player sales. To show the impact of it, people often just remove profit from player sales but often ignore that it is with this profit new players were bought, contracts were extended.

    So removing the cause (player sales profit) and retaining the effect(player purchase, Amortization, increase in salary) will always result in a skewed result, which is the case. I think this is the reason why in 2012, arsenal is shown to be incurring 31Mn loss without player profits being included.

  38. Last time I checked Manchester United's gross debt stood at £370m and net debt was a little over £300m.


    1. You're probably referring to the latest quarterly figures from United, when the gross debt had come down to £368m after using some of the IPO proceeds - though the net debt was actually £331m. The figures in the table above are from the end of the 2011/12 season (as per the graph title).

    2. RANT: Early in 2012, I tried to become an Arsenal basic entry level member. replied that I could not pay by international cheque transfer, Western Union, credit card, PayPal or banker's draft as I live in Ireland. The same goes for all countries worldwide. What is the point of doing two Asian tours where golden hordes of fans buy our merchandise if they cannot become Arsenal members? When I can buy stuff in Ireland from amazon, ebay and other international sellers, why not from Arsenal?. I went to my first match in 1951, so I am hardly a fairweather fan. I am a blinkered I care only about Arsenal fanatic.
      TONE IT DOWN NOW: WELL DONE, the Swiss Rambler. I look forward to your blog each year. Everyone: BOOKMARK his page.
      TONE IT DOWN 2: I'm too fed up to check whether this crazy Little Englander restriction is still in force. emailed twice that they knew of the problem and were working hard to solve it. If not, why won't Silent Stan sack his little pet Gazidis?

  39. We pay our taxes!

  40. Its Brilliant, and Business is all about Account Receivable/payable, so I would wait and see what Wenger and Ivan Gazidis have decided at the end of the transfer window, we have got over 55games to play and only 16 first team players available. lets see. I'm die hard Gunner, and Always will be.

  41. Funny you should mention about the finances making the club easier to sell. The first thing I said when we let all the players go this season is that I bet the club is up for sale and Kroenke will be gone after next season. I doubt he would sell to Usmanov though.

  42. Thanks for the reply Swiss Rambler, great article by the way. I am actually a Man United fan, but love football finance in general so love your articles. Unrelated to this article I know, but do you expect United's debt to dwindle away over the next five years? Interest is now down to £21m a year after refinancing half of the bonds. After refinancing the other half of the bonds the interest could drop to around £11m a season. Albeit very manageable, do you expect the Glazers to get it paid off ASAP or take their time whilst taking dividends at the same time? Thanks again.


  43. I always love blogs like this that breaks things down using data and a knowledgeable assessment of said date rather than mere opinion. Good job

  44. A great read, as always.

  45. All in all we as a club look very healthy. And even more so in comparison to most other clubs in europe I'd imagine. We seem to occupy a place all on our own - adrift of the slush funded mega clubs - too good to be grouped with 'the rest'. I guess the over criticism stems from us being help up against the mega clubs, in terms of on pitch success.

    Interesting to see we should be able to sustain a wage bill much greater than uniteds in just a couple years. Makes me believe sensible investment now to sustain fourth, until we can really evolve in those few years may explain the lack of activity thia summer, in contrast to the £70-80m we had all shaped up for after IG's rally cry in June.

  46. Great read as per usual.

    Don't disagree that we should have at least 70m in our pockets to spend and that we must spend or risk undoing all the hard work we've put in to build our commercial side of the business.

    However :

    1) Higuain. I think it is a bit disingenuous to believe that just because Napoli came in at 34-37m for the player that the price will remain stable for us should we have decided to out bid them. By the very nature of these things, the price could climb depending on Napoli's appetite (which by this season seems fairly considerable all due respects to us)

    Also as the price suddenly jolted into the mid 30m mark, Suarez became a more attractive proposition. Whether Arsenal did sufficient due diligence with regards the erratic nature of Liverpool's manager/owner is another thing but quite obviously Wenger seems to remain bullish about his chances for the player. perhaps he has inked in a secret clause with Suarez to have first rights to him should Liverpool decide they have had enough?

