http://www.sportsbusinessdaily.com/Journal/Issues/2011/08/15/Franchises/Arsenal-main.aspx

A few bits of this article stood out to me:

“We’ve created a five-year business plan that we’re ahead of target to achieve,” Fox said. “The real proof will be in the next two or three years as the plan we put in place begins to gel.”

Fox was given nearly 10 months to make sense of the English Premier League and evaluate Arsenal’s commercial operation. The learning curve was steep.

Like Gazidis, he had no team experience. The bulk of his career in sports was built on the brand side with marketing stints at Nike, Pepsi and Gatorade. He not only needed to learn the team business, he needed to understand the team business in a different country.

He quickly was overwhelmed by the differences between the EPL and U.S. sports leagues. For example, the EPL plays 380 games a year, with 138 broadcast live and 142 games not shown at all. He could not wrap his mind around the fact that Arsenal games on Saturdays at 3 p.m. weren’t televised. Similarly, he saw that the team had a season-ticket waiting list of 40,000 fans and thought the club was leaving money on the table by not maximizing demand.

“You look at those two things as a U.S. sports executive and you think two things: one, you’re not charging enough for tickets, and two, you’re leaving money on the table by not showing games on TV,” Fox said. “I spent a lot of time trying to understand that.”

The club also began overhauling its premium seating area. Fox recognized that Arsenal’s club section had a high amount of season-ticket churn. It was clear to him that the relatively barren look and feel of the clubs had become stale and offered fans little more than a warm place to spend time during halftime of a winter game. He looked to remodel the club level so it would appeal to a wider spectrum of fans.

For the most affluent club member, Arsenal created two high-end restaurants that offer five-course meals before every match at a price of $7,500 a season.

For the club member interested in a bite and a beer before the match, Arsenal converted a barren club room into a traditional sports bar, featuring portraits of past players commissioned from graphic artist Tavis Coburn and rows row of flat-screen TVs. Per caps are up 16 percent in the area since the remodel.

“Arsenal, now with Tom there, are probably the best hosts in London,” said Fred Popp, the former CEO of SME and the founder of Teamup, a European sports marketing agency. “The amenities that are available are so much more consumer appropriate for the fan segments they serve.”

Gazidis has said sponsorship revenue is the most important growth area for Arsenal, but the club has been slow to increase its list of sponsors in the last two years. It signed its first new partner in two years when it closed a multimillion-dollar deal with home appliance manufacturer Indesit last spring.

A lot of this stuff isn't new, but it reveals the reasoning behind what's happening on the pitch. A lot of people are saying that we're about to break even this year, and the impression that you get from this article is that our executives are almost solely focused on turning a profit. At this point, running at a profit would be somewhat of a major accomplishment, considering the fact that almost everyone is operating at a loss.

All this being said, it's easy to see why things that fans give our executives shit for are happening. A guy like Fox sees what he perceives as a super high rate of demand for tickets (although I think he'll find this season that the rate of demand that he perceives is much lower than what the rate is in reality), so what does he do? Increases the ticket prices. This is basic stuff based on elasticity principles. Given the fact that our stadium is shiny, new, and in the corporate capital of Europe, it should also be no surprise that they're marketing the club towards the middle and upper classes.

I think their major flaw right now is realizing that off-the-field improvements alone will somehow allow them to generate a profit. If we continue to slip on the pitch, they're going to see less tickets sold. Less tickets sold means less matchday revenues, which is obviously a massive portion of our total revenue. IMO the attendances at this week's matches will turn out to be quite indicative of what our attendance patterns will look like throughout the season: big games will sell out slowly, while several thousand tickets will go unsold for matches against smaller club. All this being said, I do think that it's possible that they only take a minor hit on this front, considering the six percent increase in ticket prices this season.

This is guesswork, but I also reckon our reluctance to spend big (even after the Fabregas and Nasri departures) comes down to the fact that the board fear that big signings could put as at a net loss. Either way, I think it's a dangerous game to assume that they can try to generate a profit purely based on what goes down off the pitch. If you look at it from an economic perspective, Arsenal is a very expensive product to "consume," so are these middle class types going to want to consume it if they can find a better product elsewhere? At the end of the day, the new breed of supporters almost exclusively care about about what happens results-wise, and I don't think they're going to be as afraid to switch allegiances as previous generations may have been.