I thought I'd write a post about Arsenal finances and try to explain what's going on with that side of the club considering very few supporters seem to realise just what is happening at the top level. Six trophy-less years on since the Emirates was built, Arsenal are finally set to reap the benefits of that stadium move and the astounding growth of the Premier League since the early 2000′s. It seems unlucky in some ways that despite the promise that a new stadium would lead to the club being more prosperous and successful, it has appeared to have the opposite effect. There is an explanation for why one of the world biggest football clubs havenât yet reaped the rewards from having such a brand new stadium built, and it involves how they got the funds to build such a stadium in the first place. The Stadium Naming Rights When the plans for the Emirates were drawn up, Arsenal opted into several sponsorship deals with Middle Eastern company Emirates Airlines, they seemed remarkable at the time but hindsight has left the Gunners regretting the length of the deals. The Stadium sponsorship deal is what grabbed all the headlines, it is why the clubs ground is referred to as âthe Emiratesâ rather than âAshburton Groveâ, and when it was announced that the North London side had agreed a deal worth almost £42 Million over 15 years (£2.8M per season) there were gasps. It was a groundbreaking deal at the time, but the length of it has caused Arsenal much distress. Just seven years after Arsenal announced they had reached a deal with Emirates, Manchester City announced a stadium naming rights deal of their own. They have managed to extract a astonishing £100 Million from Eithad Airways over 10 years (£10M per season), thatâs almost 4 times the amount the Gunners receive if you judge it by yearly income. While you have to take into account the fact that the Eithad deal is likely inflated due to Cityâs middle eastern owners and the fact that the Premier League has grown since the Gunners signed their stadium name deal, it still shows how much revenue Arsenal are missing out on from year to year on stadium sponsorship alone. Arsenal were originally planning to renegotiate the stadium deal but eventually gave in, they realised the Emirates name would likely stick whatever the stadium was officially called leading to a weak negotiating position. Meanwhile Manchester City bring in £10M per year for their deal. So how much are Arsenal missing out on compared to Cityâs deal over the next 9 years in total? A massive £64.8 million. It's not something Arsenal should worry about too much, City are just making use of the stronger marketing position football holds in the current era. So while City will bring in that amount of money for the duration of that contract, it's highly unlikely they'll be able to increase the size of that deal in future decades. Arsenal have since decided to effectively end any stadium sponsorship they receive by selling the Stadium naming rights to Emirates WITH the shirt sponsorship deal. The Shirt Sponsorship Deal The next sponsorship deal is the shirt sponsor, Arsenalâs deal with Emirates Airlines in 2004 also included shirt sponsorship of £48M (making the total of deal between the North London side and the airline £90M). Fortunately for Arsenal they only agreed to a eight year kit deal, meaning it is up for renewal in 2014. The current arrangement seeâs the Gunners bring in £6 million per year however that is significantly less than rivals Liverpool and Manchester United who earn £20 million during the same period. Thatâs a £14 million difference per year and something the club has already rectified. Arsenal announced a five-year £150M deal with Emirates Airlines last month, a deal that will see them bring in £30M per season starting from Summer 2013 (the payments are being brought forward a year early). While £30M a season is a large £24M increase of what they were earning, as Stadium naming rights are now included as part of that deal you have to take into account that the club will no longer receive the additional £2.8M per year, meaning the total increase in sponsorship from Emirates Airlines is actually £21.2M. The Kit Deal The clubs kit supplier, Nike, is also tied down till a deal ending in 2014. The stark contrast between what the Gunners earn when compared to their rivals is also easy to spot with regards to the kit deal. £8 million per season is what the club receive from the contract, compare that to the eye-watering £25 million Liverpool get, a club that doesnât even have Champions League football. Arsenal are rumoured to be in talks with Adidas after Nike relinquished the renewal option they had on the kit deal. The club's commercial team will be hoping to secure a deal that is at least level with the one that Liverpool has, but there is suspicion that any new deal will blow Liverpool's out of the water. The ideal situation would a contract worth £30M+ per season, but for the sake of argument lets presume the deal is a fairly underwhelming £25M P/A. That's still an increase of £17M per season. Overall then from primary sponsors alone, the growth in income will be at least £38.2M. Secondary Sponsors The club is working hard to attract more secondary sponsors too, and lots of them have already signed new terms at higher premiums. Arsenal also agreed a deal with Airtel this summer and look set to increase their sponsorship income from secondary sources by £10-£15M in the near future, some increases have already been arranged. It's hard to speculate on just how much money Arsenal will obtain from secondary sponsors but the hiring of a brand new commercial team shows that the Arsenal hierarchy clever recognizes the need for growth in this area. Presuming the club does increase secondary sponsorship by £10M which is a very achievable target, total sponsorship income would be up £48.2M. TV Money Itâs not just from sponsorship agreements that Arsenal will see an influx of cash. The new record breaking domestic Premier League deal which was signed last month has seen domestic TV money increase by an extra £20 million from 2013. At present Arsenal struggle to break even, they are roughly losing £5 million per season if you deduct player sales. This loss is largely due to the £15 million the club have to spend on interest payments on the debt they took on during the stadium move, however with the increase in Premier League money Arsenal will find themselves much more self-sufficient once the new deal comes into play. Once you add Overseas TV money which is predicted to rise by a minimum of 30% Arsenal could see an increase of £31.9M just for finishing third. If they finished 2nd they would get an additional £7M. Current Funds It's no secret Arsenal have money; recent financial statements show that the clubs bank balance stands at £150M, with around £100M that could be invested in the team (the other £50M is needed for cash flow purposes over the course of the year). But with the club also set to receive an extra £26M from the Queensland Road sale over the next two years, total cash reserves stand at £186M. With players like Fabianski, Squillaci, Walcott and Arshavin all likely to leave in January/Summer that would wipe around £11M off the wage bill while Chamakh, Denilson, Djourou and Bendtner leaving would reduce the wage bill by a further £10.5M. That's a total of £23.5M per season that could be reassigned to pay for the wages of new signings. The new deals for Wilshere, Gibbs, Chamberlain, Ramsey and Jenkinson have only increased the wage bill by £6.5M, meaning if we can offload the deadwood we'd still have reduced the wage bill overall by £17M. In addition the current "deadwood" likely represent £10-14M in transfer fees if we can find buyers. Rough estimations: Park £1.5M, Djourou £3.5M, Bendtner £4M, Denilson £2.5M, Chamakh £2.5M. Summary It's a myth that we've been able to spend money these past few years and have just chose not too, we've had to sell players to post profits. With Financial Fair Play and the new TV Money and Sponsorship deals set to increase Arsenal's revenue by at least £80M over the next two years the future certainly looks bright.
Outstanding and informative post - thanks. I don't think anyone doubts that we have a good financial footing but there's no question this squad is the weakest of the AW era and because of the 'transfer inflation' created by the Russians and Arabs, we probably need to spend £100m-£125m to bring in 4 quality players to get us back to a competitive level. It's a myth we haven't spent money, we've spent plenty, but what we've done is sell grade A and bring in largely grade B. No question, if Cashley, Cesc, RVP, Nasri and Flamini had been prevented from leaving over the last few years we wouldn't have been trophyless....
Wenger said I think it's quite clear that we've not been able to compete with City, Chelsea and Utd due to financial restrictions. Some people clung to a notion that it was all Wenger's fault because he chose not to spend and decided instead to run the team into the ground because he had 'lost the plot', but this statement puts that misguided argument to bed once and for all
Cheers for the replies guys, and thanks for the welcome Classzorla. You raise some good points, yes we do need to spend money and although we still can't spend £100M in one window, over the next few windows we could spend a large figure in total if we chose too, something we couldn't have done in recent years. Signings like Gervinho and Chamakh arguably haven't worked out. Most clubs could have written them off and gone out and replaced them, unfortunately for Arsenal they haven't had the funds to do that until now. When a signing didn't work out they were stuck with him, which meant that when a transfer didn't work out it was more evident. Yet teams like City could make a mistake, Savic for example, and just go out and sign someone else. We couldn't. In regards to the players leaving, you have a point too. But each case must be looked at in isolation. Cashley was a board level mistake, something that shouldn't of happened yet it did. Cesc was promised he could go back to Barcelona, and had arguably earned the respect of the fans enough to make such a departure acceptable. Nasri was always going to leave simply because Arsenal couldn't offer him the wages Manchester City could at that time. We'll continue to rely on the academy to produce some of our starting eleven and luckily for us we have quite an abundance in potential in the current crop of youngsters, arguably some of the most talented youngsters we've ever had. If we can combine that strong youth set-up with an increase of activity in the transfer market then there is no reason we can't get back to the top level. Presuming FFP works, our biggest rivals will be Manchester United and not City or Chelsea when it comes to transfers. Exactly, while we could have spent more on transfer fee's, we couldn't afford to add to the wage bill.
arsenal475 - I agree that we could choose to spend £125m over 3 or 4 windows, but the problem is that Chelsea and Man City (and even Liverpool to some degree) have often spent that in a single window and the same again in the next window. I guess the point I'm making is that we could break the bank to resolve all ability issues we have on the playing staff but other teams will continue to strengthen windiow after window after window - Chelsea won the CL last season, yet in the next 2 months they spent £80m. We'll be forever playing catch up but then I'm not expecting us to challenge year on year, as a fan who paid less than a quid to stand on the North Bank 30 years ago I remember how bad we were but how passionate following the club was for me....
