By Merlion
October 16 2015

This is the second Part of Merlion's analysis (Sustainable development?) of the club's financial performance and ends up asking is Wenger's performance enough to satisfy silent Stan. The first part can be found on the links provided at the top and at the bottom pf article.

Part 2 Continued from Part 1 here

[b]Part 2 – The Era of Sugar Daddy – June 2003 and September 2008 [/b]

Abramovich bought Chelsea in June 2003 and start the Era of Sugar Daddy in English Premier League. Abu Dhabi bought Man City in 2008 from Thaksin and immediately proves that the Virtuous Cycle works as the greater the investments, the greater the successes on the pitch which in turn will generate more revenues resulting in more pre-tax profits to invest back into the club to generate more successes on the pitch. We can safely say that both Chelski and Abu Dhabi City are now self-sustaining and will even turn a decent pre-tax profit for their investors.

And “Virtuous Cycle” is the reason why Glazer Family provided £250-million for the last 2 seasons for Van Gaal to buy players to restructure the team; even though ManU is still £400-million in debt, had paid £700-million in interests alone, and still counting, including during last FY, paid out £15-million as dividends to six members of the Glazer Family.

[b]Table 6: Arsenal Holdings Financial Report – GROUP Turnover Breakdown in £000’s [/b]

Gate & other … … … … Broadcast … Retail and … Commercial … Property … Player …. ... Total

matchday revenues …... Expenses … licensing … ... Venture … .... Develop … Trading … ... Cost

FY2006 ….. 44,099 … … 54,870 … … … 10,218 … … 22,796 … ….. 5,115 … … … 139 … 137,237

FY2007 ….. 90,613 … … 44,312 … … … 12,064 … … 29,518 … … 23,792 … … … 544 … 200,843

FY2010 ….. 93,929 … … 84,584 … … … 12,613 … … 31,360 ….. 156,910 … … … 460 … 379,856

FY2011 ….. 93,108 … … 85,244 … … … 17,702 … … 28,621 … … 30,282 … … … 735 … 255,692

FY2012 ….. 95,212 … … 84,701 … … … 18,303 … … 34,212 … ….. 7,684 … ….. 2,901 … 243,013

FY2013 ….. 92,800 … … 86,025 … … … 18,057 … … 44,365 … … 37,549 … ….. 1,598 … 280,374

FY2014 … 100,200 ….. 120,762 … … … 17,938 … … 59,216 … ….. 3,214 … … … 513 … 301,872

FY2015:__________________________________________________________________________

TOTAL .… 682,789 ….. 603,684 … ….. 113,084 ….. 246,881 ….. 392,454 … …. 9,340 2,048,232

Table 6 indicates that the future is bright when the 2016/17 £5.1 billion Broadcasting Contract kicks in and with the commercial business growing rapidly. The current Broadcasting Contract boosts the revenue by 50%. FY2013/14 indicated a rapid rise in commercial business turnover with all those onerous Emirates 2006/07 contract expired or re-negotiated with better terms.

Look at the “Player Trading” column from FY2006 to FY2014. This proves that Arsene Wenger is under severe budget constraints imposed by the Board that he needed to balance the Budget to such an extent that turnover is not more than £3-million per annum for this period ( I think you mean profit, not turnover. Ed).

Table 7 defines “Commercial revenue” includes sponsorship and merchandising revenues. It excludes player trading, joint ventures and property development.

[b]Table 7: Deloitte Money League Report – Commercial Revenue in £million’s [/b]

[u]… … ….. R. Madrid … Barca … B. Munich … ManU ….. M City … Chelski … Liverpool … Arsenal[/u]

FY2007 ……. 91.8 ….. 63.8 ……. 72.1 … ….. 58.1 … …..  00.0 ….... 56.4 ... ….. 43.3 … … 42.7

FY2011 … .. 155.7 … 141.1 ….. 160.5 … … 103.4 … ….. 57.8 ….... 56.7 ... ….. 77.4 … … 46.3

FY2012 … .. 151.4 … 151.2 ….. 163.1 … … 117.6 … … 112.1 ….... 70.5 ... ….. 80.2 … … 52.5

FY2013 … .. 181.3 … 151.5 ….. 203.2 … … 189.3 … … 143.0 ….... 83.9 ... ….. 97.7 … … 62.4

FY2014 … .. 193.6 … 155.3 ….. 244.0 … … 189.3 … … 165.8 ….. 113.5 … …103.8 … … 77.1

The commercial revenues of those clubs had grown from FY2006/07 to FY2013/14 by:

Real Madrid commercial revenues grown by 111%.

