Financial stability or ambition? Which do fans want?
Rhys Jaggar
Easy to answer that: BOTH. Fans want to know that their club can win something, but they don’t want the club to go bust.
Thing is: for many clubs, it mightn’t be possible. Arsenal seemed to manage it, but now it seems that stability has taken precedence rather than short-term ambition.
But it’s a fine, fine line to tread if you’re a Spurs, a Birmingham City, a Stoke City. Just what IS a reasonable ambition?? And what happens if you chase it and fail??
Those are the questions facing football club Boards each May as they set their budgets for the following season. What does it cost to chase 4th spot from 7th? And what is the consequence of failing?? What does it cost for a promoted club to stay up?? And what happens if they go down again??
Currently my answer is this: you almost certainly need to hock potential Champions League income buying players to get you there in the first place. The wages bill of the Premier League is unsustainable in the Championship and if you fail to reach the Champions League position, then you are in real trouble.
It says to me that there needs to be rules about the nature of player contracts in the Premier League. Contingency clauses for going down. Bonuses contingent on finishing fourth or staying up. And contracts with a 24 month termination clause upon relegation, as parachute payments stop at that time.
And it also says to me: is the success of the EPL hastening the day when a new structure for English football needs to emerge, with about 60 clubs in a Premier/Championship north/Championship south structure emerges?
There’s always space for relegation in that. But I think that there comes a time when stability says forward planning needs a minimum certainty of income, which might come if clubs were sure that no further relegation were possible.
I reckon there’s about 50-60 clubs with fan bases and catchment areas sufficient for 15,000+ crowds.
The Cups could still function as the ‘romance of the pyramid’. But the reality is that smaller clubs than that are probably better competing against those of similar size than trying to harbour unsustainable dreams in the League.
The Championship is now genuinely a competition. I wonder if a 20/18N/18S league structure, with money distributed a bit more widely through the media and financial rules put in place, would radically infuse English football with a greater stability?
Maybe not today, maybe not tomorrow.
But maybe one day??
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UNTOLD RUMOUR OF THE DAY
Stories that even the Star doesn’t print
Axylotl Wallet (head of the Olympics Location Committee) and Black Setter (head of the hand behind the back committee of Fifa) have had a secret meeting in Room 28 of the Prince Charles Hotel, Wicklow, to discuss future events.
Wallet and Setter started their chit chat with a raising of glasses to celebrate the huge success of the Greek Olympics. Through recordings made from a hidden microphone Untold Arsenal is able to confirm that Setter congratulated Wallet saying, “It is the first time that the Olympics on its own has ever bankrupted a whole country. Even the EU can’t get out of this one. That will show them for trying to impose the free movement of players on us.”
Wallet replied, “But tell me about South Africa – is their entire economy going to fall because of the World Cup type thing you are doing there?”
“We have hopes,” said Setter taking another drink, “but the best bet is the UK. Your Olympics will leave them with debts that will make their current problems look like child’s play, and if we give them the World Cup, that will totally destroy any final chance of recovery that obstinate country has – with their childish Premier League refusing to play games when we tell them.”
Their drank some more.
“So down to business,” said Wallet. “How much are you charging countries not to give them the World Cup finals?”
“$150 million” said Setter. “And you?”
“$250 million not to get the Olympics,” said Wallet. “If we give them the games it will cost them about ten times as much in building fees and a wrecked economy, so its a good deal.”
There was silence for a long time until Setter said, “I think we should put the price up.”
“That would certainly teach them,” said Wallet.
AND ALL THE STUFF YOU MISSED…
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There’s more on our great and glorious history on the Woolwich Arsenal web site.
Untold Arsenal is (c) Tony Attwood 2010. Tony is economics correspondent of CBeebies.
Rhys, nice article. You have many important points that are worth talking about because it’s clear that professional football needs a drastic overhaul.
Here’s one of them. You write, “It says to me that there needs to be rules about the nature of player contracts in the Premier League. Contingency clauses for going down. Bonuses contingent on finishing fourth or staying up. And contracts with a 24 month termination clause upon relegation, as parachute payments stop at that time.”
