Arsenal’s ‘Restricted’ Spending – The Truth

I have learned some amazing things on twitter recently. For a start there is the subject of my previous post: there are people who still believe that Arsenal had to sell all those star players year after year because they desperately needed the money. Absolute tosh. Even more amazing, there are people who genuinely believe that a good reason for Arsenal to increase ticket prices is because the money might be spent on things that would benefit the fans. I won’t reproduce the tweets here to save the writers’ embarrassment, but I was rendered speechless by that. The first and most obvious illogicality is that if the Arsenal Board wanted to benefit fans they wouldn’t be increasing ticket prices in the first place. One person claimed the transfer kitty is separate from all other funds, and trying to make any link between that and revenue is ‘silly’. The Board must love having fans like that, it gives them licence to be as obtuse or unprofessional as they like and still people don’t question them. Amazing.

Then there is the load of nonsense talked about how Arsenal’s funds have been ‘restricted’ ever since the move from Highbury until now. This is not helped by comments from Arsène, who doesn’t ever go into any detail about these supposed restrictions. Such as: What are they? Who is doing the restricting? When did it start and when will it finish? Restricted compared to who or what?

We have had Ivan Gazidis banging on about 2014 for several years as the date when everything comes together and Arsenal will rival Bayern Munich. They’ve just come up against a really good team and been stuffed, so perhaps we are getting to be more similar to them. But I think Ivan meant we’d rival them in income, though he doesn’t seem to have fully anticipated that as our income rose theirs would too. But because we have more money now does that mean Arsenal were ‘restricted’ up to this year? The problem is that the likes of Gary bloody Neville have stirred the pot with ill-advised comments about all Arsenal’s debt being paid off, which has just served to make some people think along the lines of:

Arsenal had debt, but now they don’t have debt; and Arsène used to say he was restricted, but now he doesn’t say that; and he once said that thing about having to earn £20m a year to make the debt repayments, but he hasn’t said that lately; so Arsenal couldn’t spend money before, but now they can (they’ve bought Özil so that proves everything) . . . so this must mean that for several years since deciding to build a new stadium, Arsenal had NO MONEY AT ALL. But now they’ve bought Özil so suddenly they have LOTS OF MONEY.

Unfortunately if you add up a lot of half truths and complete rubbish, it doesn’t make anything worth knowing.

I’ll recap the debt situation: when the new stadium was being built it was financed by project loans that were separate from the rest of the club’s income and outgoings. Once it was built all the debt left was packaged up into long-term agreements, so since 2006 repayments have been steady at around £20m a year in total, split between capital and interest in gradually varying amounts (interest going down slowly because the sum owed is a bit less, capital repayments going up slowly). The debt is not paid off, and won’t be until 2031. Gary Neville was talking through his backside. The amount that repayments cost has changed only marginally (ie it’s the same figure to within a million or so, which is pretty small for Arsenal these days) since 2006-07, so Arsenal are not suddenly free of obligations they’ve had up to now. The only thing that changes is that as total income goes up, the amount of the debt repayments gradually becomes a smaller proportion of the turnover.

So what does ‘restricted’ actually mean? Restricted compared to what or who? Compared to when we were at Highbury? Certainly not, as I’ve explained before (and mentioned again last time). Because of the huge extra ticket revenue from a 60,000 seater stadium, plus some property profit, not to mention the ever-increasing TV deals, there has always been a lot more cash coming in to cover the extra expense of debt repayments and sundry other costs.

Restricted compared to other clubs? Well Arsenal have always been restricted compared to Man Utd, whose commercial operations make ours look like a car boot sale. Nothing has changed there. Since the Abramovich era started Arsenal have been restricted compared to Chelsea – we simply can’t spend as much as them. More recently we’ve been restricted compared to Man City (but so has everyone else). Realistically, unless their backers walk away, this is unlikely to change.

So when Arsène commented that he needed to earn the club £20m a year before he started, unlike those awful rich oil-funded clubs who could afford to lose £100m or more a year, was that the truth? Well only in the sense that Man City and Chelsea don’t have to make debt repayments and Arsenal do. But (at the risk of repeating myself) Arsenal have always had more money than they had at Highbury (all right, bar one year by my calculations, when they were a mere couple of million down) – the flipside of the £20m of debt repayments (including interest) is the £50m of extra income from ticket sales, and all the extra money I’ve already mentioned – property profit, TV deals, CL pot. That doesn’t look like much of a restriction to me.