FC Barcelona commercial revenues grown by 143%.

Bayern Munich commercial revenues grown by 238%

Manchester United commercial revenues grown by 226%

Abu Dhabi City commercial revenues grown by 709%

Chelski commercial revenues grown by 101%

Liverpool FC commercial revenues grown by 140%

Arsenal FC commercial revenues grown by 81%

Abu Dhabi is willing to prime-pump financial support for Manchester City, who have  extraordinary grown by 709% whereas Bayern Munich 238% growth is well-supported by rich German companies.

The triple figure growth of Manchester United, Chelsea and Liverpool clearly demonstrated their superior marketability in contrast to Arsenal FC with their marquee appeal to companies willing to pay lucrative sponsorship deals.

Barring Liverpool and Arsenal, the rest of the clubs have been very successful on the pitch for the past 5 years, winning almost all silverware available and a global name equating with a successful club that wins trophies and titles.

Liverpool had established a firm foundation as a marquee club during the 80s with more than a decade-long domination of English Football with their classic confrontation with Manchester United that the whole global audience eagerly await every season. Certainly not the North London derby which just a local rivalry and not worldwide appeal like says Liverpool vs Manchester United or real Madrid vs Barcelona.

Plus both Liverpool and Manchester United, followed later by Chelsea have regular summer tours to build up their fan bases, especially  in the lucrative Asian Market.

Arsenal FC?

Their biggest commercial blunder was to pander to Arsene Wenger’s demand not to tour during the summer pre-season training. This costs us dear as then the French Spine was world-renown and Arsenal FC missed a golden opportunity to grow the commercial revenues like what Manchester United, Liverpool and Chelsea did.

Arsene Wenger dealt Arsenal FC “Commercial & Marketing Department” a double whammy:

#1 – Refused to tour during summer reducing our exposure to global fan bases and especially Asian sponsors.

#2 – Utter lack of success on the pitch drove overseas fans to support successful and high profile teams like Manchester United, Chelski and Abu Dhabi City.

#3 – Liverpool FC is unique. Through the decade, they had already developed a solid and loyal overseas fan-base which stands steadfast with them through thick and thin.

#4 – Point #3 condemns Arsene Wenger as a failure who failed to develop a solid overseas fan-base like what those legendary managers in Bill Shankly and Matt Busby did for Liverpool FC and Manchester United respectively.

#5 – Like Shankly-Busby rivalry, Ferguson-Wenger rivalry was a missed opportunity to boost Arsenal FC marketability by touring overseas fan base then.

Sadly, Table 7 proves that Arsene Wenger is the main obstacle in growing the commercial revenues by refusing to go on summer tours and almost a decade of failures on the pitch.

Silent Stan realised that and why Arsene Wenger was forced to tour Asia for the past 3 summers, and certainly, the Board will demand success on the pitch. A lucky Wenger got a stay of execution by winning two FA Cups in succession, but I believe Silent Stan will certainly demand Arsene Wenger to deliver, i.e. build a title-winning team with the new KPI being Top-2 this season with being 4^th is considered a failure.

Table 8 defines “Broadcast revenue” includes revenue from both domestic and international competitions. It includes UEFA distributions or participation in European cup competitions.

[b]Table 8: Deloitte Money League Report – Broadcast Revenue in £million’s [/b]

[u]… … ….. R. Madrid … Barca … B. Munich … ManU M City … Chelski … Liverpool … Arsenal[/u]

