So How Financially Strong Is Arsenal Afterall?

Of late, the English Premier League has been facing a lot of criticism from the likes of Sepp Blatter and Michel Platini, with accusations ranging from poaching players, too many foreign nationals, too much money which attracts all the big players in the world, hampering the development of youth players etc etc. (Arsenal has the least number of English players in the first team amongst the big 4 clubs) Sepp Blatter has announced a 6+5 formula and the FIFA has approved it as well. What remains to be seen is how the European Union responds to this. Although as a gooner I must say that I hate the sight of that bald b*stard, but Blatter is not way off the mark when he talks about the amount of money being pumped into the premier league.

Wages break 1 billion mark
The combined wage bills of the premier league crossed the £1.5 billion mark in 2006/07 season.  With the new TV rights and takeover of clubs by billionaires, the clubs in the league are getting more funds to spend on players. There are reports in the media that Chels*a, who have already signed Bosingwa for £16.2 million, are planning to spend big this time as well. ManU are also supposedly looking to splash £50 million this summer.  But not everything is as rosy as it seems to be. Only 8 teams reported an operating profit, as the collective wages to turnover ratio reached 63% in 2006/07 season as compared to 62% in 2005/06.  Also, an amazing £492 million was spent on transfers by the clubs in 2006/07 season.

Our Revenues
Our revenues have seen a tremendous increase after we moved to the new stadium. We reported an increase of 37% and our revenue touched £177.6 million. However, it doesn’t include the revenue from property development, which was £23.8 million. The total match-day revenue was £90.6 million (£3.1 million per match-day approx), which is a growth of 111% and was 51% of the total revenues. We also received £42.7 million from the shirt sponsorship deal and the stadium naming rights. Broadcasting got us £44.3 millions. With the increase in revenues, our wage bill has increased too. We paid £89.7millions in wages in 2006/07, which puts us in the third spot after Chels*a (£132.8m) and ManU (£92.3m). What the figures tell us is that the decision to move to the Grove has paid off immediately. The very first season in the new stadium has given us a growth of more than 100% in match day revenues as we had the most utilised stadium of all clubs in the league. We stand third in terms of wages paid and second in terms of revenue generated. However, we have a debt of £268m, which puts us at third after Chels*a and ManU at £620m and £605m respectively. But the difference between us and them is that we have our real estate projects at Highbury Square and Queensland Road which will be paying off the debt very easily. We have 25 years to pay off the debt at a fixed interest rate, irrespective of what the financial market goes through. Whereas, ManU have Glazer’s debt passed onto them, and they have to pay off interests to the tune of £50 million per year. Which means they have to consistently perform at home and in Europe so that they get the revenue to pay off the debts. Chels*a on the other hand have interest free loan from Abramovich. Although it is interest free, they’ll be in deep trouble once the Russian decides he has had enough and decided to buy another toy for himself.

How is the future going to be

How the future of the club is going to be will depend largely on the steps the board decides to take. According to Deloitte, the top clubs in the top financial ranking had a couple of similarities. First, all the clubs have a bigger stadium, which results in higher gate receipts. All the clubs consistently play in the Champions League. And, all the club are successful in their domestic leagues. We have just moved to our new stadium and have seen what a major difference it has made to our coffers. We have been playing in the champions league for a long time now. We have been fairly successful in the league as well. However, what we have been lacking is consistency. From 96/97 to 06/07, we have won 3 titles and 4 cups, but we have reached the quarter-finals of champions league only twice and reached one final. Compare that to ManU, they reached the quarter-finals four times, semifinals 3 times and won the UCL once. That is exactly what we are lacking. We must challenge for the titles regularly. That will not only see us get more revenue, but also will give us the satisfaction knowing that one season without any trophy will put huge pressure on ManU.

Resist Take Over Bids
We must also make sure that we resist any sort of take over bid. Our business model has shown that a take over is not necessary to be a financially successful club. We are not known to be big spenders, yet we are one of the best paymasters in the league. And that too without hurting the wage to turnover percentage. The surplus is duly invested in improving the training facilities or paying off the debt. We have worked out an almost perfect balance of wage structure and transfer budget and any ‘benefactor’ will just screw things up. The lock-down agreement between the board members will keep the b*stards out for sometime, though what will happen after the agreement is over, remains to be seen.

Image Courtesy Billcara.com

What do you think our present situation is like? What do you think our future will be like? What do you think the club should do to compete with the so called ‘big clubs’? Leave a comment and let your views be known.