Is Arsenal the economic role model for English Football?
Arsenal tends to divide opinion. They have been one of the most consistent teams in the premier league and spend within their means, but are commonly derided for a lack of “success” and have even been said to be moving backwards recently. But success is a hard term to define; if you are talking about winning trophies then Arsenal have failed miserably for the last 7 years, but then only a few teams can win trophies (only four are on offer in a single season in the premier league). Arsenal have been successful in other ways though, having finished in the top four for the last 14 years (and set to qualify this year) and reaching the champions league knockout stages consecutively for the last 12 years. But it is the second point I want to focus on here; that Arsenal are one of the few clubs that live within its means.
Consistent profit from Arsenal
Arsenal have a strong economic model in football which regularly see’s profits for their shareholders (not a given at football clubs) and has an outstanding long term view to management. Their manager Arsene Wenger has been manager at the club since 1996 (the second longest reign currently in the premier league) and has a degree in economics; providing long term vision and value to his decisions. The club made a massive long term decision in 2000 to build a new stadium, in hope of bringing more money into the club. The new stadium “The Emirates” (with naming rights awarded to the sponsor – Emirates airline) was finally ready in 2006 after estimated cost of £390 million. This somewhat has put a straight jacket on the football club in recent years, with star signings ruled out (Arshavin was the biggest signing at around £14 million) and more of an emphasis put on young players.
The new stadium of Arsenal
This has been a smart strategic plan by Arsenal; in Arsene Wenger they have a talented manager who has been able to turn raw talent into successful players (with mixed success). They have bought players like Cesc Fabregas, Samir Nasri, Emmanuel Adebayor and Gael Clichy for miniscule fees at young ages and made a hefty profit on their sales. A wage structure is also in place to make sure inflation doesn’t make costs too high, while the stadium now built holds around 60,000 (the third largest in England) bringing in much more revenue than before on match days.
The downside has been that short term results have not been good enough for fans. Arsenal having gone seven years without a trophy to its name does not portray a big club, of which they claim to be. As the saying goes that “success breeds more success” the same bears true with losing, as Arsenal have consistently thrown away chances of winning competitions. The lack of trophies also has the unwanted effect of decreasing their ability to bring in talented players, as the short careers of footballers means they crave instant trophies not the long term consistency that the club desires.
Going into Arsenal’s finances, they recently reported an excellent profit of £49.5 million from the period of June until the end of November (mainly due to significant player sales of Fabregas and Nasri). This looks to continue an extraordinary run of consecutive annual profits that sets back to 2002, which other football clubs could only dream of. In fact, looking at their rivals (top 6 teams) only Manchester United could boast a profit last season, with the other teams making losses for the year. These profits are based on the large revenues that Arsenal gain from TV rights, Match day income, Property sales (which I will come back to) and player sales. Arsenal came fifth last season in the annual Deloitte football money league with £226.8 million (£2.4 million higher than last season), finishing behind Bayern Munich, Manchester United, Barcelona and Real Madrid. Such ability to make money despite the lack of support these four clubs above them receive is commendable and points to a model that other clubs should follow.
Arsenal finished fifth in the revenue table in Europe
However, Arsenals revenue is inflated somewhat by one-off payments and depends a lot on player sales. Arsenal is currently in the process of selling the flats they built on their old stadium ground, which has boosted their income, peaking in 2010 (contributing £11 million). The problem is that most of the flats have now been sold and Arsenal will have to try and make up for this fall. Arsenal have also had to sell players most seasons to boost revenue which has had destabilising effect on the results and has been a very unpopular with the fans. Without the player sales this season for example, Arsenal would have made a £14 million loss. Arsenal’s revenue is also not growing like the other big teams; this is due to lack of commercial growth in continents like Asia where Arsenal need to boost their popularity to improve fan support (more Asian tours and expansion into the continent might be needed).
Arsenal will need to compete better in commercial terms to improve their revenue
So is Arsenal a role model for other football clubs in England? I would argue yes, as their long term view and value for money are concepts that every football club could integrate into their models. Arsenal may not get the results fans crave, but their consistency gives them steady revenue that can give them foundations for long term planning. A consistent finish in the top four and therefore qualification for the champion’s league has been considered a minimum requirement for Arsenal in recent years for fans, but this success is the sort of understated achievement which lets their economic model thrive. In a period of crazy transfer fees and wages, Arsenal remain a consistency that other clubs could do better to copy (ahem Chelsea).