Keeping things quiet has always been Stan Kroenke’s preferred approach at Arsenal,
and the way the club’s accounts were added to the website, without any fanfare, was in
keeping with his style of communication. Here’s a summary of their latest accounts:
Reporting income, Arsenal, like all clubs, have three main sources, matchday, broadcasting
and commercial. Overall income fell by 5%, which in an age
where clubs are supposed to be making more and more money, is a cause for concern, however,
many of the ticket prices were frozen for the fifth year in a row.
Nevertheless, matchday income fell slightly, mainly due to the club being unable to generate
as high prices, especially for hospitality packages. Think Europe League verses Champions
League opponents. Keeping up with Manchester United will be
difficult but compared to other Premier League clubs Arsenal’s matchday income is impressive,
but there is no room for complacency, with Liverpool and Spurs likely to catch up as
capacity increases at their stadia. The high proportion of corporate and hospitality
seats at The Emirates means that Arsenal generated £1,660 per fan last season and Arsenal have
the highest proportion of income from matchday of any Premier League club as a result.
Due to the way that UEFA allocate TV money, Arsenal’s broadcast income fell by 10% despite
the club reaching the semi-final of the Europa League, where clubs receive only a quarter
of the prize pot available in the senior competition. Relative to other clubs in the Europa League
Arsenal earned more than any other club in terms of UEFA prize money, mainly due to BT
paying a huge sum for the broadcasting rights, a large portion of which then goes to clubs
from BT’s ‘domestic’ leagues in England and Scotland.
Only those clubs with Champions League participation (Leicester’s figures are from 2017 when
they were in the CL) exceed those of Arsenal, but the gap is one they can ill afford to
let grow. Penalty clauses from commercial partners for
only qualifying for the Europa League may have been the reason why Arsenal’s commercial
income fell in 2018 too, albeit by a small amount.
In comparison to Manchester United and Manchester City, Arsenal are generating about half as
much from commercial sources, which ultimately has an impact upon the ability to compete
in the player market. Like most clubs, Arsenal generate the greatest
proportion of their income from broadcast revenues, but the club does generate more
matchday income as a proportion of total than any Premier League team.
The danger for Arsenal is that Liverpool are likely to overtake them in terms of revenue
when their 2018 figures are released, and Spurs could do the same within two years should
they ever finally move to the new stadium. The most significant costs for a club are
in relation to player wages and transfer fees and here Arsenal saw significant increases
in 2018. Bringing new expensive players to The Emirates
meant that the wage bill rose 20% in 2018 to £240 million although included in this
figure is a £17 million payoff for Arsene Wenger and his coaching team.
Urgent investment in the squad necessitated the wage rise and Arsenal were not alone in
2018 in having pay outstrip income, but this is not sustainable in the long run.
The club, compared to the remainder of the ‘Big Six’ are where most would expect
to see them, trailing the two Manchester teams and close to Chelsea.
Like all businesses, Arsenal have to also pay for everything from electricity, transport
and insurance as overheads and these are now running at about £80 million a year.
Expenses are usually subtracted from income to arrive at profit, but some expenses are
erratic in nature and sometimes excluded when trying to determine a club’s underlying
financial health for the season. Simply deducting all day to day costs from
revenue, before taking into account borrowing expenses, meant that Arsenal could claim to
have made a record £79 million last season. A look at the above profit and loss figures
shows there has been much volatility in relation to Arsenal’s profits and losses from year
to year. This is mainly due to one off transactions which distort the numbers, such as profits
on player sales. Most analysts ignore finance, tax and one-off
costs to create something called EBIT (Earnings before interest and tax) which represents
the club’s underlying profit, and for Arsenal in 2018 this converted the profit of £79
million into a loss of £18 million. The main reason for this decline was the combination
of lower income and higher player related costs that have been already highlighted.
The EBIT figure shows that running Arsenal is a frighteningly expensive business and
therefore the club needs to generate income from an additional source, and that source
is player sales. Arsenal made a record profit of £120 million
last season from player sales (Oxlade-Chamberlain, Sanchez, Walcott, Giroud etc) which helped
to offset the day to day losses. Arsenal spent a record amount on new players
in 2017/18 but also had record revenues from sales, which resulted in a net spend of just
£28 million The problem for Arsenal going forwards is
that they appear to have some highly paid players on contracts that are unlikely to
be matched by other clubs. Getting such players off the books is a delicate negotiating task.
Under a form of financial fair play rule in the EPL called Short Term Cost Control (STCC)
clubs can only increase the wage bill by £7million a season plus any extra income they generate
from matchday or commercial sources. Arsenal are snookered here at present as the
Emirates is sold out every week and fans won’t tolerate higher prices and so it’s up to
the commercial department to make the club attractive, but to do this they need to be
able to offer them Champions League football. Media talk is that Emery will be limited to
£45m in the market this summer, although if that is a net spend then should still give
them a chance to compete.