    In that respect, the 40m+1 bag of crisp bid was a warning shot to limit all suitors to his signature to us and well, Real. With Real being subject to protracted haggling to satiate their hard on for Bale (courtesy of our North London friends), there may also be reason to believe that they will be unable to match the amount of cash up front we can generate for Suarez's signature. Whether of course Liverpool care that we are in a better position to strengthen their squad is a different matter.

    2) There is also a co-relation between what we do spend on Suarez (if we get him) and what we can spend (from our 70-100m kitty) on other positions.

    This should of course be tempered by their availability of our targets as the window starts to draw to a close but considering that there will be a lot more money to say (as an example) bid for a fellaini instead of a gustavo should we elect not to further our pursuit with Suarez, it may go some way into explaining why we have been hampered in bringing in reinforcements in other positions.

  47. 3) also being dependent at the moment on player sales to generate income (until the commercial side can take over), we have been correct to be cautious in approach with regard player spend. Wenger has his fair share of duds which can be atest to the long retinue of departures this summer. because he has been frugal on spending on most of these players (Arsharvin aside), he has limited our exposure to losses in this regard.

    4) With regard early movement in the market, some of the strikers moved early on went for high prices to the french Ligue. This put a subsequent squeeze on the supply of top end strikers in the market. Unless we are content with shopping a little lower down the rung (which City and Spurs have done), our choices were significantly reduced. Some may argue that we should have perhaps moved for less illustrious names in say a Michu or a Benteke (or both) and added value in another creative midfielder for the money we are proposing to expend on Suarez, but the intention on bidding for Suarez is surely at least indication of the 'ambition' for which so many have moaned we have been sadly lacking in market in recent seasons, even if it is unprecedented to Wenger through his tenure.

    5) 70m is not a lot of money if you are chasing Suarez.

    Assuming we pry the player off of Liverpool for a face saving (for them) 45m, that leaves us with 25m to reinforce 2-3 positions.

    If we decide to pull the plug on Suarez, the game changes for us and we have suddenly more money to reinforce these positions albeit at cost to the quality we could bring in up top in the uruguayan.

    In that case 9and very hypothetically), a bid for say Michu at 15m, a defender in say Sakho at 15m, a winger in Cabella or Konoplyanka in 15m will quickly take us into the 45m mark leaving us 25m which will not be enough to mount a successful challenge for say a Fellaini considering Moyes owns an old tie with Everton.

    So you can see how fine the permutations are despite our new found spending power.

    I firmly believe we will get some quality in before end of window. It has been frustrating to say the least that it hasn't been done quicker but there are many variables involved and moving parts.

    If we do get Suarez, Gustavo (or someone with height and versatility to that equivalent), and a creative wide midfielder, all our current whinging will be moot. Let's hope so anyway. At very least we know the money is there and Wenger is willing to punt 40m+++ on one player.Surely a good sign to anyone but a gunner


    1. I understand your points, but you deal with the cards you are dealt and hand over the money. Spend 100 million now on players that will perform better and earn more commercial revenue. We may not win regularly but winning alone will increase commercial revenue as will having better players.

  48. cheers swiss,
    I wonder if I am the only one who has had their confidence eroded that FFP will benefit clubs like Arsenal?
    City and the French sugar-daddy clubs still seem to be spending like money is going out of fashion. With exemptions such as players whos' contracts signed before 31 jun 2010 (or whenever) are increasingly irrelevant, and commercial deals 'at fair value' as if 'conducted at arms length' seem to be ignored.
    UEFA have seem to have gone silent on the issue. Have they given up on their earlier tough words, deeming it unenforceable do you think? Perhaps scared by litigation if they do suspend City / PSG / Monaco... ?

