What to make of Arsenal? On the one hand, they are once
again adding to their trophy cabinet, winning the FA Cup for the past two
seasons, and continue to qualify for the Champions League, a feat that most
clubs can only dream about. On the other hand, the feeling remains that Arsenal
are not making the most of their (abundant) financial resources.
2015 was meant to be different, but the lack of signings
this summer has once again sent many fans into a tailspin, as the same old
failings continue to be exposed. This is particularly disappointing, as manager
Arsene Wenger himself believes that Arsenal should now genuinely be able to
compete for the Premier League title, as the club no longer has to sell its
best players.
Although Arsenal have not matched the fabulous success of
the early period of Wenger’s reign, they have performed in line with their
budget (slightly better some years), as the only clubs that have finished ahead
of them in the league have enjoyed significantly higher spending power.
"Stuck in the middle, Giroud"
However, Arsenal are now swimming in cash, as demonstrated
by director Lord Harris’ view that the club could buy any player it wanted with
the exception of Lionel Messi or Cristiano Ronaldo.
Arsenal could certainly do with some new players, if you
believe club legend Thierry Henry: “Arsenal need to buy four players, they need
that spine. They need a goalkeeper, they still need a centre-back, they still
need a holding midfielder and, I'm afraid, they need a top, top-quality striker
in order to win this league again.” Since those remarks the only arrival has
been goalkeeper Petr Cech from Chelsea, but, importantly, no outfield players
were recruited (apart from a couple of promising youngsters).
The limited recruitment is all the more puzzling, as
Arsenal’s activity in the transfer market had been on an upward trajectory. In
the last five years Arsenal had a gross spend of £253 million, compared to just
£85 million in the preceding five years. On a net basis, in the same periods
they moved from sales of £31 million to £97 million expenditure.
In particular, the club had “a record level of expenditure
on players” in the last two transfer windows making six major signings: Alexis
Sanchez, Danny Welbeck, Gabriel, Mathieu Debuchy, Calum Chambers and David
Ospina.
In fact, over the last two seasons Arsenal have the third
highest net spend in the Premier League of £74 million. This was only surpassed
by the two Manchester clubs (City £151 million and United £145 million), but to
place this into perspective they did spend almost twice as much as the Gunners.
Wenger explained this summer’s low spending as follows: “The
solutions we had were not convincing at all. In the end you do not buy to give
one hope, you want to buy because the players who come in can help your squad
to be stronger. Buying and selling is one way to strengthen your team, but
that’s not the only way.”
He also pointed out that the prices quoted to Arsenal and
other leading English clubs tend to be higher than those for continental clubs,
as sellers are clearly aware of the wealth coming from the Premier League TV
deals. However, that’s the reality of the football market today, so clubs like
Arsenal need to blow the other clubs out of the water – or there’s simply no
point having more money.
In fairness, another aspect of the market is supply and
demand and Wenger was keen to stress that the issue was more about the
availability of players rather than lack of funds: “It is not a shortage of
money, just a shortage of players.” Leaving aside the observation that there
must surely be one or two available players in world football that could
improve the squad, he is spot on about the financial situation at Arsenal.
Specifically, Arsenal’s huge cash balance is still the talk
of the town and has gone up yet again, rising another £20 million in the last
12 months from £208 million to £228 million. Let’s pause to absorb that number:
that’s nearly a quarter of a billion.
To place that into context, the next highest cash balances
in the Premier League in the 2013/14 season were Manchester United £66 million,
Tottenham Hotspur £39 million and Newcastle United £34 million. In fact,
Arsenal held 40% of the total cash in the Premier League that season: £208
million against £311 million for all 19 other clubs combined. Manchester
United’s 2014/15 balance has increased to £156 million, but this is still £72
million less than Arsenal.
Lord Harris was quick to boast about the club’s financial
capacity: “Money was tight when we moved to the Emirates, but it’s a lot freer
now. In the accounts, there’s over £200 million in the bank.”
"Speed your love to me"
However, he had obviously not received the memo from chief
executive Ivan Gazidis, who had previously explained why not all of this cash
balance is available to spend on transfers: “It is quite untrue that we are
sitting on a huge cash pile for some unspecified reason. The vast majority of
that cash is accounted for in various ways.”
