Arsenal’s models of finance and the difficult road we’re travelling

By Tony Attwood

There are basically five models of finance in English football at the moment.

1: The self-sustaining club

The club which through commercial sponsorship, attendances at matches, TV revenue and advertising revenue makes enough money to keep going without the need of an outside investor.  This is the model of Manchester United.  Through investing in world-wide marketing from the 1960s onward the club has built up a following that generates fortunes.  Additionally through having built a large stadium early on, it has not had the cost of moving into and developing a new ground – it has been able to update its existing ground.

2: The plan of moving towards being a self-sustaining club

Here we see a club that is losing money but which like many a business has a plan to grow its revenue by investing in the future.  This is what business loans from banks are for, although few banks tend to have too much faith in such schemes unless backed up by some very valuable property which can be sold if all goes wrong.

3: The lottery ticket model

In this model the club is kept running in the hope that eventually someone else will come along and buy it, or that by chance the club will discover in its ranks a young footballer who cost nothing and is under contract and who will bring in a good transfer fee.  Or indeed that the club’s site will be suitable for development, can be sold and the profits used to build a new ground and keep the club going.

Since there is such a lot of chance in this model, it is hard to call it a business plan – it really is like buying the lottery ticket.  And the big problem is that the club can run out of money before the hoped for pay-day occurs.

4: The sponsorship of the rich

Originally the plan was to find a rich person and persuade him or her to back the club.  Gradually the level of richness has risen and risen, and now we have either the mega-rich or whole states backing clubs as with  Chelsea and Manchester City.

The problem here is that the rich can on occasion turn out to be less rich than was thought (this has been true of one or two Chinese investors) or it can be that issues relating to the cash of the rich might change (perhaps as with Mr Abramovich losing his UK business visa).  Often these difficulties can be overcome, but not always.

5: Persuade the local authority to see the club as an asset

In this way the local authority is persuaded to give a loan at a low interest rate, or indeed provide a guarantee for loans that the club will take out, on the grounds that the club is a local amenity that brings money into the local authority area.   This is a model being used by Everton to build itself a new ground.

The European Union has been very wary of such schemes since they can look like state sponsorship of commercial enterprise, and thus the UK’s departure from the EU could help stimulate more approaches of this type.

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Arsenal started out in the 19th as a Type 1 club, run by the workers for the workers in the days when the only income was gate receipts and profits from the programme.  Eventually the club ran into bad times and Henry Norris took over in 1910.

With the club on the edge of extinction with gate receipts far below that which was needed he moved the club into a Type 2 club with a plan.  And it was just about the most audacious plan ever seen in football.

In Phase One of his plan he offered local people in Plumstead the chance to buy the club through taking shares in the limited company.  When this failed he looked for a way to generate far more money through gate receipts, and did this by moving the club to Islington.

The idea in this second phase was that a club in north London would generate cash in three ways

a) Because there would be houses all around the ground rather than only on two sides (Plumstead of course being on the river and having no supporters to the north), in an area where there were a lot of rented houses – the tenants being seen as typical football supporters.

b) Because there were already two clubs in the area (Orient and Tottenham) meaning that with a third club, football would be a major topic of conversation for the local papers and the men across the area who would tend to be for one club and against the others.  This in fact worked brilliantly as the crowds of all three clubs shot up significantly in the years after Arsenal’s move to north London.

c) Because there was excellent transport that could bring supporters in from other parts of the city by underground and overground train.  Indeed for many years Arsenal advertised games with details of how easy it was to reach the ground from central London and the northern suburbs.

Henry Norris (Sir Henry after 1917 – he was knighted for his war work in raising the first Footballers Battalion and his work in organising volunteers and the conscription census in Fulham), rented the ground at first, in order to prove that he could get decent crowds – which proved to be correct – and used his money, income from the crowds, and bank loans, to develop the ground.   And in fact by 1924/5 Arsenal were getting the biggest average crowds in the league, even though for the second year running they only just missed relegation.

Then with the cost of developing the ground paid off, Sir Henry entered Phase Three – bringing in the top manager of the day (Chapman) and top players.

After Sir Henry left the club, the directors who took over the club benefited from the success of this extraordinary plan – creating the most supported club in the country out of a club that was about to fold in 1910.

Unfortunately these directors then sat on their backsides and watched the money role in as Arsenal became the most successful team ever, and remained a fairly decent side still winning trophies in the early post-war era.

Yet as far as I can see, these directors had no plan at all except more of the same.  The club owned its ground and got big crowds, it was a perfect Type 1 club – without debt, successful and self-sustaining.

But as success drifted away in the late 1950s and 1960s the model began to falter.  Despite the success of Mee with a European trophy and the first Double, he soon was talking about cutting costs, abandoning the youth teams and reserves and so on.  Occasional success followed but the crowds were down and money wasn’t rolling in.