  49. Getting the club ready to sell? Ah, the American way!!!!

  50. I never understood football's reluctance to use a director of football more often. All American sports have a General Manager who runs the player/personnel side of the house (drafts, free agents, contracts) and a coach or manager who runs the teams. Not every GM is good, but given the amount of work required to be successful it seems obvious that a dedicated GM will lead to better results.

  51. Arsenal have Dick Law specifically for contract negotiations. I also believe that Dein is still around, albeit very much informally in the background, trying to help swing things.

    How effective this is is another matter...

  52. There could be a few other unspoken reasons for not spending the 70M quickly.
    Will 70M win us the premier league? If yes, I am sure Chelsea, Man City will spend much more. So would it be akin to throwing money away for nothing? Therefore, the club has to think carefully and get the best buys out of the money. For example, trying to outbid Napoli for Higuain will probably leave nothing much for other buys - and can Higuain alone help us win the league. The other thing is , can we spend 70M every year like Chelsea and Man City. Nurturing young talent is a must. But Chelsea and Man City are willing to go after instant success and proven talent year after year.

  53. Hi Swiss Ramble.
    Did you get a comment from a legal perspective - I may have messed it up but I definitely pressed publish. I will redo if you didn't. It was yesterday am.
    Thank you.

  54. nice article mate but you haven't factored in risk and other clubs factor endowments ie rich owners. I thought as an economist you would have. It leaves a pretty big hole in your argument. Especially when you highlighted that arsenal could have been running at an operating loss without these new commercial deals in future years.

    Also you dont factor in the potential for unsuccessful signings. Maybe after considering these points you should re-write the article and make it more comprehensive.

  55. I think one of the biggest problems is finding quality to match arsenal's current squad (don't laugh please). Plenty of ordinary players are worth £10-20m now, Downing for instance, and it's easy to panic buy. That said we do need at least 3-4 new players through the spine of the team and they should be good enough to interchange with the regulars, if not even keep them out.

  56. Y'all should stop deceiving yourselves. As fans, only winning trophies can make you happy. You can't be happy for another man's money! Busters!!

  57. Excellently researched analysis that exposes the myths published in tabloids. Arsenal fans are lucky that you are one of us and you enable us to take on the know it all Man U fans in the pub ;-) . Perhaps if Dein was reinstated we might be able to match them in the transfer market too LOL and maybe just maybe compete once again and we might even win some silverware. Personally I believe that Wenger has to go if Dein isn't brought back. I note that a number of your respondents were looking for a similarly constructed piece about Spurs. I for one would love to see it particularly if you compare and contrast them with Arsenal up to now and project ahead what the future might bring short term to medium term and having regard to a potential stadium move by them. Thank for your hard work in creating this hugely informative and appreciated blog.

  58. Plumstead,Royal Arsenal,Dial Square, Woolwich Arsenal, Failed merger with Fulham, Arsenal... only English league club not to be named after a geographical location.
    To actually describe Arsenal as a football club is as absurd as describing McDonalds as a restaurant. Like McDonalds, Arsenal is a franchise.
    Its m.o. is to make money. The 'club' was created by a corrupt conservative politician. The fact that a ball is kicked is purely coincidental. And here we have a forensic break-down of its finances written by one of its own customers. The circle is now complete, and quite evidently beyond parody.

    1. A jealous Middlesex Ranger fan eh? Arsenal were founded by armaments workers actually. They were never called Plumstead they just played there... They moved to North London to help the club's financial stability. A bit like Spuds wanted to become an East London club moving into the Olympic Stadium...

    2. The club which was founded by armaments workers is not the same 'club' as the one which exists today. How can something which has had so many name changes, liquidations, failed mergers and geographical relocations be seen as anything but a series of failed clubs/companies which bear absolutely no legal link to one another.
      You are the football equivalent of 'Theseus's Paradox'. You are Trigger's broom. Get Swiss Ramble to research your history.

    3. Manchester United were founded as Newton Heath LYR Football Club (LYR= Lancashire and Yorkshire Railway) are they not deserving of your approval as a football club either? As a professional club, there were two names- Woolwich Arsenal and then Arsenal after their relocation.

