This post is based on a comment that was left by ‘Ricky’ on another post. I thought that as it raises interesting questions, rather than provide a cursory answer in the comments I’d try and address it slightly more fully. My comments in blue.
Not related to this particular post but would appreciate your thoughts. Clearly there is at least £50m cash to spend. (May cash balances risen £118m in last 6 years.) Yes – best estimates seem to be that Arsenal currently have up to around £70m that could be spent without causing any cashflow issue.
What will Arsenal do with the cash?
- Repay debt – which I know they don’t intend to do. There’s no point – the debt is structured so that it’s repaid slowly over the next 20 years, and it’s at very advantageous rates because the penalties for early repayment are basically that full interest to term must be paid.
- Invest in fixed assets – which will be minimal at best. Agreed – the stadium and training ground are both pretty much state of the art, so there is little to spend on – unless the Board want to start speculating in property or vintage wine!
- Start paying dividends/management fees – would lead to a fan revolt unless we win champions league or premier league by some miracle. Agreed again – there would certainly be protests about money being taken out rather than invested in the team. Not spending is bad enough; actively withdrawing money is clearly far worse. I can see Stan taking out some kind of fees in the future, but this depends on controlling costs – mainly player wages.
- Reduce ticket prices – LOL. You may well ‘LOL’, but that in my opinion is the most likely option you’ve listed. However, there are dependencies here too, mainly whether the stadium remains full on a regular basis.
If I was Mr Gazidis I would Invest c. £50m on two players in addition to replacing any other players sold in future (ideally under 26 year olds that can be resold to achieve break even worst case). The board are ‘confident’ the team can already get Champions League so with addition of two high quality players Champions League would be ‘GUARANTEED’. Going further in competitions would protect/increase income streams. Reputationally would help board appease fans (stakeholders) and make us more attractive to the ‘next Henry’. What you’re saying there is what many have said for a long time, basically that there should be benefit in speculating to accumulate. Kev Whitcher, editor of The Gooner, has been banging this drum for a very long time (I proofread his column in every issue, and I see it over and over again!). But the fact is that there are no guarantees. You could buy two players and end up worse off than before in terms of league position. You don’t know if the new players will gel. This doesn’t mean that you shouldn’t try, though. You could argue that the Board should do everything possible and spend every available penny in the quest for success.
The reality is it appears the board are going to continue their frugal spending policy (spending just enough to get fourth place) in the hope that FFP comes in and lowers transfer fees and wages. And then when Arsenal finally do win a trophy, Stan will pay a huge dividend and the spare cash we have been hoarding will disappear. (And of course FFP gives an excuse to increase ticket prices.) Problem is City and Chelsea will legally protest and FFP could be dragged out for years.
Okay, some of this I agree with, some is making too many assumptions for me. FFP does give clubs a reason to increase ticket prices, that’s true – Man City have already done it as far as they dare, to make the balance sheet more balanced. I also agree that the Board seem happy with how things are, but in my opinion that’s due to the situation they have got into with the manager. I don’t know if all the Board are genuinely happy, but there’s nothing they can do apart from sack Arsène. They handed power to him when Dein was kicked out and that’s the way it is. All they can do is make money available to him. You can decide whether they are making all of it available or just saying they are, and Arsène is happy to go along with the deceit because in every other respect he can do what he likes. Personally I think it’s Arsène who decides what to spend, within the limit of available cash – and it’s possible for those with accounting and Arsenal knowledge to work out a good estimate of the available cash.
I think we will have to win quite a few trophies before Stan gets away with taking a load of money out – and he’d have to reduce ticket prices substantially first, or there would definitely be a lot of unrest. I wouldn’t be surprised if quite a lot of tickets went unsold otherwise. Whether a boycott of games would stick I’m not sure, but there would certainly be calls for it.
I can’t see City or Chelsea objecting too hard to FFP. I think they are more likely to work within it but push it as far as possible – eg allowed losses up to the maximum, inflated sponsorships, etc. No English club is going to break away from the Premier League, so the success of FFP in England partly depends on whether the PL introduces its own form of it that corresponds closely enough with UEFA’s version. There is a battle coming up between owners, players, and to some extent fans, as to who gets the increased revenue that TV deals are bringing. FFP affects that, but there are too many competing forces to see yet how the battle will develop.
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