In fact, the club is so sensitive on this point that the
accounts note that “proper consideration” of the cash balance should make
deductions for the £35 million debt service reserve and the net £66 million
owed on previous player purchases, which would leave “only” £128 million.
The annoying debt service reserve has been required since
the 2006 bond agreements, though it does raise the question of whether these
arrangements could be renegotiated given Arsenal’s significantly better
financial position today, thus freeing up this £35 million.
It is also true
that most season ticket renewals are paid in April and May, so Arsenal’s
cash balance will always be at its highest when its annual accounts are
prepared, namely 31st May. The club has to pay a good proportion of its annual
running expenses out of this cash, though it is equally true that other money
will flow into the club during the course of the season, such as TV
distributions and merchandise sales.
Despite all of these factors, the truth is that year after
year Arsenal’s cash balance has steadily risen: May 2007 £74 million, May 2008
£93 million, May 2009 £100 million, May 2010 £128 million, May 2011 £160
million, May 2012 £154 million, May 2013 £153 million, May 2014 £208 million
and May 2015 £228 million.
In other words, there is substantial money available to
spend. It’s clearly not as much as the £228 million in the books, but we can
say with some conviction that there would be enough available in the January
transfer window to safely cover some of the glaring weaknesses in the squad: let’s say
£70-80 million (with the usual caveats).
Looking at Arsenal’s cash flow statement, we can see signs
of a change in approach: in the six seasons between 2007 and 2012 Arsenal spent
just a net £4 million on player purchases, while they have spent a net £83
million in the last three seasons. That said, more than half of the money still
goes elsewhere.
In 2014/15 Arsenal generated an impressive £102 million from
operating activities, spending a net £46 million on transfers and £56 million on
other things: £19 million on
financing the Emirates Stadium (£12 million interest plus £7 million on debt
repayments), £14 million on capital expenditure (e.g. refurbishment of Hale End
Academy and some initial work on London Colney) and £2 million on tax. What
happened to the remaining £20 million? Nothing really, as it just went towards
increasing the cash balance.
This is nothing new. Since 2007 Arsenal have produced a very
healthy £628 million operating cash flow, though £231 million has had to be
used on the stadium financing (£147 million on loan interest and £85 million on
debt repayments) with a further £103 million on infrastructure investments
(“this may not attract headlines in the same way as player transfers, but will
provide benefit over a longer term” per Sir Chips Keswick) and £14 million on
tax.
Only 14% (£87 million) of the available cash flow has been
spent in the transfer market, though almost all of that has been in the last
three seasons. The other notable “use” of cash in that period is to increase
the cash balance, which has risen by a cool £193 million.
Major shareholder Alisher Usmanov noted that Wenger had been
put in a very difficult position, as the shareholders did not put money in to
finance the new stadium, which meant that the near quarter of a billion
incurred to date on stadium was not available to improve the squad. That’s
evidently correct, but it is equally true that Arsenal have left a lot of
available money in the bank to attract one of the lowest interest rates in
history, while transfer inflation is running amok.
Although Sir Chips stated, “we remain committed to spending
only the money we earn”, the reality is that the club comes nowhere near doing
that. They have “a pocket full of pretty green” (to quote The Jam), but they don’t
seem to know what to do with it.
Arsenal’s 2014/15 financial results underlined how well run
the club is from a business perspective with the chairman commenting, “The club
has had a successful year both on an off the pitch. We are in a robust position
across all the key areas of our activities.” Indeed they are, with profit before
tax rising by £20 million from £4.7 million to £24.7 million. The increase was
smaller after tax, as the previous year’s figures were boosted by a tax credit,
but this still rose by £12.8 million to £20.0 million.
Revenue surged by £31 million to £329 million (excluding £15
million from property development that brought total revenue to £344 million),
mainly due to an increase in commercial income from the PUMA kit deal, while
profit on player sales was £22 million higher at £29 million and a once-off
profit-share bonus from a previous sale meant that property was up £13 million.
Against that, the increased investment in the squad resulted
in the wage bill climbing £26 million to £192 million and player amortisation
rising by £14 million to £54 million. Depreciation and other expenses were also
£4 million higher.