The directors were used to the Type 1 model, and certainly were not ready to put their hands in their voluminous pockets and become a Type 4 club in which the directors actually paid, rather than received benefits for being directors and shareholders.

Crowds collapsed, the stadium shrunk from its 65000 capacity to 38000 as it became all seater, and when success returned under Wenger, the idea of moving to a much bigger stadium arose.  The model was one in which the club would pay the stadium costs but cut back on transfers, salaries etc..  Hence Mr Wenger and his youth team policy.

Now we have a new owner who most certainly believes he has bought a Type 1 club – he puts no more money in (having bought the shares) and takes a dividend out.  The club has to live by its own means; it has to make money by filling the stadium, and failing that by selling players.

It is a tragedy, in my view that the club that was taken from disaster in 1910 to having the largest income in the country of any club by the 1930s, had directors who ultimately frittered away the gift that Sir Henry Norris gave them,

And yet, curiously, this position is one in which suddenly supporters find they have complete power.  Because the club depends on income from supporters to make a profit.  If the supporters ever said, “we’ve had enough” and stopped attending, sponsors would leave, TV would be less interested and the whole model would collapse.  That is real power.

In one sense, we have control of the club.

Finally, as a PS, if you have read this and you are thinking, hang on, wasn’t Norris a crook who bought Arsenal’s way into the First Division by devious means.  If you think that might I invite you to have a quick look at our monumental work “Henry Norris at the Arsenal”  Just a quick look will show you the popular story is completely unfounded.

But in case you don’t have the time – here’s how it went, summarising the 150,000 words in our series into as few as possible.

Henry Norris was respected as a businessman, but not popular with the toffs who ran the FA and League first because he made his money by building houses having left school at 14 (ie he didn’t inherit a fortune and didn’t go to university), and second because he had dangerous views (like equal pay for women, pensions for life for all soldiers injured in the first world war, subsidized rail fares for commuters, and no salary cap for players).

He further annoyed the authorities by exposing match fixing by northern clubs before the war.  But with some he was popular because he rescued the club that had seen off the Southern League and supported the Football League in the capital, and these factors (his success in moving Arsenal and thus bolstering London football in the League, and his exposure of corruption by some northern clubs) made him popular in some quarters.  As a result Arsenal were elected to the first division fair and square in 1919.  No newspapers thereafter suggested there was anything wrong with the vote that elected Arsenal.

He was also a war hero.  He volunteered to fight in France but was turned down for three reasons – he was too old, his eyesight was too poor and he was much more value to the country organising recruitment which at first was in a total shambles.   The War Office sent him first to the south coast to sort our recruitment there, and then placed him back in London overseeing recruitment and conscription across  the whole of the south of England  At the end of the war he put in charge of  demobilisation of the entire armed forces.   For his work he rose from having no rank and no university education – essential for would be officers)  in 1914 to being a Lt Colonel by the end of the war.

The stories about him refusing to allow the manager to buy players, winding up the scouting network, forcing the manager to use the brother in law of the physio because he didn’t have a team to put out etc etc only appeared in 1946 when Leslie Knighton who manged Arsenal from 1919 to 1925 wrote a series of articles for a sunday paper and published his autobiography.  In our series of articles (noted above) we’ve been through his claims against Norris line by line and provided evidence to show they are all factually unsound.   However the claims have been repeated by others who did not check their facts and have since been repeated.  Sir Henry Norris the war hero and most successful club owner of all time, has been turned into a scumbag.

Let me, if I may, conclude with one tale you might know.  Sir Henry Norris bought Charlie Buchan to Arsenal in 1925 with a deal in which Arsenal would pay a fee up front and £100 a goal for each goal Buchan scored.  The tale then says that Arsenal ended up paying more than the original fee demanded for Buchan.  An example of how Norris’ meanness caught him out.

That story is everywhere – from Wiki to official Arsenal histories.  But it is wrong just as is the claim that Norris stopped Buchan playing because he was scoring too many goals (as it says in Knighton’s autobiography).  In fact Buchan scored 20 goals that year and Arsenal paid  the same as they would have done had they paid the original fee.  He played every match save three where he was injured.  But the publicity Arsenal got was dramatic – every goal was headlined in the papers as another £100 for Norris to pay, and the crowds went up and up.

Anyway, the full story is on the Arsenal History site.  But my point is, we are at an interesting moment in Arsenal’s history.  We ought to be aware that being a self-sustaining club in an era in which some clubs are using Model 4 – the sponsorship of the very rich – might not be the model that will bring us a return to the success we had in the early Wenger years, or in the 1930s.

And from here on, just blaming the manager if things go wrong, isn’t really going to help.  Nor will pillorying the previous set of directors – but at least it would be accurate.

Henry Norris at the Arsenal

 

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