Introduction
We are in the middle of the 15-16 season and we are
hanging on to the coat tails of ManShitty, so its looking positive on the
League front, though our UEFA Champions League adventure for the year seems to
be on the verge of burning out spectacularly. I decided to take the time in
this boring Interlull to look at commercial operations of Arsenal.
Right at the
beginning, let me disclose that I have no access to any of the books of
accounts or contracts at Arsenal FC. I am relying on publicly disclosed figures
and applying my business background to make sense of those numbers. We are the
8th largest football club in the world based on revenues. That was
the good part, the problem is that the largest 7 clubs are putting distance
between themselves and us and it is looking increasingly difficult to bridge
this gap. So I have tried to look at inventive ways to see if our revenues can
be increased given our existing operating structure.
 |
| Welcome Ozil |
The 14-15 season was the year we had all been
waiting for. This was supposed to be the year that we would have repaid a
significant portion of the Emirates Stadium debt plus all the restrictive
commercial deals we had tied ourselves into for funding the Emirates Stadium
were ending. And what do you know? We started spending at the beginning of the
13-14 season itself with the Ozil deal, followed up by the Sanchez and Cech
deals. I think the willingness of the Club to spend was always there, but it is
now being backed by the ability to do those same deals. We have also shown our
ability to continue to be efficient in the market a la Gabriel as well as pay
slightly over the odds for the best next generation of talent a la Chambers.
I think one factor which is constantly overlooked
is the role played by Wenger in these deals. While his stock amongst SOME
Gooners is low, there are a number of players who want to play for Wenger. This
is an ability which we will lose when he is no longer in the dugout. Don’t
underestimate the pull of a charismatic manager, you will see a few players who
the Liverputzes will now attract because Klopp is rocking it over at the Kop.
Coming back to the commercial side of the Arsenal,
typically a clubs revenues can be split into 3 parts, i.e. broadcasting,
matchday and commercial. I will look at the 1st two parts in this
post and I think the Commercial revenues merit a look by itself. So we will
look at the numbers posted by Arsenal FC for the 14-15 season and essentially
try to see if we can establish a revenue model for the 19-20 season which will
take us to the next level.
Commercial
Revenues
The Competition
 |
| Rich get Richer |
NO
|
CLUBS
|
REVENUE
|
MATCH-DAY
|
BROADCASTING
|
COMMERCIAL
|
1
|
Real Madrid
|
€549.5m
|
€113.8m
|
€204.2m
|
€231.5m
|
2
|
Manchester United
|
€518m
|
€129.6m
|
€162.3m
|
€226.4m
|
3
|
FC Bayern Munich
|
€487.5m
|
€88m
|
€107.7m
|
€291.8m
|
4
|
FC Barcelona
|
€484.6m
|
€116.8m
|
€182.1m
|
€185.7m
|
5
|
Paris Saint Germain
|
€474.2m
|
€63.1m
|
€83.4m
|
€327.7m
|
6
|
Manchester City
|
€414.4m
|
€56.8m
|
€159.3m
|
€198.5m
|
7
|
Chelsea
|
€387m
|
€84.4m
|
€167.3m
|
€136.7m
|
8
|
Arsenal
|
€359.6m
|
€119.8m
|
€147.3m
|
€92.3m
|
9
|
Liverpool
|
€305.9m
|
€61mm
|
€120.8m
|
€124.1m
|
10
|
Juventus
|
€279.4m
|
€41m
|
€153.4m
|
€85m
|
11
|
Borussia Dortmund
|
€261.5m
|
€56.1m
|
€81.5m
|
€123.9m
|
12
|
AC Milan
|
€249.7m
|
€24.9m
|
€122.7m
|
€102.1m
|
13
|
Tottenham
|
€215.8m
|
€52.5m
|
€113.3m
|
€50m
|
14
|
FC Schalke
|
€213.9m
|
€41.1m
|
€68.5m
|
€104.3m
|
15
|
Atletico Madrid
|
€169.7m
|
€32.5m
|
€96.5m
|
€40.9m
|
16
|
Napoli
|
€164.8m
|
€20.9m
|
€107.1m
|
€36.8m
|
17
|
Inter Milan
|
€164m
|
€18.8m
|
€84.7m
|
€60.5m
|
18
|
Galatasaray
|
€161.9m
|
€47.1m
|
€47.7m
|
€67.1m
|
19
|
Newcastle United
|
€155m
|
€31.4m
|
€93.5m
|
€30.6m
|
20
|
Everton
|
€144m
|
€23.1m
|
€105.8m
|
€15.2m
|
Source: Deloitte Football
Money League
Given above is the breakup of revenue for the 13-14
season for the top 20 clubs and since then Arsenal revenues have grown to approximately
€445M, depending on the Sterling Euro exchange rate taken. We are in 8th
position but our revenue are a good €200M lower than RealMadcaps.