Traditionally Arsenal have been one of the few football
clubs able to make a profit, but the impact of the last TV deal has helped change this with only five Premier
League clubs reporting a loss in the 2013/14 season. In fact, Arsenal’s £4.7
million profit was only the 12th highest that season, far behind clubs like
Tottenham Hotspur £80 million, Manchester United £41 million, Southampton £29
million and Everton £28 million.
The importance of player sales to these figures is clear. While
Arsenal had “a quiet year in terms of outbound player transfers” in 2013/14,
making only £7 million from selling Gervinho and Vito Mannone, other clubs
generated sizeable profits from this activity: Tottenham £104 million (largely
Gareth Bale to Real Madrid), Chelsea £65 million (David Luiz to PSG),
Southampton £32 million (Adam Lallana to Liverpool) and Everton £28 million
(Marouane Fellaini to Manchester United).
As we have seen, Arsenal’s 2014/15 accounts included much
higher profits on player sales of £29 million, including the transfer of Thomas
Vermaelen to Barcelona and the proceeds of an agreement with Real Sociedad to
cancel the club’s option to reacquire the registration of former player Carlos
Vela.
Despite the improving profits at other clubs, Arsenal are
still very much the financial poster child of the Premier League. You have to
go back as far as 2002 to find the last time that they made a loss. In fact,
they have made total combined profits of £226 million in the eight years since
2008.
This is an astonishing achievement in the cutthroat world of
football where success is very largely bought. In the last four years up to
2013/14 (the last season where every club has published its accounts), only
Tottenham had higher total profits than Arsenal and that was entirely due to
the Bale sale. In contrast, Arsenal have been very consistent and are one of
only three clubs that made money in each of the four years, along with
Newcastle United and WBA.
However, it is worth noting that Arsenal only managed to
post a profit in 2014/15 thanks to £29 million of player sales and £13 million
from property development. Over the years, much of the club’s excellent
financial performance has been down to profits from player sales (e.g. £65
million in 2011/12, £47 million in 2012/13) and property development (e.g. £13
million in 2010/11, £11 million in 2009/10).
These should be lower in future, as Arsenal no longer have
to make “forced” player sales, while the property development is largely coming
to an end, which means that Arsenal will be more reliant on their core
business.
Arsenal’s property development segment generated revenue of
£15 million and operating profit of £13 million in 2014/15, almost entirely due
to a once-off bonus in relation to the revenue achieved for the sale of
residential units on a previously sold site. Apart from this, there was
“minimal activity” on the property side, but there should be money coming from
the sale of the Holloway Road and Hornsey Road sites once planning consents are
resolved, though this is proving to be more complex than anticipated.
The other side of player trading accounting is player
purchases, where the recent increase in spending has been reflected in
Arsenal’s profit and loss account via player amortisation, which leapt from £40 million
to £54 million in 2014/15. In fact, this expense has increased by £32 million
from £22 million four years ago. For the same reason, player asset values on the balance sheet have risen to £172 million.
However, Arsenal's player amortisation is still by no means the largest in the
Premier League. Those clubs that are regarded as big spenders logically have
the highest amortisation charges, e.g. Manchester City £76 million and Chelsea
£72 million in 2013/14, while Manchester United’s cheque-book strategy since
Sir Alex left has driven their annual amortisation up to an incredible £100
million in 2014/15.
Although this is fairly technical, it is important to
understand that transfer fees are not fully expensed in the year a player is
purchased, but the cost is spread evenly over the length of the player’s
contract – even if the entire fee is paid upfront. As an example, Mesut Ozil
was reportedly bought for £42 million on a five-year deal, so the annual
amortisation in the accounts for him is £8.4 million.
The fundamental point is that when a club purchases a player
the costs are spread over a few years, but any profit made from selling players
is immediately booked to the accounts, which helps explain why clubs like
Manchester City can spend so much and still meet UEFA’s Financial Fair Play
targets.
As a result of these accounting complications, clubs often
look at EBITDA (Earnings Before Interest, Depreciation and Amortisation) for a
better idea of underlying profitability. On this basis, Arsenal’s profitability
has improved considerably in the last two seasons after many years of decline,
with EBITDA rising from £25 million in 2013 to £64 million in 2015.
That’s very good, but is still only around half of Manchester
United’s £120 million (down from £130 million the previous year), which goes to
show what an amazing cash machine they are.
