Thoughts On Usmanov’s Open Letter
Thank you to those who took time to comment on yesterday’s post. One or two of you have correctly pointed out that Robin remains an Arsenal player, and more talks are scheduled so we should not write-off his Arsenal future just yet. It would be volte-face extraordinaire if he were to stay though and even the most hopeful among us must acknowledge that it’s highly unlikely. Still, hope is a good thing and as Arsenal fans we’re used to carrying a lot of that around every summer.
A day after Robin questioned Arsenal’s vision for the future, another divisive missive was sent towards the club’s board by almost-30% shareholder Red & White Securities Ltd, aka Alisher Usmanov. In the opening paragraphs, the issuers state categorically that they would never do anything to destabilise the club – the rest of the letter sets about doing exactly that.
Before I go further, it’s important to clarify that I do not support either Kroenke or Usmanov. They are both businessman, as are other owners and shareholders of football clubs. The reality is that football is big business now and increasingly, these owners are looking at clubs because they offer tremendous potential to make money by way of capital growth.
Back to the open letter – without doubt, the timing was highly opportunistic. It seems the content had been readied for some time, waiting for the perfect moment to create the greatest impact. Robin van Persie’s outburst a day earlier presented the opportunity – and to that extent, I think it was a miscalculation on part of Usmanov and Co, as most fans recognised it for what it was, a cheap shot aimed at earning brownie points with supporters.
It was contradictory too. On one hand, it claimed Usmanov was not seeking preferential treatment i.e. a position on the board. On the other, it laid heavily into Ivan Gazidis for not affording special status to a Usmanov company while seeking sponsorship.
That aside, the interesting parts of the letter addressed the following:
1. Cashing out by previous board members
2. Self-sufficiency model
3. A rights issue to retire debt and enhance playing squad
With regards to the first point, there is little dispute that previous shareholders made sizeable profits from their holdings in Arsenal when they sold out to Stan Kroenke. But that in itself does not make it morally wrong, as the letter seems to suggest. After all, the aim of football club owners is to increase the value of the business so that their holdings naturally increase in value. Roman Abramovich and Sheikh Mansour are trying to do exactly this with heavy investment aimed at increasing the brand value and revenue of their respective clubs.
And it’s the same with R&W as well, in fact they allude to this in their own ‘vision’ for the club. From all accounts, Arsenal board members at the time were under pressure to choose sides between Kroenke and Usmanov, both of whom were intent on buying every available Arsenal share. Would Usmanov have had similar objections to Fiszman and Co making money on their investment had they sold to him instead of Kroenke? I suspect not.
The second point tackles the stadium financing. Usmanov suggests that the better option at the time would have been to inject more equity into the club instead of resorting to a bank loan. However, we have to remember that neither Kroenke nor Usmanov were on the scene in 2006 when the Emirates Stadium move was completed. In fact, it’s almost certain that Arsenal’s appeal to both of them was largely due to the swanky new stadium and potential of additional revenue.
The most interesting suggestion, and one which targets the hopes of every fan, lies in R&W’s proposal for shareholders to inject capital into the club with a rights issue. This would allow the club to repay the stadium loan early and have enough cash available to strengthen the playing squad.
It sounds reasonable and if it were to happen, it would certainly show the willingness of the owners to take the club forward. Of course, Usmanov would also get an opportunity to pressure Kroenke to stump up more cash or risk diluting his share in the club. The obvious corporate brawl between the two would be to Arsenal’s advantage though, if both were forced to bring in additional funds.
But what would we do with that money? Buy new players? How many? At what cost?
Consider this – Eden Hazard will cost Chelsea a minimum of £80m over 5 years. That’s 16m a year on one player alone. Assuming we need at least 3-4 world-class players of Hazard’s standing, that’s £48-64m a year more in expenses. And that’s not factoring in the increased wages for current players which would need to be revised to ensure they don’t leave for pastures green (or blue). There would be a reduction in the wages of the outgoing players but no one earns anywhere close to the £200k a week Hazard is reportedly on, so the net savings will not be substantial.
Can we cover this increase in expenses with additional revenue that would come from winning trophies?
Both Chelsea and Manchester City, despite winning titles and trophies, are still unable to get anywhere close to balancing their books. After three years of relatively low activity in the transfer market, Chelsea are still neck-and-neck with City in terms of the wage bill and even with their Champions League success this season, are likely to post another loss this year. If you want a better understanding, do read some of Swiss Ramble’s posts on club finances on his site, especially those of Chelsea and Manchester City.
Will the additional revenues ever cover spiralling costs? How sustainable is this in the long run?
Also, spending cash in itself is no guarantee of success. Liverpool, Tottenham and Chelsea all finished below us in the league table, all having outdone us in the spending stakes over the last 4-5 years. Remember also that Chelsea required massive amounts of luck for their Champions League win and City had United’s late slump to thank for their winners’ medal. A bit of luck for their rivals and neither of the two clubs’ investment would have been justified, as they are being done now.
Once down the route of raising cash to chase titles, it is impossible to fall back. What happens if we spend £150m and fail to win anything? We moan about not being able to get Squillaci and Chamakh off the books because of their high wages, exactly how would we offload the likes of Wayne Bridge and Roque Santa Cruz? In that respect, are Arsenal lacking ambition or just being sensible?
The thing I find most interesting is the suggestion that Arsene Wenger is being hampered by the board in pursuit of trophies. I find that difficult to believe – Arsene Wenger is a modern-day Herbert Chapman, a man who is involved in every aspect of the club’s running, from training sessions to the thickness of the blade of grass at the Emirates.
I firmly believe it’s Arsene Wenger’s philosophy that is currently driving Arsenal. It’s not the board that is placing restrictions on him, it’s Wenger himself who is trying to see out this ridiculous inflation in player wages and transfer fees, whilst trying to remain as competitive as possible in the meantime. This is very much his project and I suspect even he were given a £100m cash to spend, he would not spend it – if it didn’t balance the books. Only history will provide a definitive answer as to whether this is the right strategy. In my opinion, it will prove the Frenchman right.
As fans, we have no control over who owns and runs the club. But single ownership is fraught with danger, as the Glazers have proved at Manchester United. The best thing for Arsenal would be to have multiple owners and run independently – pretty much as the club is doing now. In that respect, Usmanov’s letter merely attempts to pressure the board and as such, should be viewed with caution.
More thoughts tomorrow. Until then.