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Cod eating northern surrender monkeys part 2

(If you don’t understand the headline read yesterday’s blog) .

Thus, the question is asked, in this world of chaos football, in which Manchester Bankrupt are quite clearly, and obviously, bankrupt, how come they carry on?  How come the banks allow them to go on?  And why do they keep suggesting it is Arsenal that is in financial trouble.

To answer all your questions here is Professor Sir Hardly Anyone with an analysis.

When Manchester Utd’s new owners bought the club they placed all their own personal borrowings within the club – guaranteed by the club rather than by themselves.   So the club moved from zero debt (one of the old Man U’s great strengths) to huge debts.

The debts all have different repayment times – like Arsenal have with the stadium, or indeed most of have us with mortgages.  Some debt has to be paid in full on certain debts some not etc.

Interest on the debt has to be paid monthly or annually, but there is provision as to what happens if the club doesn’t pay the debt.  In this case it is wrapped up into the debt and so increases the interest due next year.   Thus not paying the debt is perfectly ok as far as the lenders are concerned – it was written in the plan.   The value of the club is thought to be going up all the time, and so the debt is secure.

So the only question is how does the club ever get out of debt.

a) By increasing turnover.  This is hard – they are increasing prices year on year and are still a lot cheaper than Arsenal and other London clubs – and they have to keep doing the overseas trips – Saudi Arabia, South Africa, Far East – not only to earn money from the trip but also to expand the sales of their TV rights and the shirt sales overseas.    But even so, there is a limit as to how far they can go, so this is not the long term solution – it might just help stave off disaster for a while.

b) By selling the club to a billionaire owner – and that is the plan as far as I can see.  In the end someone who doesn’t see this as a financial deal, but as a power deal will buy the club, and as Abramovich did with Chelsea, just pay the debts.  

Because of this it is vital to keep the club at the top – if it slips, it loses its universal appeal and its premium price.  So they have to keep adding to the debt by buying new players for success today.

The danger of this approach is that either football in general or Man U in particular will lose the attraction and the billionaires will find something else to play with.   This could happen if Ferguson leaves Man U, or if Italian style fighting at matches returned to the English game, or if there was a match fixing scandal, or quite simply if football wasn’t sexy any more.

This could happen – all bubbles burst in the end.  You might recall the South Seas Company (which gave the government £7 million to fight a war in France, and later took over all the national debt of £30 million and paid 5% interest (coincidentally the current bank rate).  Shares rose to 10 times their value, everything collapsed, and it brought down the government)

The dot com revolution was another – and although the government’s didn’t fall, the banks almost did – they survived just in time to fall over again in the sub-prime housing market. 

Football can go the same way.  In my lifetime I’ve seen football be something that is just old fashioned, with crowds in decline year after year, a place the nice people don’t go because it is the home of hooliganism, an irrelevance because one team (Liverpool) just dominated everything, the plaything of government (Thatcher’s “everyone must have a membership ticket” and “all seater stadia”) and now the game everyone talks about all the time, and a league that is the most famous in the world.

This certainly isn’t the end – there will be another twist shortly.  But the question is, which clubs will survive around the next corner?  On this basis at the moment, Man U looks particularly insecure, as does Liverpool.  Arsenal, being based on something quite different looks much more secure to me. 

So why is Arsenal always touted as being in trouble financially when its figures show it is not?

First, because its easy.  When one paper writes a story it is easier for the others to join in, rather than do any research to contradict it.  The Mail did the Arsenal can’t pay for the stadium story, the others copy it.

Second because the papers like simplicity, and simplicity says, “big clubs buy big”.  Wenger however breaks the rule twice, by often buying small or not buying at all, and by buying people no one has ever heard of.  That’s not news.  Consider two stories: Arsenal buy Alonso for £15 million, or Arsenal buy Ferndado dos Legume from Sochaux for £250,000.

Finally the Arsenal difference comes because of World Wide Scouting.  In essence it is simple (quadruple the number of scouts, quadruple their pay, and for the first time ever make sure they really know everything about Wenger’s way of thinking and playing).  But it is a complex story, and papers don’t like it.

Thus the situation… there’s more – if anyone is interested I’ll write it.   But I can tell you what I would love to read (and if it is not out there I will write it) – a full insider’s analysis of World-Wide Scouting, and the people involved all the way from Grimandi down.  Now that is a story you will never see in the papers.

Tony

6 comments to Cod eating northern surrender monkeys part 2

  • Colonel Mustard

    great read…..sanity in a an Arsenal world gone hysterical! write the analysis of the scouting network…would love to read it.

  • FunGunner

    Good article. Again. Thank you.
    The scouting system is indeed one of the pillars of the club’s success. And it isn’t even the biggest scouting network in the Premier League, but it must be the most effective. It works so well because AW has shown good leadership – he has a clear vision which everybody understands. This applies to the academy as well as the scouting set-up. I don’t think some Arsenal supporters realise how lucky they are.

  • bertie wooster

    A good read.

  • don't believe the hype

    Really interesting read and I would love to read the article about the scouting network too.

  • Jimmy

    Great article as ever. I always enjoy reading your stuff, and not just because I often agree with you (although it helps I’d guess!)
    Maybe it’s an arsenal generated paranoia, but it really does seem as if the football press are delibrately avoiding writing about the potential bankruptcy (both actual, and dare I say, moral) of Liverpool and man utd, instead preferring to return again and again to arenals so called financial perils! Maybe it’s lazy journalism, maybe it’s something more invidious. Either way it doesn’t seem like all the clubs are judged with the same standard!

  • Sajit

    This is one of the most under-rated Arsenal blogs out here on the net.

    great work . keep up the good efforts mate.