      Their one liquidation which I'm aware of was due to the lack of money in football then generally and the unpredictable nature of income causing financial problems. Then the ONLY attempted merger was Henry Norris' attempt to merge Arsenal with Fulham, the other club he owned. That failed so the club made ONE relocation to North London.

      Spurs nearly went into liquidation before Alan Sugar stepped in. Spurs wanted to move to East London for financial gain. Does that make them an illegitimate football club? No. These things have been the nature of football for over a century.

      By the way, I am an historian.

    4. I'm not sure why you've even mentioned Manchester United and Tottenham Hotspur. Their respective histories are in no way comparable to that of Arsenal.

      Tottenham never went into liquidation, Tottenham never moved across London. Manchester United have never experienced liquidation, or tried to merge with another club, or had 4(four) different names.

      Arsenal were essentially an Edwardian-era MK Dons, a franchise created to make money. From Dial Square in Plumstead, to Arsenal at The Emirates... Trigger's Broom. It obviously has negative connotations, quite understandably so, but as an historian I'm sure you've come across far worse things than the somewhat shady past of Arsenal.

    5. I explained why I mentioned those clubs... I never said Spurs went into liquidation- I said they nearly did. It wouldn't negate their status as a club was the point. Arsenal weren't founded as a professional club either so the financial motive you assert lacks credibility.

      You rhetorically stated that there were "so many name changes, liquidations, failed mergers and geographical relocations". When in fact, the club has only changed its name ONCE since becoming professional (the most meaningful time for such an occurrence), and that was to reflect the ONE relocation, following the ONE failed merger after the ONE time the club went into liquidation.

      Spurs wanted to move to East London to the Olympic Stadium- obviously on your terms that would negate their legitimacy as a club since it is based on financial success over location, though for luxury rather than necessity. Maybe a name change would be legitimate if that were to happen too? Well it's a double standard to criticise essentially the single process of Arsenal's change as a professional club; initiated for financial survival more than anything.

      I'll leave it there as there's not much more to be said past that, so I won't check back. Spuds fans in particular always come up with these 'arguments', and it's more a compliment than anything. Certainly not real history at any rate.

    6. West Ham Hotspurs has a nice ring to it doesn't it.

    7. Tottenham Hotspur used the Stratford link to gain goverment support for a new stadium in Tottenham. The strategy worked.

      Dial Square, Royal, Woolwich, Arsenal, all different names. What has being a professional club got to do with it? What is your 'ONCE/ONE' argument? As if doing something just the one time makes it ok?

      You have no reasoned argument against the fact that 'modern' Arsenal is a franchise, created by Norris to make money. Hence the merger, and the move across London. Exploiting A Gap In The Market.
      You say it's not 'real history'? It's based on factual evidence of past occurrences, of course it's real history.
      The history of Arsenal is important in reference to this Swiss Ramble article on Arsenal's current finances. It provides a historical frame of reference. To understand the present, one must first have to understand the past.

      Arsenal fans unhappy about Kroenke treating Arsenal like a business rather than a football club have to understand that Arsenal was essentially created as a business by Norris. If you understand these facts, the contemporary picture becomes much clearer.

    8. You don't have inside, copper-bottom sources showing the motives for Tottenham's planned move. "To understand the present, one must first have to understand the past." What a revelation that is to me in my line of work...

      I've actually dealt with all your points already and explained them. You're clearly unwilling or unable to understand the argument. If anyone wonders why this is my last reply it's because this bitter Spud has simply repeated his original points, points which I've dealt with- as would anyone with an understanding of these matters. On his potential fifth attempt I see little scope for him to significantly expand upon his inane, bitter ramblings.