Football revenue increased by 10% (£31 million) from £299
million to £329 million in 2014/15, largely thanks to commercial income, which
was up 34% (£26 million) from £77 million to £103 million. Broadcasting revenue
was 3% (£4 million) higher at £125 million, while match day revenue was flat at
£100 million.
Arsenal’s revenue hardly moved at all between 2009 and 2011,
but since then has grown by 46% (£104 million) from £225 million to £329
million. Most of the growth (£57 million) has come from the previously
under-performing commercial division, while improved TV deals have driven a £40
million increase in broadcasting revenue. Match day income has also risen by £7
million in that period. The advances made in the last two years alone are quite
striking, amounting to £87 million.
Arsenal’s £329 million is still some £66 million below
Manchester United, even though their revenue dropped from £433 million to £395
million in 2014/15 following their failure to qualify for the Champions League.
Moreover the Red Devils are projecting revenue of £500-510 million in 2015/16.
Arsenal are now quite close to the 2013/14 figures of Manchester City (£347
million) and Chelsea (£320 million), though they may well increase in 2014/15.
This is important, as budget is closely correlated with
success in the pitch. As Wenger put it, “The clubs who have better financial
resources have the better teams.” Arsenal already have the 8th highest revenue
in the world (per the Deloitte 2014 Money League), but the problem is that
three of the clubs above them are English. In fact, 14 Premier League clubs are
now in the top 30 (with all 20 in the top 40).
Gazidis has been quoted as saying, “Our revenues will grow
to put us into the top five revenue clubs in the world”, but that is far from a
fait accompli
given the continuing progress made by the leading clubs. For example, both
Spanish giants have announced good revenue growth in 2014/15: Real Madrid up 5%
to €578 million, Barcelona up 16% to €561 million. Against that, their revenue
in Sterling terms will be impacted by the weakness of the Euro.
If we compare the revenue of the other nine clubs in the
Money League top ten, we can immediately see where Arsenal’s largest problem lies,
namely commercial income. OK, the £197 million shortfall against PSG is largely
due to the French club’s “friendly” agreement with the Qatar Tourist Authority,
but there are still major gaps to other clubs in commercial terms: Bayern
Munich £167 million, Real Madrid £116 million, Manchester United £112 million,
Manchester City £89 million and Barcelona £78 million.
On the plus side, Arsenal are well ahead of most of their
rivals on match day income, while they are competitive on broadcasting revenue,
only really losing out compared to the individual deals negotiated by Real
Madrid and Barcelona.
Arsenal’s revenue mix is remarkably even with broadcasting
the most important at 38%, followed by commercial and match day at 31% apiece.
Gazidis noted, “Whilst our match day revenue is now ranked behind both
broadcasting and commercial as a source of income, it remains vitally important
to the club and is a key differentiator to competitor clubs with smaller, less
modern venues.”
This can be seen by looking at the importance of match day
revenue to Premier League clubs in the 2013/14 season, where Arsenal were the
only one above 30%.
Arsenal’s share of the Premier League television money was
£97 million in 2014/15, up £4 million from £93 million the previous season,
primarily due to finishing one place higher in the league.
Gazidis made a good point, when he observed: “Most of this
new revenue is shared very, very equally around the league. We are going to
have teams who will to be able to sign top class players. There will be teams
that do it very, very well and they are going to be challenging for those top
four places.” That may well lead to a rise of the “middle class” clubs and make
the Premier league more competitive.
This is even before the increases from the blockbuster
Premier League TV deal in 2016/17. My estimates suggest that Arsenal’s third place would be worth an
additional £47 million under the new contract, increasing the total received to
£144 million. This is based on the contracted 70% increase in the domestic deal
and an assumed 30% increase in the overseas deals.
Arsenal did not announce how much they received from the
Champions League, but I have estimated €32 million, up from the €27 million in
2013/14, largely due to more money from the UK market pool, as this did not
have to be shared with a Scottish club in 2014/15 (as was the case in 2013/14
with Celtic). However, this would have been adversely affected in Sterling
terms by the weaker Euro.
Nevertheless, the value of Champions League qualification is
clear, especially if it is compared to the Europa League, where the most earned
by an English club in 2013/14 was Tottenham’s €6 million. This underlines the value
of Arsenal qualifying for the Champions league 18 times in a row, described by
Sir Chips Keswick as “a remarkable record of consistency unmatched by anyone
else in England.”