It’s worth also noting that since the Glazers took over Man Utd that club has been forced to make debt repayments far in excess of Arsenal’s, in fact far in excess of the total cost of Arsenal’s stadium. The money taken out of Man Utd by the Glazers would have almost bought two Arsenal stadiums. I must have missed when Arsène said how unfair to Fergie that was.

The only logical ‘restriction’ on Arsenal’s finances has been the self-imposed straitjacket of the longstanding commercial deals with Nike and Emirates that have now come to an end (or been renegotiated in the case of Emirates). Arsenal were restricted by not being able to renew these at ‘current’ rates in about 2008 or 2009, so have forfeited some income since. But hang on – if you look closely at the accounts you can see that the aforementioned extra £50m ticket income per year plus the profits on property dealings and development have more than made up for the shortfall there.

I’m going to repeat this point: The ‘restriction’ on finances was caused by building a new stadium – but the income generated because of the new stadium is more than the amount of the restriction. SO THERE’S NO RESTRICTION! It’s like me complaining that my spending is restricted because I’ve moved to a more expensive house, while at the same time renting rooms out that give me more disposable income than I had before – but look at my rich neighbour, he’s not even got a mortgage! Oh I’m so hard done by!

Arsenal have got richer in 2014 and will continue to get richer, but they will still be behind the three very rich clubs (two in Manchester plus Chelsea), roughly on a par with Liverpool and well ahead of everyone else. In that respect nothing much has changed. In 2002 Arsenal were second richest. Chelsea demoted them to third, then Man City demoted them to fourth. That would have happened with or without a new stadium and any debt repayments.

Assuming the correlation between overall spending and league position continues to hold, these five clubs mentioned are all most unlikely to finish outside the top six or seven – they should be the top five really, but occasionally one will slip up, as Chelsea did two years ago, Liverpool last year and Man Utd so far this season. But slipping up is relative – they’ve all stayed in the top seven, a seemingly stable group made up by Spurs and Everton as the also-rans.

Arsenal will probably struggle to finish in the top two, definitely in first, for the foreseeable future. I would suggest that is the most worrying thing for Arsenal fans right now.

Follow me on Twitter: @AngryOfN5

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18 thoughts on “Arsenal’s ‘Restricted’ Spending – The Truth

  1. So condescendant. Thankfully, you’re here to put the plebe in the right way again ! So kind of you.

  2. Blablabla I am going to post an article based on my assumption and some half arsed calculations because I can pretend to count unlike many others. Did Arsenal invite people over to show them their financial structure and the accounts? I must have missed that day. This is article is nothing new. Bloke down the pub said the same thing and at least he managed to chip in that his mate works for Arsenal. Show everyone some actual evidence instead of a fallacious argument with no merit.

  3. There’re plenty of half truths on all sides of this debate but to say there haven’t been any restrictions since we moved into the Emirates is not even half true. The refinancing costs associated with the bond scheme virtually wiped out the profits in our first year at the Emirates. The short term loans related to the property development of Highbury stadium which could only begin once we had moved out, and the subsequent property crash as the development was nearing completion all imposed restrictions on cash flow. A cash flow which, as you point out was also compromised to some extent as the sponsorship deals were front loaded in order to provide important funding to meet stadium development costs – a development which had been delayed for a year as building was halted as we’d run out of cash. Another point less than half true is: “We have had Ivan Gazidis banging on about 2014 for several years as the date when everything comes together and Arsenal will rival Bayern Munich.” It was less than a year ago that Gazidis spoke of our ability to compete on the level of Bayern and what was said at that time is significantly different “We should be able to compete at a level like a club such as Bayern Munich. I’m not saying we are there by any means, we have a way to go before we can put ourselves on that level.” Another half truth is the impression that the club hasn’t been spending money for some time. The reality is that in the 3 seasons since Kroenke took control the club has spent more on transfers than in the previous 8 seasons combined. To give the impression that we only started spending this summer when we bought Ozil is also less than half true as we’ve spent less in this season than we’ve spent in either of the two previous seasons.