This sounds like a great idea, but I’m wondering how this might be done because I don’t see how any player would prefer incentive-laden contracts compared to guaranteed contracts. In other words, if you are trying to attract top-notch talent, it seems like this plan won’t work UNLESS there are new rules to enforce this (not only throughout the league, but also throughout Europe) or perhaps something like a players’ union…
But then again, if you are a team like Everton or Villa, who are constantly on the cusp of the CL, you’re not going to get the cream-of-the-crop talent anyway…
Hmm, haven’t really thought it through…What do people think?
“Axylotl Wallet (head of the Olympics Location Committee) and Black Setter (head of the hand behind the back committee of Fifa)”
Awesome. What’s sad is that given the present financial conditions,this “untold rumor” might not be that far from the truth…
I really love those rumours. Keep them coming.
About the article it self indeed a lot to think about and I think some good propositions but like Tim rightly pointed out it will not be enough to just change things in England.
Even though it is an island, it is still connected to the rest of the football world.
So I really think (and this is my fear) that it is up to fifa to organise things in terms of contracts and so to make sure that all country’s have the same rules (and things like maximum wages and so, maximum ratio wages/turnover, etc…)
But can you see Black Setter or any other member of Fifa doing things that will benefit football in general and bring some common sense in the football world. I think we first will see a moon base on Mars (a Mars base ?) than that Fifa will act wise for football in general.
They only care about how much money goes to them at the end of the day.
I like the idea that players contracts should be linked more to performances, with much lower fixed salaries, and I believe there are a few clubs already trying to go down this route especially those in the Championship that are regular promotion candidates.
I also think that now more than ever, the FA needs to concentrate all its efforts on re-structuring the game from grass routes levels and developing young players purely on technical skills, much like what they do in the Netherlands – and France to a certain extent also. Trevor Brooking has been looking at this for a number of years now, but still we see no real changes taking place. It still breaks me a bit that the FA deemed building an £800m disaster of a national stadium, more important than investing in grass routes facilities and coaching skills. We want to host the world cup in 8 years, but face the real prospect of a sub standard national team to compete at it. Apart from Arsenal and ManIOU where are the next generation of really good players coming from? We need to start drastically increasing the supply of good footballers in this country and then the economics of this will help clubs as more supply of good footballers = less demand for high wages as much more talent to choose from which then = more competitiveness across the board. No more Joe Coles, sitting on the Chelsea bench for 3/4 years collecting £80,000 per week as Chelsea will have a dozen Joe Coles to choose from
You can pin-point the exact instant when salaries went up exponentially with the arrival of Abramovich, open chequebook to get the best players that Mourinho can buy.
And now, Act 2: Abu Dhabi City got into the act.
Next season, we may even see the first 200,000 quids per week player in prem league.
The danger of giving a player a 2-year or 3-year contract, with incentive payments and bonuses, is that star players can easily buyout their contracts without even invoking the Brewster Clause.
The best way to ensure stability is to limit salaries to not more than 50% of turnovers.
But then, people like Abramovich and Abu Dhabi City can overcome any restriction easily by, say:
1 – Increase turnover by giving the football club cash injection from any of his other companies in his stable. E.g. RusskiMafiso Agency gives Chelski a 10-mil per annum sponsorship.
2 – Abu Dhabi incorporates a 100-mil asset company, with 10-mil annual turnover, under CITEH PLC.
There is no way you can limit financial doping and financial discipline with such an uneven playing field in prem league, especially the likes of Chelski and Abu Dhabi City; who can overcome any type of financial restriction easily.
what a crap???u call this an article….an eight year old can write better than this…
well, if the cap fits.. critic
fancy writing an article?
Sensible stuff – although, for practical purposes it’s probably the top division that should have the fewest number of clubs in it as they will have more European games to fit in and will probably go further in the domestic cups. Maybe also there should be some limited relegation from the North and South Championships – one team per year? – to keep some element of potential for what would be the third tier.
One thing is certain – there will be re-structuring and that will include more European games as well.