The financial significance of a top four placing is even
more pronounced from the 2015/16 season with the new Champions League TV deal
worth an additional 40-50% for participation bonuses and prize money and
further significant growth in the TV (market) pool thanks to BT Sports paying
more than Sky/ITV for live games.
Arsenal’s 2015/16 payment will partly depend on how far they
progress in this season’s Champions League, but is also dependent on where they
finished in the previous season’s Premier League (3rd in 2014/15, compared to
4th the year before). If they reach the same stage in the Champions League in
the 2015/16 season, this could be worth an additional €20 million under the new
BT deal.
Match day revenue was flat at £100 million, despite two
fewer home games (in the FA Cup), as this was compensated by the 3% ticket
price rise. Manchester United’s income dropped by £17 million to £91 million
following their lack of European games, so Arsenal will earn most from this
revenue stream in 2014/15.
This is partly due to having the second highest attendances
in the Premier League, up from 59,790 to 59,930 in 2014/15, but also very high
ticket prices. The club is keen to emphasise that ticket prices have only been
raised three times in the last ten seasons (frozen for 2015/16) and that the
increases are significantly below inflation, but there is no doubt that Arsenal
fans are not happy contributing so much money to effectively grow the club’s
bank balance.
Gazidis said that the board wished to “strike a balance
between the expense of coming to games for our supporters and the club’s
ever-increasing costs and expenditure as it develops on and off the pitch”, but
he slightly ruined the effect by adding, “demand for tickets continues to far
exceed supply”, reducing it to an issue of basic economics.
Commercial revenue passed £100 million for the first time,
as it shot up £26 million (34%) from £77 million to £103 million, comprising
£78 million from commercial deals and £25 million from retail and licensing.
This was largely due to the new PUMA kit deal, which started in July 2014.
The club stated that this contract “signals the end of a
period where our commercial revenues lagged behind a number of our competitors
as a consequence of the long-term deals that were in place as part of the
funding of the Emirates move”, which is right, but the reality is that Arsenal
are still a fair way below the Manchester clubs: United’s 2014/15 revenue was
up to £197 million (nearly twice as much), while City’s 2013/14 revenue was
£166 million (and is expected to rise).
Similarly, Arsenal are still behind Chelsea (£109 million)
and Liverpool (£104 million) before any 2015 growth, though they are miles
above other Premier League clubs, e.g. Tottenham £42 million, Aston Villa £26
million.
Despite an increase in the number of partnerships, the
concern is that Arsenal’s commercial performance will continue to place them at
a competitive disadvantage relative to other leading clubs. Indeed, in the
interim accounts the chairman warned, “Inevitably, this growth rate will now
slow as we have our key partnerships with Emirates and PUMA in place for the
medium term.” Further substantial increases are only likely to come as a result
of success on the pitch, which again makes you wonder why the available cash
has not been spent on strengthening the squad.
The PUMA agreement is worth £150 million over 5 years, so
£30 million a year, which represents a £22 million increase over the former
Nike deal. This is one of the best kit deals around, but is still dwarfed by
Manchester United’s extraordinary £750 million 10-year deal with Adidas that
starts from the 2015/16 season.
Similarly, Arsenal’s Emirates deal is also among the highest
in the world. The £150 million contract covers a 5-year extension in shirt
sponsorship from 2014 to 2019 plus a 7-year extension in stadium naming rights
from 2021 to 2028. The club has not divulged how much of the deal is for naming
rights, so I have used the straightforward £30 million annual figure, though my
own estimate would put the pure shirt sponsorship at around £26 million, which
would still be pretty good.
That said, it has since been overtaken by new sponsorship
deals at Manchester United with Chevrolet (around £43 million a year) and
Chelsea with Yokohama Rubber (£40 million).
There’s an old saying that “it’s an ill wind that blows no
good” which applies to Arsenal’s relatively poor commercial performance to
date. The new Premier League Financial Fair Play regulations restrict the
amount of money clubs can spend from the new TV deal on wages, but 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.
Arsenal’s wage bill actually increased by 16% (£26 million)
from £166 million to £192 million, primarily as a consequence of player
purchases/upgrades and contract extensions for several players. Even with the
revenue growth, the wages to turnover ratio has risen from 56% to 58%.
