Frank Lee
The Arsenal Supporters Trust Meeting Annual General Meeting last Monday began with an analysis of the six monthly interim figures on Arsenal’s annual accounts, up to the end of November 2017. It was interesting to see the effect not taking part in the Champions League has had on the club’s income. The Trust’s Simon Hill, a financial expert, estimated that by the time the financial year ends in May, Arsenal will be posting a loss of around £54 million, in contrast to the £37 million profit figure in May 2017. A larger version of his figures can be downloaded here.
So where has the money gone? The two most significant areas are a decrease in TV income of £29 million (the bulk of this due to not qualifying for the Champions League this season) whilst at the same time an increase in the club’s wage bill of £15 million. Additionally, Hill estimates that the club’s commercial income will fall by £8 million to £83 million. Of course, money can be raised to address the fall of income through judicious business in the transfer market, but part of Arsenal’s problem is that they have a number of players on wages that they are not going to be offered elsewhere, with the result that they are difficult to unload.
It’s a vicious cycle once a club begins to slide. Arsenal used to be regarded as one of the top four clubs in the Premier League (alongside Chelsea and the two Manchester clubs), and in terms of revenue, they still are. However, when expenditure is taken into account, to remain in profit and have regular funds available for player investment (both wages and transfers), success is key. Unless previous success is at least matches, the wage bill cannot continuously increase. Arsenal, at least, had profile through their participation in the Champions League before 2017-18 and by remaining in the Premier League title race for 75% of the season – as has happened at times over the last decade. But that profile is ebbing away.
There is little chance of catching the commercial muscle of Manchester United, and strike deals for more money with an increased number commercial partners, such as the one the Old Trafford outfit struck with casinosmash.com. In the last round of figures, United made £279.5 million in commercial and retail revenue, compared to the £117.3 million at The Emirates, according to Deloitte’s. That’s an advantage of over £160 million a year to invest in the team.
The reality is that Arsenal are unlikely to match United’s operation in most of our lifetimes. However, what they need to do is start competing on the field so that they can begin to at least close the gap and lessen the advantage. Granted, Arsene Wenger has kept the club in the spotlight, albeit for sometimes the wrong reasons, and the continued interest of sponsors will partly depend on whether they simply want exposure for their brand or for it to be associated with success.
The best case scenario for getting the optimum deals will give them both, so the club need to prioritize rebuilding from what, in time, will be viewed as the wreckage Arsene Wenger has done to the club by staying on too long. The situations where you have quality players either allowed to wind down their contracts to leave for nothing or force the club into meeting extortionate wage demands to remain is one that should never have been allowed to develop, but in the cases of Mesut Ozil and Jack Wilshere, that is certainly the case. Aaron Ramsey has 15 months left on his deal. Players like Wilshere and Ramsey will have noted with interest the progress made by a player such as Alex Oxlade-Chamberlain under a different coach when they consider whether to re-commit to Arsenal. Certainly, Jack Wilshere looks very unlikely to remain unless there is a new coach in situ before his current deal expires.
At least, in Sven Mislintat and Raul Sanllehi, the club has made two very important signings off the field. Mislintat can identify real talent before the price of the relevant targets goes through the roof, and Sanllehi’s reputation for getting deals across the line is well-established. So although financially Arsenal are at a disadvantage, there is cause for some optimism. Even if the club manage to win the Europa League, they would be well advised to change the manager in the summer, as it’s quite obvious Arsene Wenger can no longer get consistent performances out of his players, and that there is no good reason to delay the rebuilding job that needs to come.
Commercially, Arsenal need to start being in the mix more frequently in the two big competitions, the ones that are watched worldwide. Domestic cups make for a good day out and fans love trophies, but they’re small fry as far as sponsors are concerned. Another season out of the Champions League would be a huge financial blow to the club, but it’s fairly likely at the time of writing, in spite of the victory in Milan. Granted, things like adding a different sponsor’s name to shirt sleeves will help a little but it won't be long before every team is doing it and the reality is that the now established ‘big three’ will get more for theirs unless Arsenal can re-join the party, something they are battling to do alongside the lesser-earning Liverpool and Tottenham.
The danger though, is that the process of recovering the ground lost since the move to the Emirates will take so long that the Premier League title winning sides will be too far out of sight, a permanent league within a league to carve up the title, with the three sides behind them scrapping for the fourth Champions League spot. The directors need to be careful about who they get in to clean up the mess left by the current incumbent, but the longer they wait to make that decision, the greater the financial gap will be. A shot at next season’s title may seem unlikely, but if the club are not in the Champions League, a new man should be able to make a better fist of it that Arsene Wenger managed this season. For Arsenal to at least be taking part in meaningful matches every weekend would be a start in their recovery.