We can divide the clubs above us into 2 groups, the
3 British clubs and the 4 European Clubs. Can we catch up and overtake any of
them? I have decided to see if we can set Arsenal FC a stretch revenue target
for the 19-20 season of £500M and figure out ways and means in the subsequent
part to reach this number. This revenue should put is in the top 5 clubs by
that point. While this idea may be laughable right now, according to me the
clubs which are most vulnerable to being overtaken by us are Madrid, Barcelona
and Munich. Here’s my reasoning for this.
- The relative strength of the £ vs the € helps tremendously and is big leg up in this competitive landscape. At current exchange rates it translates into a revenue of €666M approximately.
- The TV revenues in Spain will become more and more equitably distributed. As a result of this while their revenues might not reduce, they will struggle tremendously to increase this number from domestic rights. All the growth in their broadcasting revenue will come from the growth in their Champions League numbers. TV revenues in Germany were never great to begin with, just as an exam.
- While the EPL many not be the most technical (best?) league, it is the most ENTERTAINING. As a result demand for the EPL will continue to remain strong and post phenomenal growth in the next 2-3 cycles as well.
- Clubs like Chelski, ManShitty, ParisGerms will continue to cook the books by having commercial deals with friendly sponsors which will continue to help.
Arsenal Revenues
The breakup of total revenues of Arsenal Holdings
for the 13-14 and 14-15 seasons are given below
Arsenal Holdings plc
£Million
|
14-15
|
13-14
|
% Growth
|
Matchday
|
100.40
|
100.20
|
0.20%
|
Braodcasting
|
124.80
|
120.80
|
3.40%
|
Commercial
|
103.30
|
77.20
|
33.9%
|
TOTAL
|
328.50
|
298.20
|
10.3%
|
Given here are details of Arsenal revenues over the last few few years with its break up into Match day, Broadcasting and Commercial. The heartening thing to note is that Commercial revenue have shown big numbers, but when viewed in the context of what the other clubs are doing, it looks pedestrian.
Source: Swiss Ramble
While Arsenal posted a reasonable 10% growth for the 14-15 season and
posted an overall revenue of £328M, becoming the 8th largest club by
revenue, the gap between us and the top 8 will continue to grow. As mentioned
earlier, I am targeting a revenue number of £500M by the 19-20 season, which I have broken into £125M
in Matchday revenues, £200M in broadcasting and £225M in commercial revenues.
This gives us a slight margin of error to play with. Arsenal’s biggest area of
weakness is our commercial revenues and since this point is vast and complex, I
will cover it in the next post but I will look at Matchday revenues and
Broadcasting revenues here.
Matchday
Revenues
Matchday revenues are dependent on 4 factors,
- no of seats,
- average price per seat,
- no of home games played in the season,
- additional events held at the Emirates
This last point depends on how well we do in
domestic and the Champions league but on average we tend to manage about 26
games a season and this will probably not change much. Also in the current
environment where price increases are increasingly unpalatable to fans, it will
be difficult to push through any price increases.
What the club can manage to change are the number
of seats. To this end my proposal is as below.
- Convert 25,000 of the topmost tier of seats which are currently on a full seating basis to 50,000 seats on a safe standing basis.
- I am aware that Gazidis has been a proponent of safe standing and I am sure enough safe guards can be built in to ensure that the City Councils planning and safety requirements can be met. We NEVER EVER wish to have a Hillsborough or a Heysel disaster again but adequate safeguards such as proper sectioning, stronger barricade and multiple points of ingress and egress can solve this problem.