A few points:
1. I can never understand why anyone would suggest Arsenal do not have ambition. Lacking ambition would have been deciding to stay at Highbury. Instead the club spent 350million (THREE HUNDRED AND FIFTY MILLION POUNDS!!!!!!!) of their own money on a new stadium in order to be able to increase wages and compete long-term with the biggest clubs in the world. How on earth is that lacking ambition? I do not understand it at all when people like Rhys say things like “it seems that stability has taken precedence rather than short-term ambition”. Surely a decision based on “stability” would have been to stay at our old, cozy, stable stadium instead of risking EVERYTHING to move into a new stadium even when we all knew it would seriously hamper us financially for a decade (as David Dein knew and warned as well). I personally think building the new ground was the most ambitious thing any English club has done in the past 20 years, perhaps longer.
2. Critic – “an eight year old can write better than this”. When you reach that age we will test your writing to see if that is the case. Certainly I would hope you are no more than four or five years old right now given the quality of your writing so you have plenty of time to improve.
3. I think even 60 clubs is too much for England to sustain on a full-time professional level. I would say it should be more like 40.
Arsenal Holdings plc Results for the year ended 31 May 2009
ARSENAL CONFIRMS RECORD PROFIT AND SIGNIFICANT PROGRESS ON
HIGHBURY SQUARE PROJECT
• Group turnover increased to £313.3 million (2008 ‐ £223.0 million) reflecting income generated from cup competitions and property sales.
• Match day revenue was increased to £100.1 million (2008 ‐ £94.6 million), mainly as a result of progress to the UEFA Champions League and FA Cup semi‐finals.
• Operating profits (before depreciation and player trading) in the football business were £62.7 million (2008 ‐ £59.6 million).
• The completion of sale of 208 (2007 – Nil) private apartments at Highbury Square contributed £88.0 million of revenue (2008 ‐ £15.2 million) and boosted the operating profit from property activities to £7.8 million (2008 – Nil).
• Profit after tax of £35.2 million (2008 ‐ £25.7 million) was a record for the Group.
• Since the end of the financial year there have been a number of further positive developments in relation to the Group’s Highbury Square project:
‐ Of the 655 private apartments in the development, sales have now completed on 445 units with a cumulative sales revenue value of £172.4 million.
‐ The balance on the bank loan used to fund the project has been substantially reduced to £47 million and agreement has been reached to refinance the loan and extend its term to December 2010.
COpied from ARSENAL.COM
**************************************************************
Our annual repayment mortgage loan for Emirates is about £20.1 million.
Our cash in bank is about £99 million.
Whatever cash we received from player’s sales, which I suspect had goen to reduce the Highbury Square debt from £137 million to present £47 million.
Not forgetting that cash reserves are needed to kick-start Phase 1 of Queensland Road project soon, maybe by 2011.
Thedanger is not so much as financial stability, which is an extremely good target for corporate predator like Usmanov and Kroneke.
Just long at our positive of operating profits, ranging from £60 million to £80 million for the foreseeable future.
And Usmanov and Kroneke will behave exactly like Glazer Family and Hicks & Gillett.
They will tap into into cash stream and pay themselves salaries and directors’ fees of £20 million per annum, without denting Arsenal Holding PLC ability to serve that Emirates’ mortgage payment of £20.1 million per annum.
Because of Arsenal superb “financial stability” and growing operating profits year-by-year, it becomes a lucrative target for corporate predators.
If you use Chelsea as the rule, it takes about £100m in transfers to get from 4th/5th to 3rd/4th, and then an additional £100m to get from there to 1st. The first £100m is to overpay players to get the quality needed to compete in the Champions League. The second £100m is needed to get the 2 or 3 elite players who can change the course of a game when you’re losing.
Of course, Chelsea’s rise occured at a time with the Top 4 was the Top 2, with 3 or 4 teams that were regular contenders (Chelsea, Liverpool, Newcastle, and Leeds) for CL qualification. So, it was a lot easier to get from being a CL hopeful to a CL regular. It would be harder now for Aston Villa, Man City, Tottenham, because the Top 4 have been in place for a few years, and all of them have quality players and experience to get through and qualify. If Liverpool were to fall because of the financial instability, then that may change, but at the moment, I’d say each of those clubs would need heavier investment (£100m+) to break into the CL ranks.