  59. Hi again.
    Sorry if this has already appeared and I have missed it.
    This is an excellent article, comprehensively researched, and most importantly, from my perspective, easy to read and understand from a non-accountant's perspective. Thank you.
    I tend to look at what Arsenal do from a legal perspective to try to reach some form of a personal conclusion.
    Obviously as a listed company they cannot (and clearly do not) mislead in their actual messaging. My conclusion has therefore always been that whilst we do have the money, we have no idea who is sanctioning its being spent (or not spent). Lose commentary about keeping powder dry and the fact that Arsene may not spend it in the same way as you etc. does not mean that the rest of the Board would. I do not think we have any idea about the Board's actual view on this.
    Secondly I wonder about standard obligations to act in the best interests of Arsenal itself and its shareholders (inter alia) and have reached the conclusion that either the current no-spend is a case of stockpiling cash to pay off the debt early in its entirety (notwithstanding your point about the real value of the present day debt being higher) or future dividend payments. Putting more cash on deposit than, I think, banks are required to hold by financial resources requirements doesn't make sense to me otherwise, because given current low returns, investing in the squad and the future growth of the team and the brand must surely reap greater reward when you have such a distinguished and capable manager. Of course, having money doesn't mean you can always spend when you have competition with greater amounts of cash, but each year that passes Arsenal's ability to attract players of a certain calibre diminishes without that investment.
    So in short, I simply don't understand but would be interested in your thoughts on this.

  60. From a business accounting point of view how should revenues coming from the sale of fixed assets (property) be treated? Should a business run on the custodianship lines that Arsenal obviously is put those revenues into the same pot of liquid funds that are used to buy perishable assets like players - or would that be like selling the family silver and putting the proceeds on the 3.30 at Kempton Park?
    If they shouldn't be used for such a purpose it begs the question as to how much of Arsenals cash holding is actually propery derived and is therefore only potentially available to be used for the purchase of other revenue generating fixed assets?

  61. Great article. There reference of facts and analysis helps to overcome some ill-conceived assumptions about Arsenal’s finances.

    I thought I will add my own opinion on how Dein’s expertise is missed by Arsenal in the transfer markets. My understanding of the framework in which a club like Arsenal operates is:
    1. Several qualified personals and employed and assigned to different roles within Arsenal. Wenger, Gazidis and David Law are some of such personals.
    2. Wenger probably does enjoy a special ‘executive’ type role with respect to club’s footballing objectives and strategies.
    3. However, Wenger alone does not decide and run each and every functionaries, and each role has certain degree of autonomy in how the role is done.

    Within this framework, I would imagine Arsene, with the scouts, will identify players for Gazidis, Law & Co to recruit. Perhaps, Wenger does put a suggested valuation for such players. Law & co will pursue the players for the price set by Wenger. My guess is Law&Co do not have much autonomy in negotiations; they will make the bid, and if rejected then return to Wenger for round two. This explains why transfers take such a long time and are ineffective.

    I think Wenger misses Dein’s competencies and knowledge of the market in this role. My guess is that Dein will be involved in the valuation of players and will correct Wenger before he ‘short values’ a player out of Arsenal’s pursuit. And in negotiation, Dein will have more autonomy and skill to play the negotiation game and come to a deal sooner. Lastly, Dein probably has the courage to withstand any criticism of bad purchase or over-paying, while Law and Gazidis are probably not willing to be as risk taking or willing to take public criticism for such mistakes.

    As a result Arsenal are affected in multiple ways: (i) they miss out on potential talents, (ii) they overpay wages/transfer for undervalued talents and (iii) overall footballing strategies are altered to accommodate this talent drain.

  62. Thanks for the yearly view on my club; this is one of the pillars I always use to evaluate the proceedings of Arsenal onwards.

    1) It's quite splendid to see you twitching as a professional financial expert at the club's under-used positive balance. :)

    2) And I, as a marketing professional, twitch at the possibility of using the money in many ways to enhance the brand.

    3) But what about everyone's shopkeeping logic? If Arsenal buy someone, who would that player replace? And at what price? I'm having problems trying to find options at a comparable and/or reasonable price. Surely we could replace a Wilshere, a Walcott, a Szczęsny and a Podolski for a good market price, but who should we go for as their alternatives?

