By Tony Attwood
Warning, this article includes a bit of crowing… although with a certain degree of caution.
Having been caught out saying that I had an exclusive yesterday, when seemingly I didn’t as Arseblog beat me to the particular story by half an hour, I take today’s piece with caution.
However the point about Untold has always been that it aims to go places where others don’t (hence the name), which means sometimes we go into unknown territory and do get it wrong, but equally, just occasionally, we do see things before others do. And when that happens I say so. Sorry to readers who find that rather tedious, but not crowing when our predictions come to pass seems a bit restrictive and I quite like the occasional glass of champagne.
So off we go…
In 2011 I published an article Could the Swiss Ramble have got it wrong? in which I suggested various ways in which the highly esteemed financial reviewer of football might have made a mistake. I did so with trepidation, knowing the man’s reputation, and of course got a fair bit of criticism for it. For no one argues with Swiss Ramble. Or at least no one did.
My point was simple: Arsenal’s finances were far lower than some other clubs because the revenue from marketing was far lower than elsewhere. Now in the parlance of football that meant Arsenal are useless, stupid and pathetic in marketing. Sack everyone.
Swiss Ramble didn’t say that of course but his view seemed to be that Arsenal’s marketing would stay at the modest level it was at and therefore the only thing to be done was to clear out some of its “dead wood” players and accept that future growth will be modest. “Offload under-achieving players, even if they are sold cheaply or given away, in order to have some room to manoeuvre in the wage bill,” was his exact point.
But, I argued, marketing is the one area in which a club can make rapid growth when compared to others. If broadcasting revenue goes up, it goes up for everyone. The amount of money that can be made from match days is controlled by the stadium – Arsenal had built a new stadium, so that was done. Arsenal had a good record in player trading, often bringing in players for next to nothing and then either turning them into superstars or moving them on to realise their value.
So my point was that underachieving in marketing (because all the deals up to that point had required the marketing partners to pay in lots of money up front, to help reduce the borrowing costs which were there due to the stadium), meant that the opportunities for the future were great. Increasing our marketing revenue vis a vis other clubs was a lot easier than increasing our revenue from other sources (short of selling most of the squad, which is what some commentators wanted), because Arsenal created a stadium with two levels that catered for corporate customers, and this was an audience the firms with marketing money wanted to impress.
Now to be open and honest, I must add that in the article I did suggest also that Man U might find it hard to increase their revenue much more in what I perceived to be the hard times after Ferguson left. They did have hard times on the pitch, but their worldwide marketing has (of late) grown and grown as the worldwide profile of the Premier League has grown. Even dropping out of the Champs League hasn’t really hurt them.
Thus one prediction was wrong, but the other – that Arsenal’s marketing revenue was about to take off when Swiss Ramble said it wouldn’t – turned out to be right.
Looking back a bit, in 1996/97, Arsenal were 20th in the table generated just £30m in total revenue. Now Arsenal are in 8th place and their 10% increase in revenue this past year (£30.8m) is bigger than the total revenue 19 years ago.
85% of this year’s growth in revenue comes from additional commercial revenue, which rose by £26.2m (34%), the second highest commercial revenue growth of all Money League clubs in 2014/15. (Commercial revenue here includes sponsorship, merchandising, stadium tours and other commercial operations).
As Deloittes says about Man U, “Their ability to generate commercial revenue in excess of their domestic rivals continues to be the primary factor behind their success.” Arsenal are still a long way behind, having entered the field of worldwide marketing about 30 years after Man U, but the club is clearly making progress.
Thus Man U now have the largest commercial revenue income, having overtaken PSG whose income is exaggerated by over-the-top payments for various rights from Qatar Tourism Authority (payments which are so excessive even Uefa got uppity about them).
Arsenal’s growth in commercial revenue has been driven by the launch of the deal with Puma. There has also been renewed shirt and stadium sponsorship agreements with Emirates and a number of new regional partnerships around the world, which has meant a 66% increase over the last two seasons.
This narrows the gap in commercial revenue to Manchester City (sponsored of course by a country, and having done its deal with the local airport), Chelsea and Liverpool. This is hugely significant because Arsenal have only recently paid for the stadium, and so had the chance to arrange sponsorship deals which go into funding the club at large. Yes Chelsea will get a boost from their new stadium, but that is still three and a half years away if not more.
Income can go down as well as up
And lest anyone still thinks that Arsenal are still laggards in this regard and that enhancing commercial revenue is easy remember this: Bayern Munich’s revenue from commercial sources actually went down by 5% in the year being analysed. Chelsea’s commercial revenue remained static, and Liverpool’s rise was slight.
Meanwhile at £100.4m Arsenal recorded the highest matchday revenue of any club despite the club playing two fewer home games than in the previous season. No other football club has as much of its revenue from matchday sources – which means there is still a massive opportunity for expanding the marketing revenue.
The importance of this ability to grow marketing revenue is further emphasised by the fact that broadcast revenue for the year under discussion rose only by 4%, and is largely out of Arsenal’s control. Of course the figures in a year’s time will show a massive rise in broadcast revenue, but in that regard all of the English clubs will benefit. It is the marketing that takes Arsenal up the league table vis a vis the rest of the Premier League.
Arsenal is also only the second English club ever to earn over £100m in each of the three core revenue areas in the same season and the prediction is that in the next couple of years Arsenal could reach the top five. Not bad considering where we were in 1996/7
Deloitte Football Money League Table
|Rank||+/-||Team||2015/16 Revenue (£m)||2014/15 Revenue (£m)|
|17||+1||Zenit St Petersburg||147||127.7|
|18||N/A||State Aid Utd||143.8||122.4|
Untold Arsenal and the Arsenal History Society… recent stories