  4. Arsenal are no longer the club we first supported. The old club would never have treated their fans the way they have been treated in recent times.
    The way they are issuing cup final tickets is disgraceful
    The web site is awful, the people who answer the phone tell people to go to hell as Arsenal are supposed to have 40000 waiting to buy our season ticket if we tell Arsenal to stick it up their backside.
    Away fans who don’t have to stump up 1000 pounds for a season ticket that is sold 3 months before the season even starts, get preference on cup final tickets. Never mind they have only come in a few years back and there are season tickets holders who have been so for over twenty years, never mind whether you have attended Arsenal since 1938 like I have!
    We, season ticket holders, don’t even get a discount in the shop, but have to pay exorbitant prices the same as the tourists!
    Why did not the local council lay down better conditions for long time fans before giving permission for the new stadium.
    A Stadium in fact which is nothing more than an upstairs/downstairs Victorian structure.
    Arsenal are no longer special, I bet the Manager would not write to me like the George Allison and Tom Whittaker letters that I hold. Nor is there anybody there now like Harry Homer, who not only sent me programmes when I was stationed in India but invited me to lunch!
    Just a lot of greedy capitalists now.

    • Yes, there has been a definite shift in the attitude of the Board to supporters over time. I quite agree with your point on long-term season ticket holders being unfairly treated regarding Cup Final tickets, but it appears the club do not even have records from Highbury days of season ticket holder details, which is quite shameful.
      The manager, for all his faults, is more of a gentleman than most though – perhaps not with the same standards or from the same era as Allison and Whittaker, but if he had the time I’m sure you’d be more likely to get a letter from him than many of his peers.
      There are still good people working at Arsenal. I know that because I know some of them personally. But they tend to be rather swallowed up in the money-making machine that the business has become. It’s a shame, and for older fans in particular such as you, sir, I can see why you are not happy.

  5. You have failed to mention wages, which I hope is not intentional on your part.

    Rising wages have brought expenditure ever higher, we took gambles with long term contracts on good wages trying to maintain a squad, starting around 2006.it gave us good years from some players like fabregas, but also left us with Denison, djourou and bendtner.

    How we handled our squad numbers and wages was the primary issue that we had, and there is no garrantee that we would have won the league against our rich rivals if we had got this strategy perfect anyway.

    We do seem more competitive in the transfer market now that the commercial income is growing, equally we are starting to fine tune our squad size better from the average over paid squad players to the better quality that we see this year.

    This summer will be a true test for the board, we will lose Sagna, fabianski and bendtner probably sell vermaelen. That’s 4 places to replace plus we need to add true quality in the final third and potentially defensively in the middle.

    If we step it up we will know just how restricted we had been.

    I don’t think the board will dip into the cash reserves however. They aren’t likely to gamble that. If day that money is the safety net of falling out of the top 4.

  6. The writers of Arsenal the Making of a Modern super club confirm that we couldn’t really spend any money for the first 3-4 years after the stadium move. Since summer 2010 we’ve steadily been building up more and more income but Wenger has been reluctant to use it. One factor is that we didn’t have the new sponsorship deals lined up until last year. The club didn’t want to gamble earlier on. Over the past 3 years we have had more and more money and now with the new sponsorships kicking in, we can definitely spend big.

    The board and Wenger have made mistakes, yes outside factors have made it hard for Arsenal, yes we could have spent some more money earlier. No,Wenger isn’t perfect and he deserves some criticism for not being more pragmatic at times and seemingly making the same mistakes over and over again.

    But frankly, to say that Arsenal had NO financial restrictions since the move to the new stadium is a bunch of bullshit.