    There are only 11 places to play for a team. Zero-sum stuff in a way.

    I'd say Arsenal in 2013 could use a marquee signing as a marketing highlight, but otherwise should fill 2nd team options, motivating the incomers with the options of Champions League football and the Premier League as a marketing vehicle for themselves.

    Oops, I think I revealed everything. ;)

  63. Great analysis. It essentially validates the discussion amongst supporters. You really have a couple of strategies, and the implementation depends on what your end game is. If your end goal is to sell the team for a return on your investment then you may want to (forgive me as I hate this saying) "splash the cash" win the league or Europe and leave the balance sheet issues to the next punter. If you want to build on a legacy then you have to take a longer view, and hope that financial mismanagement in Spain, Italy, England, and (now introducing) France will allow our financial model to rise to the top. Problem is our model is based on following the spirit of FFP, which is clearly not the way Monaco, PSG, Citeh, Real, and Barca are interpreting it. Until we have truly robust regulations around spend, we will be on a one way trip to elite pan European super leagues and their subservient domestic leagues which will act as reserves and youth schemes. I say continue to fight the good fight, and please please please do not sign Suarez!

  64. Barcelona have sold close to 600,000 Neymar Jr shirts since his arrival at the club. That's mental. At $85.79 a shirt, that's $51million. And the season is yet to begin. Bringing in top players has its own benefits. Let's stop counting coins and sign players. The bigger the player, the better for the club's finances. Whose shirt will you buy among the present team? In Nigeria, peple dont even buy the replica shirt of Arsenal any more. It's sad. Nice analysis tho.

    1. firstly barcelona will not get all $85.79 from selling a neymar shirt...heard about nike? secondly man utd are top of nike list in selling replica shirts with real madrid top in adidas list...dont believe all the dross

  65. Why does City have more than twice the commercial revenue as Arsenal?

  66. Excellent read, thanks for all the information.

  67. @Alex Blohm
    I suspect City's commercial revenue outstrips Arsenal's because Arsenal signed a lot of long-term sponsorship deals years ago and took most of the money up-front. Their per season payments since have been quite small.

    City have recently signed some big sponsorship deals. Arsenal's new sponsorship and kit manufacturing deals come into effect next year. This could easily boost the coffers by ~£50M per season.

  68. A very interesting article.

    I suspect that there is also an element of the board who don't really care about success and just happy with the income they are generating.

    Currently they have a manager with a proven track record of achieving Champions League qualification every year. One year they may get lucky and progress a little further.

    Its a good little earner when you think of it. Why push for success when you can make a business exceedingly profitable by retaining the status quo? Sell one or two of their best players every couple of seasons for big money and buy 3 or 4 good players with the proceeds to maintain that level. Talk up the potential for big money signings when season ticket renewals are a bit slow.

    It would take a huge amount of investment to get on the next strata, and this injection would provide no guarantee of winning anything. Especially as Chelsea, City and Utd are unlikely to step back and watch from afar. Even if they could achieve success, I suspect the returns would not make this investment worthwhile so why bother?

  69. First class analysis. Much appreciated.

    Would it be fair to say that our 'football business' would not be running at an operating loss if we hadn't wasted big wages on average players?
    Your report shows the wage bill increased by more than 50% since 2007, but I would say the overall quality of the squad declined.

    The idiotic wage policy is a reason why Mr £52k per week Bendtner is still out our club!

  70. why bother spending the money with city chelsea watching from afar truly a spurs or utd supporter.then we should make even more money and give it away to other clubs.who is the marquee sighning not including rvp that utd have made in recent seasons.phil jones was not exspensive and may become a good english defender.we were in for jones but penny pinching seen him go to utd.

    why bother spending compared to city or chelsea as it may be a waist. utd do not count as they have not massivley spent where is hazzard or moura or lewandowski at utd.swansea have spent money this season but also spurs and liverpool have too. so what if one of liverpool or spurs gets or swap around each season fourth or fifth spot.not a nice little earner then when we are in the europa league.

    real till jose arrived were put out of cl second round six seasons running this did not stop them eventually topping the deloitte money league did it.utd or spurs fans snould stop there nonsence about arsenal.

