Haven’t posted anything for a few days. I have something a bit different coming later, but in the meantime . . .

Obviously we’ve had lots of debate on the size and effect of Arsenal’s debt recently, with Ivan stating fairly strongly that even if George Osborne doesn’t agree in general, the period of austerity for Arsenal is coming to an end. You can debate – and many have – the level of austerity that Arsenal have had, how much spending has been constrained by the new stadium and what restrictions the manager has been working under, but we all agree that things are now looking up.

We need to remember that some of the improvement is due to TV, and that’s an improvement for everyone – it won’t make Arsenal better off relative to any of our English rivals; if anything it will just fuel wage inflation. The effect on wages may be tempered by FFP, which is designed to help owners rather than players, but either way every PL club becomes richer. In fact the smaller clubs could be said to do better from the new TV deals because their income will be increased by a greater percentage.

The other improvement for Arsenal is their sponsorship deals, and this is where we gain an advantage over our competitors. You could argue that in a way we are only getting to the level we ‘should’ have been at for the last few years anyway, but of course it’s still a tangible improvement.
The revamped Emirates deal can be realistically described as good, verging towards very good, but not great. This is subjective of course, but when you consider the way stadium naming rights have been literally given away as part of the package for so many years into the future, it could be better. I’m sure some will argue with that, but some will argue with literally anything.

The Puma kit deal, which is still ‘the alleged Puma kit deal’ at this stage, looks to be very good in current terms, though that should be expected – in a rising market if the deal wasn’t better than those that comparable clubs made a couple of years ago, then it would have to be rated as poor. I’ve seen it described as ‘the best in football’, which it’s not; Man Utd have had a deal as good or better for over a decade, and that doesn’t include their famous training kit deal. Still, no one should be complaining.

So that’s where we are. Things are reasonably good and getting better. Which brings me back to debt. The following question was recently left as a comment on my previous post on this subject:
“Phil, simple question: I just want you to confirm what I think so there’s no doubt in my mind.
So the debt now is at a manageable level, so the debt issue is no longer a issue, so no longer an excuse in any way for the club to be left behind?
I especially believe this to be true considering we make almost £100 million a season in matchday revenue and now our Commercial deals are getting renewed meaning we should reach over £300 million in revenue.”

Simple question maybe, but not necessarily a simple answer. Taking one part at a time:
“Is Arsenal’s debt at a manageable level?”
Short answer: Yes.
For any normal (non-football) business, with a turnover of £225m projected to rise to £300m within two years, a structured debt being repaid at just under £20m a year (capital and interest) would not be considered a problem. Football as a business is a slightly different ball game (ho ho), but does have the advantage that the biggest cost – wages – is far easier to manage than in most businesses. This sounds perverse when you see the ever-escalating wage bill, but consider it this way: the vast bulk of the club’s wages are paid to a very small proportion of employees. These employees can be sold if needed to balance the books. In an organisation like a large retailer for example, the wage bill can’t be managed in the same way – you need a certain number of people to make the business function. You can make jobs disappear and make people redundant, but each person is just a miniscule part of the turnover. If someone leaves, someone else on comparable wages almost always replaces them.

What I’m saying is that Arsenal’s debt repayment to turnover ratio is unlikely to be a problem to any business, and especially not in football. Wages (and thus costs) for football teams are easily controllable, although it doesn’t normally play out that way due to the need to be competitive on the field.

“Is the debt no longer an issue?”
Again the short answer is yes – ie it’s not an issue. However, in this case there’s a ‘but’. Having to set aside £20m a year for repayments is an obvious hindrance. It’s £20m that can’t be spent elsewhere. It’s buying a £10m player and paying him £2.5m a year – every year. A £10m player may be rubbish, of course, but if you buy an extra one every year – or save up and buy a £20m player every two years (and pay him £5m a year) – then you will get some hits too. The chances are you will improve your squad and thus your likelihood of winning trophies. So to glibly say that debt is not any kind of problem is wrong. It’s not an issue in the sense that Arsenal can afford to repay it, but it does take money away from squad improvement. That cannot be in dispute. So for Ivan Gazidis or anyone else to dismiss a rights issue that would repay the debt and free up that £20m a year is a political move, not a financial one. He can sell it any way he likes, but that’s a fact.

“Is the debt an excuse for Arsenal to be left behind?”
This is even more a matter of opinion. Left behind who? We’ll (foreseeably) always be behind Man Utd on income, unless we can somehow put together a 20-year period like they’ve had since 1993. Even then, their global fanbase is such that we might not overtake. Man City and Chelsea? Depends how and if FFP works. Barca and Real? Depends whether they wake up to the fact that they’ve turned Spanish football into a bigger version of the Scottish league, and start redistributing TV income. Bayern? Depends largely on what they do on the pitch compared to what we do. Everyone else we’re ahead of on turnover anyway, and thus should be ahead on the field (on average – not necessarily every club every year).

So there you go. If nothing else, that proves that there’s no such thing as a simple answer to a simple question.

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