FY2007 ……. 89.1 ….. 71.8 ……. 41.2 … ….. 61.5 … ….. 00.0 ….... 59.6 ... ….. 52.2 … … 44.3

FY2011 … .. 165.7 … 165.9 ……. 64.8 … … 119.4 … ….. 68.8 ….. 101.4 ... ….. 65.3 … … 87.4

FY2012 … .. 161.2 … 145.5 ……. 65.9 … … 104.0 … ….. 88.2 ….. 112.8 ... ….. 63.3 … … 87.2

FY2013 … .. 162.4 … 162.3 ……. 91.7 … … 101.6 … ….. 88.4 ….. 105.4 ... ….. 63.9 … … 88.4

FY2014 … .. 170.7 … 152.2 ……. 90.1 … … 135.8 … … 133.2 ….. 139.9 … …101.0 … … 132.2

Table 8 is a condemnation for our failures on the pitch resulting in an inferior Broadcast Revenue in contrast to Manchester United and Chelski, who collected more UEFA distributions due to CL Cup. Abu Dhabi city had caught up with Arsenal FC due to their participation in CL Cup for the last 3 seasons. Liverpool FC is an example of the cost for failure to qualify for CL Cup – a loss of revenue of about £25-million.

Table 9 defines “Matchday revenue” is largely derived from gate receipts (including season tickets and memberships).

[b]Table 9: Deloitte Money League Report – Matchday Revenue in £million’s [/b]

[u]… … ….. R. Madrid … Barca … B. Munich … ManU ….M City … Chelski … Liverpool … Arsenal[/u]

FY2007 ……. 55.3 ….. 59.7 …….     37.0 … …..  92.5 … ….. 00.0 …....   74.5 ... ….. 38.4 … …90.6

FY2011 … .. 111.6 … 100.0 …….   65.0 … … 108.6 … …..  26.6 …....     67.5 ... ….. 40.9 …    93.1

FY2012 … .. 102.1 ….. 94.1 ……. 69.1 … ….. 98.7 … ….. 30.8 …....     77.7 ... ….. 45.2 … …95.2

FY2013 … .. 102.0 … 100.8 ……. 74.7 … … 109.1 … …..  39.6 …....    70.7 ... ….. 44.6 … … 92.8

FY2014 ……. 95.2 ….. 97.7 …….  73.6 … … 1 08.1 … …..  47.5 …....      71.0 ... ….. 51.0 … …100.2

Table 9 is proof that we need Emirates Stadium to compete with marquee clubs and even the likes of Chelski and Liverpool with that virtually 100% increase in matchday revenue to invest in the team.

Financially, Emirates Stadium enables Arsenal FC to generate matchday revenue on par with Real Madrid, Barcelona and Manchester United.

Arsenal in the past missed that window of opportunity to leverage on Emirates Stadium £90-million+ turnover to buy marquee players instead of those bargains that Wenger sniffed out just to maintain Top-4 status and never really a serious title-winning team.

Financially, if Silent Stan was willing to go into debt like Real Madrid, Barcelona, Manchester United and Chelsea to buy those marquee players that Arsenal FC desperately needed to rebuild a title-winning team, we were not be in such a dire straits now with Chelski, Paris Saint-Germain and Abu Dhabi City – all Sugar Daddy teams - overtaking us in the Deloitte Money League.

Instead, Silent Stan insisted on locking up all the cash flows into Cash Reserves to protect his £450-million and instructed the Board to live within their means. And so goes the window of opportunity for the past 8 years to build an Arsenal team in a group of Real Madrid, FC Barcelona, Bayern Munich, Manchester United, Chelski, Paris Saint-Germain, Juventus, AC Milan and Inter Milan that will fight for the title and CL Cup every year.

 Sure, Arsene Wenger is the right man at the right time and at the right place during those “Lean years” of Emirates Stadium construction, nobody denies that without Arsene Wenger we will not be in CL Cup for 18^th successive season.

The question always that I believe Silent Stan is asking the Board:

“Is Arsene Wenger the right man to lead Arsenal FC into the next decade with a rebuilt title-winning team that will grow the broadcasting and commercial revenues to match the likes of Manchester United with turnover exceeding £400-million by FY2017/18?”

With the new 2016/17 TV Broadcasting Contract, a predicted £50-million revenue increase for every premiership team, Arsenal Holdings plc should achieve £350-million easily. And FY2017/18 £400-million turnover is easily achieved by success on the pitch which attracts more sponsorship, more advertisements, more merchandise sales and all those new commercial contracts superseded those derisory amounts “long-term” contracts signed to finance Emirates Stadium construction period.

This is the new KPI (key performance indicator) for Arsene Wenger if he wants another contract extension for 2017/18 season.

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