    1. You need to learn some English, then there might chance people will understand what you are trying to say!

    2. Really Mr Grammar Policeman. I read it, some good points, behave yourself.

    3. True these people need to learn at least one world accepted language.

    4. I agree with the first reply. How does the first line make any sense?

      "why bother spending the money with city chelsea watching from afar truly a spurs or utd supporter.then we should make even more money and give it away to other clubs."

      If you want other people to read, understand and appreciate your views, then please try and make your comments comprehensible to others.
      Thank you!

  71. Dear Swiss Ramble, I realise this is a bit late to the article.

    Thanks for the great work as always.

    I wondered if you could explain why Juventus and AC Milan seem to get so much from the TV pool when compared with what are seemingly 'bigger' TV leagues such as UK teams and Spanish teams. It seems disproportionate.

    Lastly, although Arsenal haven't spent, it seems also that Liverpool haven't spent this season. Net spend is near 0, and wage bill seems to have been drastically reduced (for the second season running). This may be purely down to a 40m loss that you post in your article, but it would be good if you could do a blog post on it.

  72. Very comprehensive and the maths seems close. I still fail to see why FFP will ever be an issue and should be almost discounted as reason to not spend. Balancing the books can be done in the same way that City and Utd are using overinflated sponsoring of the "Training Kit" or naming rights to their training ground. With Ushmanov willing to invest surely we can name the training ground for a fee of 40M a year?

    1. Anonymous, you said "Balancing the books can be done in the same way that City and Utd are using overinflated sponsoring of the "Training Kit" or naming rights to their training ground".

      The difference between the two deals is that Utd's deal is with a genuine third party, DHL, unconnected with the club and who are willing to pay that amount of money for a perceived commercial advantage.

      By contrast, City's deal falls into the category known as 'sweetheart' deals, where the deal is done by connected organisations who are doing themselves a favour by making these seemingly commercial deals but which do not stand up to independent scrutiny.

      Whether City get away with it remains to be seen but, if Platini and UEFA are to have any credibility, then City should not be allowed to get away with it.

      Any move by Usmanov to pump £40m a year into Arsenal by means of a deal involving naming rights for the training ground would have no chance of getting past Uefa as it would be far too obvious a ploy for even Platini to let go unchallenged.

  73. Wow great article! I'm new to the Swiss Ramble but what a detailed and well researched look at Arsenal.

  74. Excellent post. Does anyone know why Juventus and AC Milan got so much more of the TV pool. Not that I'm in any way cynical about Italian teams ha ha

    1. There were only 2 Italians teams to share the money.

  75. Written (off) a little too soon.

    Wenger mentioned he was going to spend and likely toward end of window. He did.

    Gazidis said we would/could afford the likes of Wayne Rooney, well maybe not in wages but we pulled off a massive transfer fee.

    Never in doubt.


  76. very solid and interesting financial analysis, appreciate it if you all would check out my research as well:

  77. You owe Arsenal a post Ozil article ")

  78. I respect your articles greatly, but your analysis of player sales and the contribution to profit is incorrect. Your analysis does not net off player acquisitions - which would not have been made if players were not sold.

    As it stands your analysis says that we have made ~£180m profit from player trading over the period - this is wrong. IN fact we have broken about even, meaning the profit reported is real profit and not related to player trading.

    1. Don't confuse "player sales", which is what I clearly mentioned in the analysis, with "player trading", which is very different. To see the full impact of player trading on reported profit, you could also introduce player amortisation into the equation, but the net impact would be relatively minor compared to the hefty profits booked for player sales.

      The story is obviously different in terms of cash, where the player sales and purchases over the last six years have indeed just about broke even. That can be seen by looking at the cash flow statement later in the piece, but (at the risk of stating the obvious) that is different from the P&L.