      • Compared to being financially unrestricted would be the answer to what. The answer is also just as obvious if you ask compared to who. You might have meant to ask compared to when, in which case it is clear that our revenues have grown significantly compared to the time we hadn’t taken on the cost of the stadium. However, as the stadium cost a reported £400m+ to build and the refinancing was for £260m it’s fair to assume that the difference of £140m or so which came out of the clubs resources would have restricted finances. It’s also true that we would have carried that restriction beyond the first few years at the Emirates and net debt levels really only became less restrictive in the last few seasons. That can also be seen in the less restricted spending of the last 3 years but everyone spending from self-generated resources faces financial restrictions. It’s doesn’t help clear up the nonsense spoken about Arsenal’s funds by pretending there weren’t any.

  7. I think the mistake is the word “restricted”.

    We have not been restricted per se, but the move did result in our revenue growth not matching the increasing cost of transfers and player wages. This would have been even worse if we had stayed at Highbury. Just look at Liverpool, who had to take out a loan to sign players this summer as a “hail mary” in the hope of getting back CL football / revenue. Even they have realised that this isn’t a long term solution and will be expanding Anfield.

    We weren’t restricted, we were just unable to match the top earners as they are able to spend more in these areas than we did. The goal when we created the stadium was to match the spending power of the Man Utds, Bayerns and Barcas of this world, not billionaire playthings like City, Chelsea and PSG.

    While I agree that our finances weren’t restricted, that should not take away from the fact that we weren’t able to compete financially with those at the very top. With the new sponsorship deals in place, we will have roughly at least a 60m increase in revenue from next season and seeing as we were still profitable before, the entire sum can go towards transfers and new contracts. We’re already seeing this with Walcott, Ramsey, Ozil, Podolski all on 6-figure weekly salaries. Sagna was offered 100k a week as well. Previously, only Cesc and Henry ever broke the 100k barrier.

    In conclusion, we weren’t restricted but this year was the milestone year for us to kick on.

  8. I think the mistake is the word “restricted”.

    We have not been restricted per se, but the move did result in our revenue growth not matching the increasing cost of transfers and player wages. This would have been even worse if we had stayed at Highbury. Just look at Liverpool, who had to take out a loan to sign players this summer as a “hail mary” in the hope of getting back CL football / revenue. Even they have realised that this isn’t a long term solution and will be expanding Anfield.

    We weren’t restricted, we were just unable to match the top earners as they are able to spend more in these areas than we did. The goal when we created the stadium was to match the spending power of the Man Utds, Bayerns and Barcas of this world, not billionaire playthings like City, Chelsea and PSG.

    While I agree that our finances weren’t restricted, that should not take away from the fact that we weren’t able to compete financially with those at the very top. With the new sponsorship deals in place, we will have roughly at least a 60m increase in revenue from next season and seeing as we were still profitable before, the entire sum can go towards transfers and new contracts. We’re already seeing this with Walcott, Ramsey, Ozil, Podolski all on 6-figure weekly salaries. Sagna was offered 100k a week as well. Previously, only Cesc and Henry ever broke the 100k barrier.

    In conclusion, we weren’t restricted but this year was the milestone year for us to kick on.

  9. Great article. I find it amazing how people defend the same people who are ripping them off and taking and banking their money.

    • Nobody’s taking anyone’s money – it’s being given voluntarily. Nobody is being ripped off unless it is with their consent. I find it equally amazing that anyone can go to such lengths to cultivate a victim mentality which is evident in the suggestion that one side of the debate is misrepresented made by misrepresenting the other side of it. Whatever ‘truths’ there might be in the article it isn’t that there weren’t any financial restrictions.

  10. MIke Wages are constant against income as is reported every year. Jeremy we are a club with shareholders accounts are published every year go to http://www.arsenaltrust.org/ to see their take on the last few years accounts. I am member of the trust and get invited to meet the board and management on occasion and have asked why we dont spend on players that are ready for the 1st team and the rply is consistantly “we dont get asked for the money its there but Arsene makes all judgments on players, if he asks we will give it to him” There is and always has been money to spend, Arsene was going through project youth and didnt want players taht would “kill” his protege’s

    • and here is another point. how much money did he waste on paying project youth wages that were over the top in a bid at some sort of socialist wage structure. the famous dead wood we got stuck with as no other club would pay them that much. thankfully that has changed and when bendtner goes that chapter is closed. huge waste of money but we had it to waste!!

  11. Pingback: Arsenal’s Best Era: Not The Wenger Years | angryofislington

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