This is higher than the 46-50% achieved between 2008 and
2010, but is still very reasonable and is in line with most clubs in the
Premier League.
However, it is striking how close Arsenal’s wage bill is to
other leading clubs now. For example, Manchester United’s 2014/15 wage bill
fell to £203 million, just £11 million more than Arsenal, compared to a £48
million differential the previous season. It is also within striking distance
of Manchester City (£205 million) and Chelsea £193 million, though those are
the 2013/14 figures.
Of course, Arsenal’s wages are way ahead of most other
Premier League clubs with the nearest challengers (in 2013/14) being Liverpool
£144 million, Tottenham £100 million and Newcastle £78 million.
One other point worth noting is that Arsenal’s wage bill was
inflated by bonus payments for Champions League qualification, which, depending
on your view, is either a sensible performance plan or demonstrates a palpable
lack of ambition.
Although there is a natural focus on wages, other expenses
also account for a sizeable part of the budget at leading clubs with Arsenal’s
increasing by £2 million to £72 million in 2014/15, which is exactly the same
as Manchester United. These cover the costs of running the stadium, staging
home games, supporting the commercial partnerships, travel, medical expenses,
insurance, retail costs, etc.
Last year they also included a £3 million fee paid to
majority owner Stan Kroenke’s holding company for “advisory services”, but we
will have to wait until the full accounts are published to see if a similar fee
has been paid this year. If so, it would be helpful if the club provided a
meaningful explanation for this apparently ridiculous payment – even if they
were to say that it was effectively a dividend in all but name.
There have been a few misguided reports in the media that
Arsenal have paid off their stadium debt, but the reality is that the debt
incurred for the Emirates development continues to have an influence over
Arsenal’s strategy. Although this has come down significantly from the £411
million peak in 2008 to £234 million, it is still a heavy burden, requiring an
annual payment of around £19 million, covering interest and repayment of the
principal.
The interest payable of £13 million is a lot more than any
other Premier League club (£5 million at Manchester City, Everton, West Ham and
Liverpool) with the exception of Manchester United, who leapt to £35 million in
2014/15.
Although the net debt stands at only £6 million, thanks to
those large cash balances, the gross debt of £234 million remains the second
highest in the Premier League, only behind Manchester United, who still have
£411 million of debt even after all the Glazers’ various re-financings.
Arsenal’s debt comprises long-term bonds that represent the “mortgage” on the
stadium (£206 million) and the debentures held by supporters (£28 million).
Apart from financial debt, it is worth noting that the money
owed to other football clubs for transfers, including stage payments, has gone
up from £38 million to £81 million in 2014/15.
For the past few years Arsenal’s business plan has seemingly
been based on the belief that Financial Fair Play (FFP) would level the
financial playing field, but a series of legal challenges, allied with other
clubs’ ability to meet the targets, has severely compromised this strategy.
Even Wenger acknowledged this: “It has gone. I have seen the signs coming from
UEFA for a while now. I thought for a while FFP would happen, but now it is not
possible.”
"Young at heart"
Although the basic FFP rules remain in place, the subtle
difference is that new owners will now be allowed to make larger losses, as
long as they can produce a business plan that will show how they will reach
break-even. Hence, clubs like Milan and Inter will be allowed to spend more
after being bought by new owners.
Essentially, UEFA are now arguing that the modified stance
is a move from “austerity to sustainable growth” in an effort to encourage
investment into European football, though Wenger pointed to the revenue growth
in the Premier League as another factor: “I believe the television contract in
England has pushed some other clubs in Europe to want this to be a bit more
flexible for them, so they can compete better with investors investing in their
clubs.”
"Red Hot Chile Pepper"
Even if some other clubs are still well ahead financially,
Arsenal are still better placed than most. If they continue to qualify for the
Champions League, their revenue should be up to £400 million in two years, but
the question is how much of this will be seen on the pitch.
The board should surely follow its own virtuous circle,
which describes how “funds generated by the business are available for further
investment into the club with the aim of achieving an increased level of
on-field success, which ultimately translates into the winning of trophies.”
Arsenal have a fine squad that is eminently capable of
gaining silverware, but the latest financial figures clearly demonstrate that
the club has not used all of its resources to give itself the best chance of
success – which is all that most fans are asking for. They will hope that this
summer does not come to be regarded as another missed opportunity.