    2. There was no confusion.

      Many media outlets reported that Arsenal 'only make money from selling players' which I guess is a good story but not true. The distinction between profit from player sales, net player trading and cash generation is not something the media would want to go into. Too complex for the audience.

      I do disagree with your point on amortisation - over the full period the effect would not be relatively minor.

      IMHO, the true reflection of profit excluding all player trading would be that arsenal have made a significant profit over the period.

    3. Agreed that the media, perhaps understandably, often simplify the reporting of football clubs' financials, but I would suggest that your point is a little weakened by the somewhat cavalier way that you use financial terms, e.g. talking about £180m "profit from player trading", when you mean player sales (as I actually wrote).

      Similarly, I'm not sure why you're so keen to say that AFC would have made a significant profit over the period excluding all player trading, when I specifically referred to the last two years in the blog. In other words, you would appear to be debating a non-existent point.

      Finally, if you want to examine the full impact of player sales and purchases on the accounting/reported profits, then you would have to look at the movements in player amortisation, not just the gross amounts.

    4. No I meant player trading because it is the more important measurement IMHO. Profit from player sales means nothing, which is why I thought it was odd that profit from player trading would even be compared to overall profit in the article. It is this part of the article that the media picked up on.

      Hands up though, I have only just started reading your blog - which is superb - so have perhaps not go the full context of what you meant.

      I am keen to say that Arsenal made a profit on their business if you take out all player trading because it is true and doesn't really come across in the article.

    5. By the way, do you know when the full year 2013 accounts are due out? I was expecting them by now...

  79. Excellent Blog I am a massive Arsenal fan from Munich

    Feel free to visit my weblog :: Matt Curt

  80. My Dear Swiss Ramble, why have you gone silent? Not a single post in the last 3 months and this is unusual.

    Please do write. We fans of the blog are eagerly awaiting.

  81. Hi, are you okay? We miss you. Regards, Robs

  82. You really have a couple of strategies, and the implementation depends on what your end game is. If your end goal is to sell the team for a return on your investment then you may want to (forgive me as I hate this saying) "splash the cash" win the league or Europe and leave the balance sheet issues to the next punter. If you want to build on a legacy then you have to take a longer view, and hope that financial mismanagement in Spain, Italy, England, and (now introducing) France will allow our financial model to rise to the top.

  83. Yes, we miss your posts. I hope you will write again soon...

  84. For a very popular team like Arsenal it's not impossible that they have that huge amount of money. They just need to learn how to use it for their future. They need someone who knows how to handle this kind of situation.

  85. That's an "old" article by now.... Yet, it is the latest on Arsenal, I was re-reading it today, and this paragraph struck me:

    (g) Lack of a proper transfer structure

    As Monaco’s former chief executive, Tor-Kristian Karlsen, noted, when commenting on Manchester City and Tottenham’s transfer activity this summer: “I for one doubt it's a coincidence that the only two teams in the Premier League with genuine sporting directors (or technical directors or directors of football, if you like) are the ones who have appeared the most prepared, structured and with clear strategies in their work in the summer transfer market.”

    If there is a modern, coherent transfer structure in place at Arsenal, then it seems remarkably well hidden. There may well be a great deal of activity behind the scenes, but the results speak for themselves.

    As you can see,,, what seemed loadable/proactive a few months back is very controversial today, clearly Tottenham had a messy transfer period, and it turns out, buying 7 players do not necessarily replace Bale.

  86. Excellent topic. It so great that media post this kind of news.
    Yeah, money doesn't matter as long at it keeps its ranking good.
    Great run. Arsenal, keep up the good work. Very encouraging.
    Keep the game going. Good Teamwork.

  87. Yes, we miss your posts. I hope you will write again soon...صب واى

  88. I wish you write again about financial aspect of football. please write again mate. your posts is so fantastic. love your blog

  89. Can you do a small post with the new english TV-deal and compare it with the situation in countries? I think that deal will have a huge impact.


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