As for Arsenal? Where’s our mythical 2 or 3 players who would make us contenders? We’ve got a CL regulars team. We’ve got the 2 or 3 players who can influence a game (Arshavin, RvP, Cesc). But we don’t have the squad depth or experience or mentality to win stuff. We wouldn’t need another £100m to be contenders, but we do need a few purchases.
I wouldn’t say that we would be risking financial stability to buy those players. We have £30m at least from the Toure and Adebayor deals, plus their saved salaries. That’s enough for a goalkeeper, at least. We make £30m a year profit. That’s enough for the second player. As long as we don’t keep selling our best players each year, we should have a team capable of winning stuff.
But then, I’m a doomer and a plastic and I don’t appreciate the beauty of a flapping Fabianski in full flight, don’t I?
Well-Endowed – I think a lot of fans would support the idea that a new keeper would be great, but finding such a guy is hard. There are very few top-class keepers around and every one that I’ve seen has his own flaws. Seeing Given flapping all over the place repeatedly this season should remind us that even those suspected of being “top-class” are prone to the same mistakes as everyone else. To me the one that got away was Cech, who we couldnt sign due to work permit issues. By the time that was sorted out Chelsea simply bid too much for him.
As far as building that squad depth, that is exactly what is happening right now with the progression of young players through the club.
You seem to be suggesting that spending 30million on a player will instantly produce a great player. I suppose you are referring to Shevchenko arent you? Or Berbatov? Or great keepers such as Barthez? Yeah, those three cost 70million and were worth every penny.
Great players are not just picked from trees. It isnt as easy as everyone seems to make out to find players that will suit a certain system. Veron is still playing for Argentina and yet was a complete bust in England and yet people seem to think that guys like Aguero will just automatically be stars in England.
What happens if you spend the money and the players dont work out? Well, we know exactly what happens. Portsmouth. Leeds. Newcastle. Yep, the fans of those clubs must sure be happy that their team “chased the dream” and spent the big money, huh?
Paul, as I said in my first post, there’s a huge difference between a mid-tier team over-spending to try to be a Champions League regular, and a Champions League regular needing 1-2 players in order to compete for the title.
The first group are spending lots of money but are consistently out-bid by the Champions League clubs for the elite players. Hence, they need to take a punt on lesser players who might make the step up (e.g. Berbatov, Ashley Young), or pay over-the-odds to knock the CL clubs out of the water. They need to do this facing competition from their rival mid-tier clubs, and trying to fend off poaching from the CL clubs. The loss-gain ratio is very highly slanted towards loss.
The second group of clubs (i.e. Arsenal, Liverpool) have a CL spot sown up, have the status to attract and pay for elite players, have a couple of elite players who can influence games. However, they don’t have the squad depth to maintain a genuine league challenge. Liverpool are coming off a lower financial base, and don’t have the ability to maintain a deep squad of quality. Arsenal are the only profitable club in England, make £30m in profit a year, and have at least £30m allocated for transfers and wages from the Toure+Adebayor sales. Liverpool have over-extended themselves and are in the shitter. But I maintain that Arsenal have the finance clout to maintain a deeper squad with more quality, and one which has the ability to mount a genuine challenge for the league. The figures are there, if you’re willing to open your eyes.
I believe Wenger still has a great eye for a player. Vermaelen, Arshavin, Sagna have all been successes. But he’s been crimping his spending. Why, I do not know. But if you gave him £30m to spend on a goalkeeper, I’m sure he’ll oblige with a good one. Would £30m budge Buffon from Juventus? How about £20m for Akinfeev? Or £15m for Lloris? No transfer is without risk, but I believe the risk is worth taking if the alternative is the guarantee of failure in the shape of Almunia or Fabianski in front of goal.
Arsenal have simply prioritised the balance sheet over investment in the team and will continue to do so.