- This project should cost approximately in the range of £50M since it is essentially a reworking of seating in existing sections and putting in the improved safety requirements and no major structural changes should be required. After putting in the costs of extra stewards etc, it should still net the club an additional £20M every year.
- It will also allow the club to provide much cheaper tickets to these fans and the large number of fans (60,000 to 85,000) should definitely provide for a more charged up and vociferous home atmosphere at the stadium.
- I have given below a rough break up of my estimates re the number of seats and per ticket pricing.
- Caveat: I am not a structural engineer and such my estimates on number of safe seats which can be provided as well as the cost of the project may be off but I am definitely in the right ballpark and as such these number should be close to the actuals.
Category of Seats
|
No of Seats
|
Rate
|
Revenue/Game
|
Remarks
|
A
|
45,000.00
|
£ 45.00
|
£ 2,025,000.00
|
2nd tier seating
|
B
|
10,000.00
|
£ 90.00
|
£ 900,000.00
|
1st tier seating
|
C
|
5,000.00
|
£ 240.00
|
£ 1,200,000.00
|
VIP Boxes
|
60,000.00
|
£ 4,125,000.00
|
|||
£ 53.28
|
||||
No of home games
|
26
|
|||
Revenue
|
£ 107,250,000.00
|
|||
Category of Seats
|
No of Seats
|
Rate
|
Revenue/Game
|
Remarks
|
A
|
50,000.00
|
£ 30.00
|
£ 1,500,000.00
|
Standing
|
B
|
20,000.00
|
£ 45.00
|
£ 900,000.00
|
2nd tier seating
|
C
|
10,000.00
|
£ 90.00
|
£ 900,000.00
|
1st tier seating
|
D
|
5,000.00
|
£ 400.00
|
£ 2,000,000.00
|
VIP Boxes
|
85,000.00
|
£ 5,300,000.00
|
|||
£ 47.97
|
||||
No of home games
|
26
|
|||
Revenue
|
£ 137,800,000.00
|
|||
Increase
|
£ 23,625,000.00
|
Finally the Pitch at the Emirates is used for less
than 30 days in year i.e. 90% of the time that the stadium is available is
unutilized. While the club is taking steps to increase events in the off
season, and there is genuine need to preserve the playing surface at the
stadium, can we increase the number of events held at the Stadium to make it a
more lucrative proposition. This can may be done by introducing a sliding
surface on top of the existing surface, which will fulfill the dual role of
protecting the playing surface plus it allows the secondary surface to be
tailor made for events which could be highly lucrative.
Broadcasting
Revenues
Football as a TV property has seen an unprecedented
and an unimagined growth in terms of revenue and reach across the globe. At the
present moment, there seems to be an unlimited appetite for watch football in
general and the EPL in particular. This is reflected both in the absolute value
as well as the growth in the numbers. The 13-14 season saw a huge increase in TV
revenues from the preceding year and the bids for the 16-17 season seems to
promise another growth bonanza for EPL clubs. Just to give you an idea as to
how significant this revenue growth has been
Arsenal Holdings plc
£Million
|
Broadcasting Revenue
|
10-11 season
|
85.20
|
13-14 season
|
120.80
|
16-17 season (exp)
|
165.00
|
Increase over the 10-11 season
|
80.00
|
Given above are the revenue figures for Arsenal
just for Broadcasting. It covers their revenue received from the Premier League
as well as the Champions League. While the 16-17 season numbers are an
estimate, they should be more or less accurate based on the figures released so
far regarding the domestic rights. It also assumes that Arsenal will continue to
play in the UEFA Champions League. The growth numbers over the last 2 cycles
have just been phenomenal as we by the next season the revenue from this area would have doubled.
 |
| TV Money |
Conclusion
The 14-15 season was supposed to be the year that we would have
repaid a significant portion of the Emirates Stadium debt plus all the
restrictive commercial deals we had tied ourselves into for funding the
Emirates Stadium were ending. The new TV Revenue deal with a bumper rise
kicking in the 13-14 year is a happy coincidence. Going forward Arsenal FC absolutely needs to target a revenue of £500M which will enable it to go past at least 3 of the clubs above it and be a Top 5 Club which is where WE belong.
 |
| Victoria Concordia Crescit |
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