It depends on whether you believe FFP will work or not. I personally do, and even if it doesn't the Premier League is introducing it's own fair play rules which means clubs won't be able to go out and spend £125M over one window. Man City will likely just fulfill FFP regulations, Chelsea are looking likely to do it too. Presuming financial fair play does work, Man City will be posting profits of £10-15M in the next couple of years compared to our £80M+, suddenly we have the edge in the transfer market and not the other way around. Manchester United will be our biggest competitors in the transfer market, yet while their owners continue to siphon off their cash to pay for their debts, they'll never be as powerful as Manchester City have been in the past few windows despite their large revenues.
I used to think FFP will work but then I realised the bullies who own these clubs are not used to losing/not getting their way and having an 'authority' like the PL telling them what they can/can't do will end up with court case after court case - do you remember when Chelsea were banned from transfer windows because they were found guilty of tapping players up ? The Russsian got the best lawyer to fight the PL and of course the PL couldn't win and retracted the ban, I think they gave the fella who is worth about £12b a £1m fine instead!!! I fear the same with FFP. Nothing to stop the Russian/Arab agreeing 'sponsorship' deals worth £200m, £300m or more a year which gives their clubs the right spend millions more than clubs without owners who have complete disregard for the value of money.
The difference with the Premier League version of FFP is that it requires only 14 out of the 20 Premier League clubs to agree on it. It might surprise you slightly that Chelsea have voted in favour of financial restrictions in the premier league. Unsurprisingly, Manchester City have not. Whether UEFA's version of financial restrictions works or not, I can almost promise you the Premier League ones will have an effect once the 20 chairmen agree. Obviously the proof will be in the years to come, and remember; income based restrictions is not the only form of FFP that could be introduced. A £200M sponsorship deal might help you beat UEFA's FFP but it won't help you beat a wage cap (something the Premier League chairmen are thinking of imposing). It's a waiting game, I'm cautiously optimistic that one way or another football will become fairer.
There's been no mention of a salary cap, the deal being discussed is a cap on wage increases (I heard no more than 10% uplift per year) as I understand it. Chelsea agreeing to the deal doesn't surprise me at all, 2 years ago the Russian drove initiatives to reduce/limit clubs spending, he had 8 years of investment and had the infrastructure he wanted but he didn't like what Man City were doing and wanted their spending stopped (and that of any clubs in the future), so having almost single handedly inflated the transfer market beyond most clubs grasp during his reign he now wants to prevent others from doing what he did ! And again, regardless of what rules the PL bring in there will still be disagreements that end up in legal wranglings IMO. Sorry, I've sceptical to the point of cynical on this subject....
Apologies that's what I meant to say. I don't blame you for being cynical, and I agree with your points completely. At the end of the day we'll just have to wait and see what comes of all this. I'm optimistic but still have nagging doubts.
football is a business, if you choose to not advertise sure sales will drops same in football, if you sell your best players and not having good results, this mean definitely less sales in kits or clubs merchandises and if you don't reach later stages in CL, you will have less money...etc. look to it from another angle, UTD generate 50m more on marketing alone let alone other area (overall, UTD are generating around 75m more than Arsenal) I think Arsenal approach of the business is too safe and the less you invest, the less outcome you will get
Rich enough to steal your best player! BURN! Seriously though, well done on those sponsorship deals. 30 Million a year main kit sponsor is very good, its probably 60% of United's next one.
Hopefully our kit manufacturing deal goes good as well, if we can get 25 million a year from Adidas, that'd be 55 million being brought into the club. With having a usual 20-30 million available to spend in the transfer market, add that to 50 million, and we can be finding ourselves with a regular transfer kitty of 70 million+ season in season out.
that is the slogan of small companies tbh..and they all end up eaten by the big sharks if you want to be a strong brand .. you need to play hard and strong no one should spend more than they generate like Leeds did.. but playing it safe is the other extreme, .. the solution is always something in the middle to be save but still in the game as Ivor Biggun said above in the kits deal example with new Nike deal for UTD is worth 1Billion, same for shirt sponsor deal which GM which is 51m a season compared to 21m for Arsenal, ... remember no one is asking to spend crazy, but the minimum is keeping you best players, investing reasonably to reinforce the side that will assure you will get wins and get more money in the process
THe one thing that I think the OP realizes (nice article) is that the financial battle has changed to one of income rather than straight cash. You not only need to have 200M in the bank for transfer fees, now you also need another 200M to pay the new players contracts over the next 5 years. If you sign players that you can't afford to pay out of your income, and you have to dig into cash (or capital) every month, then you are on a slippery slope to financial ruin. I think that is why the OP was emphasizing income gains so much.