Ambition? For some clubs ambition is just to play in the Premier League and hold their spot. For others it`s to make the top four and enter Europe and for the few it`s got to be silver, depends on your dream and what is satisfying. Providing your supporters are happily entertained each week and the management or owner is not tearing the guts out of the club then it`s somethng to look forward to. To have the “impossible dream” of putting the Premiership or Europe Champions cup on your shelf remains a dream and something to try and aim for but not at the expense of losing your club and the happiness it brings to thousands each week. There is nothing like financial security to build confidence and with confidence comes success but that`s in a perfect world, in the real world where there is money there are thieves never more obvious than in `the beautiful game`.
ga ga goo goo…..
i think this was a rubbish article. oh look! iam growing with this blog.
@WEG
well, u got a good point for Arsenal FC. But people usually discuss Arsenal company here.
Well-Endowed – but the transfer fee is just the first step. You say “would 30million budge Buffon from Juventus”? Well maybe. But then he would ask for 150k a week wages. And if we gave it to him then Cesc, Gallas, Vermaelen, RvP, Arshavin would all ask for the same money (as happened at Chelsea) and Walcott, Nasri, Diaby etc would ask for 120k a week. Once all those wage increases go through then the 30million profit we currently make changes to a 15million loss and all because of one 30million purchase.
The transfer fee is the smallest part of the equation. The wages are the main component of running a club and where caution is needed. It has been shown by evidence that when you run a wage bill at over 60% of revenue then you get into trouble (unless you are Chelsea). Ours is at about 55% I think so we have a small amount of room to move but any new players MUST fit into the existing wage structure.
Obviously once the stadium debt is paid off that will clear up another 25million a year for wages, so that will make a big difference as well and put us onto Utd’s level for wages. We will never be at the level that Chelsea are, since not even Real Madrid are at that level.
Yes Paul C, the “hidden” cost of wages is often forgotten by many people. And like you say if you buy a new player and he gets more money than the players who have been around for a while it will bring trouble to the club as they will demand more money. Jealousy is a strange thing and even for people who have big wages it can be have strange effects. It could mean the whole team’s moral is affected by this by players who are thinking : okay, you XYZ, you get twice as much money as I so you can work and run twice as hard as I do. A bit simplistic maybe but even if it is true for 10 % you could end up in trouble.
So if a player comes to The Arsenal it has to be on the right price but also on the right wages and to put those two together is not always easy to do.
Emirates’ debt needs another 15 years to payoff.
Meaning – we can’t afford “super super players” demanding 160K to 200K per week.
As of now, it is alleged that Fabregas had turned down a new 5-year 30-mil contract paying him 120K per week.
We can forget about signing marquee players like VIlla, Dzeko, Akinfeev, et al if the present salary scale is capped at 120K per week.
Abramovich and Abu Dhabi can outbid Arsenal anytime for any marquee players.
Both their teams need heavy investment in players (and manager??)next summer to rejuvenate the squad into title-winning team.
To win titles and trophies, Wenger had given himself 18 months to turn-around current squad, i.e. to win a piece of silverware by 2010/11 season.
And he is still sticking to his Ajax Model of nurturing a group of youngsters from Academy to senior squad, growing up playing together and remain friends on-and-off-the-pitch.
And Wenger needs this squad to stay together, remain healthy throughout 2010/11 season and current senior squad players to improve and fulfil their potential by next season.
Who know if we can win all our remaining 11 games, we may very well win the title by the “back-door” – our 1st silverware as promised by Wenger within this 18-month period.
(Did we won our 2001/02 Double by winning the last 13 games?)
We can have financial stability and ambition too.
Merlin – I agree. Many see “ambition” as spending money. But that is a very narrow view of things. Like you say, we cannot afford the very, very highest quality player. The funny thing is, neither can Chelsea or City. Chelsea still keep talking about “breaking even” but it is quite simply impossible for them to EVER break even as long as they continue to try and maintain their current level of wages and City will soon find the same thing in a couple of years, at which time the Sheiks will have the same decision as Roman Abramovich had – namely whether they continue to pump money in forever with no chance of ever seeing any of it again or whether to insist that the club eventually stands on its own. If the Sheiks decide they will just keep pumping money in then nobody will be able to compete with them, and it would be suicide for anyone to try.
