Arsenal At Crossroads – Self Dependency Or Sugar Daddy
The fallout from Chelsea’s European Cup win continues on Arsenal blogs and Twitter timelines, debate raging about the merits and demerits of the Arsenal way in staying competitive at the top level.
I came across a wonderful article by Phil Wall yesterday about the boardroom battle between Stan Kroenke and Alisher Usmanov. An AST board member, the author presents a well-balanced view of the current issues facing the club in terms of majority ownership. He concludes with the opinion that while Kroenke’s involvement may not bring success in the short-term, it is better than ceding full control to Usmanov.
I agree that single ownership is fraught with danger. As we’ve seen with the Glazers at Manchester United, having a sole benefactor is not necessarily the best thing. The liabilities taken on board at United mean that while the Reds continue to be the most valuable club in England, a £500m debt noose is firmly tied around their necks. Unlike the stadium loan at Arsenal, United’s debt is not helping them achieve more revenue.
At Arsenal though, the discontent among many supporters has to do with the club choosing not to compete with the buying power of Chelsea and Manchester City. ‘Spend money to make money’ should be our motto too, is the growing feeling.
While City are still getting started with their project, I think there’s a fundamental problem with the way Chelsea have achieved success. This is often ignored amidst talk of transfer fees, but Chelsea have consistently posted losses since Roman Abramovich’s arrival at the club. As the chart below shows (courtesy: @SwissRamble), operating losses have accumulated even in years of on-field success.
This throws up an interesting question – if Chelsea cannot be profitable in a year when they won the double (2009-10), what kind of success will it take for them to return a positive figure? While the £50m from their Champions League victory will help, it will still not be enough to post a profit next season.
For the long-term, growing on-field success will have impact on commercial revenue but matchday and TV income is unlikely to see any exponential rise – the Blues are unable to expand stadium capacity and there’s a fairly equitable division of TV payments in the Premier League. If Chelsea are unable to generate enough revenue in a Champions League winning season to cover expenses, they will have to consider cutting costs.
Because eventually, the only businesses that survive are the ones that make a profit – whether they are large football clubs or small grocery stores.
Actually, Abramovich did try to scale back his investments on new players between 2006-2009. But the Blues retained the high-paid players they signed between 2004-2006, so the wage bill continued to be the highest in England until City came along. With the emergence of Mansour’s Manchester, Roman has been forced into putting in more money with City raising the bar in terms of player salaries.
Forget FFP, I am sure the clubs will find ways to meet UEFA’s requirements. But the Russian cannot indefinitely fund the club at a loss. With revenue growth limited beyond a certain extent, the only way to return a profit will be to trim the wage bill, which forms 70% of the total expenses. As Arsenal fans know only too well, that usually means losing the best players to clubs that can pay more – which in turn makes the team that much less competitive. In the end, the Blues may be victim to a monster of their own making.
Undoubtedly, Chelsea’s commercial value will build if they continue achieving success on the pitch. Maybe this is what Abramovich is planning to do, sell the club on and capitalise on this added value. But who’s to say that the new owners will not adopt the Glazer approach to funding such a buyout? And even if he’s not planning to do this, what happens if he dies, as people tend to do no matter how rich they are? Will his successor share the same passion?
For Arsenal, regardless of whether Usmanov or Kroenke takes charge, the aim should be to continue with the policy of being self-sufficient because it is the only logical way to ensure long-term health. As fans, we have to be patient and appreciate that the current conditions make for an uneven playing field. While the alternative may bring some success (no guarantee) in the short-term, it has the potential to cause massive headaches in the future.
That is not to say we cannot be competitive on the pitch. In this respect, I agree with Arsenal Vision that we aren’t a long way off the top. I know we’ve heard all of this before but it is true. A bit of hard work on the training ground and some tweaking of the squad will probably give us a better chance of succeeding than pursuing glory down a one-way street.
Do write in with your thoughts. Until tomorrow.