I think it is wrong to think we can compete with Barcelona or Madrid as well. Those clubs are on another level. I fully expect Cesc to return to Spain and I think it is a mark of our standing as a club that he has stayed as long as he has. If we can keep him another year that will be fantastic in my opinion since by that time Song, Diaby, Ramsey, Nasri etc will all have matured another year. And besides, we will get a stack of money for Cesc. The big question is whether Barca can actually afford to buy him.
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Paul, we’re already over-paying our kids to lure them to the Arsenal. Fabianski, a reserve keeper, recently signed a contract for 30k a week. Schwarzter, an Australian international and Fulkham first choice keeper, is on 20k a week. Which one is better? I’d take Schwarzter every time.
We have the 3rd highest wage bill in the Premier League. It’s comparable to Man Utd and Chelsea’s, but we just have a more even wage structure. We don’t spend on transfers. We make a 30m profit every year. We use the proceeds of our transfers to extend the contracts of young players who haven’t done anything to deserve it. Theo Walcott is on the same wage as David Villa.
And Paul, I see “ambition” as the willingness to do the best you can, and not to settle for 4th place and play the kids. I like my ambition on the pitch, not on the balance sheet. But from your last post, it seems like you’re different. You’d rather take Cesc’s transfer money than to have Cesc in the side. Do you support Arsenal FC, or Arsenal Ptd Ltd?
Paul C, if we’re at 55% of our revenue, and 60% is the limit, then why not go for the limit? It doesn’t cost that much more. Let’s do the sums for a hypothetical Buffon purchase.
Firstly, I don’t agree that he’d ask for 150k a year. No one outside of Man City, Chelsea or Real Madrid is on that kind of money. Let’s say he’s willing to sign a 4 year contract on 100k a year. And let’s say Juventus are willing to let him go for £30m.
Secondly, we’re going to have to sell Almunia and Fabianksi. Selling both would take out at least 60k from our wage bill (Fabianksi is on 30k, and I assume Almunia is on more). Additionally, selling Almunia and Fabinaksi would bring in transfer money. Let’s say we could get £8m for both ‘keepers. If you subscribe to the pro-Fabianski, pro-Almunia camp, you’d probably agree that they’re worth (at least) that much. And if you’re not part of that camp, then why would you be arguing that a goalkeeping replacement isn’t urgent?
Now, the difference between Buffon’s hypothetical wage and Almunia and Fabianksi’s combine wages is 40k a week. If you multiply that over the length of the contract, that’s an extra £2m a year, or £8m over the life of 4 year contract. Coincidentially, that’s the amount of money that’s covered by the sale of Almunia and Fabianski!
So in this hypothetical situation, Buffon comes to Arsenal for a fee of £30m, payment staggered over a few years. He earns 100k a week. Almunia leaves for £5m, and we save 30k from his contract. Fabianksi leaves for £3m and we save 30k from his contract. The money from the transfer and the savings from the wages pays for the wages of Buffon. All that is needed is the £30m transfer fee.
That’s ONE player Arsenal can bring in, and it doesn’t touch that 60% wage:revenue threshold.
Great post Rhys….very enjoyable read
Well-endowed – just looking through old posts and saw your response to mine. You didnt take into account the fact that signing Buffon would instantly make other players want their raise to 100k a week. Cesc, Vermaelen etc wouldnt want to be on less than the goalkeeper. Cesc as captain would want to be earning the most, so his raise would be 2mill a year at least. Vermaelen, RvP etc the same. Others on 40k would want 60k etc etc etc. That is the way these things go. Same in football as in business. No difference. Every business in the world must be aware of wage inflation. Cesc from 80k to 100k is 25% increase and if you take that across our entire wage bill then we go flying through the 60% mark of total wages to revenue without even trying. Then every player we want to sign subsequently wants the same treatment.
I just dont know where the idea that 30million is not a lot to spend on a player came from. That is an absurd amount that should be reserved for the absolute creme de la creme strikers who can score 25-30 goals a year. 20million is a huge amount to spend on a single player.
I personally think very, very, very few players are worth anywhere near that money.