Burnwinter,
Have to confess, I don't really read Swiss Ramble all that regularly - it's all a bit 'day job', something I like to get away from when I'm not at work! Nevertheless, his analysis is pretty good, he usually unpacks the numbers well, whenever I do read him.
I think we're at the point where a bit of broader context would be relevant. It's something the SR guy alludes to, but to reiterate, the narrative of our business has been a slightly unfortunate, in someways foolish story.
Simply put, Arsenal locked themselves into an extremely long-term business strategy many years ago when they first committed to the Emirates development. And we were REALLY locked in - no options to unwind, no break clauses, no lawyers we could turn to to pick holes in the contract - we basically went 'all-in', full steam ahead, no turning back. Now, the big problem with 'long-term' plans is that nothing at all is certain in the long-term. Fundamental assumptions need to be made, and often these assumptions turn out to be inaccurate. In our case, two major things changed that we hadn't bargained for:
1) the property crash / credit crunch - actually didn't affect London property, in that region of the city, nearly as much as it did elsewhere in the country in terms of value - north London property prices have not fallen that much, if anything they've held steady / increased, albeit at a much slower rate than previously, and forecasted. Nevertheless, liquidity in the market dried up somewhat, and whilst prices remained solid(ish), sales were slower. Even despite this, Arsenal have had to recognise some not-insignificant impairment charges on the property portfolio.
2) the landscape of finance within football changed completely when the oligarchs first arrived.
Whilst I think it's evident that the stadium development project has been good for the club on the whole, it's also true that it was conceived in a world that was very different to the situation we find ourselves in today.
In short, the game has changed and we need to find a way to keep playing.
In fairness to the club, and the manager, we've managed to at least get ourselves invited to the party by qualifying for the Champions League every season. But we're not ones who're going to be pulling. Nevertheless, there are plenty of avenues I think we could be pursuing to increase our spending power:-
a) Stop pursuing profit, especially profit driven by player-trading. Bit of an odd suggestion, given we're talking about this in business terms, but not all that illogical. As I've said above, we're currently heavily locked in to a business plan that was designed to deal with a different world. It's an out of date plan. Rather than focussing on making profits in the short-term, Arsenal should be making the sorts of investments now that will protect the business in the long-term. That means both maintaining qualification for the Champions League, something we've undeniably achieved, albeit with a few too many close-calls for my liking, but also putting ourselves in a position to maximise those sponsorship contracts, those corporate tickets, those media revenue opportunities when they do come around for renewal. No sponsor is going to pay us because we're a profitable business, they're going to pay us to get their names front-and-centre on a glamorous location in the media's eye. This goes back to my earlier point (and I'll return here a lot): in the long term, the money that comes into our club comes in because of the team.
A couple of other salient points here: businesses are answerable to their shareholders, and when the shareholders wish to see profits, that's what businesses try to achieve. Football is a bit different here though, particularly in our case, and I don't think I need to explain why. The controlling shareholder interest in our club also sits on the board - it's well within his direct power to forego the short term profitability in terms of core investment and realigning our strategy.
What's more, I come back to my earlier point that I don't even believe in a football club necessarily being run for profit - solvency is one concern, but whose interests are really being served if we're making profits that we are not re-investing?
b) actually spend some of the cash we have. Most of us are familiar with the famous 'player trading account', though it often gets mischaracterised as our 'transfer warchest' or whatever. The first thing that normally gets pointed out here, when this mistake is made, is that it's actually a form of collateral held on our own balance sheet against the stadium debt we first took on. This is quite correct. What usually doesn't get mentioned, however, is that the precise intention of this collateral was to guarantee to our lenders that we wouldn't be fire-selling on field assets to fund debt repayment, to ensure precisely that our core business (playing football) does not suffer to a degree that our revenues fall so low as to not allow debt repayments. Our debt is long-term, and our creditors understood that long-term we needed to maintain core performance to fund the debt.
We have significant cash-liquidity sitting on the books, and significant assets that we could leverage to...
c) Take on more debt. Bit of a buzz-word this, and a lot of 'fanalysis' used to focus on overall debt levels, seeing some enormous numbers, and assuming that there's some kind of problem. A lot of fans are beginning to realise now that it's a question of debt sustainability that's important, not outright levels, and as an asset-rich business, with robust revenue streams, low base-rates (despite a higher spread), now may not be a bad time to take on longer-term debt. Remember, we have reasonable expectation of significantly higher revenues in future (as you've pointed out). Just how much higher those streams are depends largely on the product we can sell sponsors - and back we are to that old chestnut, investment in the team will pay dividends in the longer term. Talking of sponsorship...
d) take a bit of a short-term hit and negotiate an up-front settlement of our most unfavourable contracts, or, alternatively, extend with our current sponsors at a more competitive rate.
This has been something that's already been raised directly to the club, and was dismissed, but the response was so crass and glib that I struggle to have confidence that this is an avenue that's been fully pursued. 'Not something Arsenal do'? What the fuck does that mean?
Without being privvy to the relationship we have with our sponsors, or the exact contracts that have been drawn up, it's hard to be sure that this is possible, but as with any financial contract, there will be an exit price that could be negotiated, and there comes a point where the opportunity cost becomes too high and this price becomes worth paying.
e) A share-rights issue. Easy to understand why Kroenke doesn't want this - he'd have to cough up another chunk of cash just to maintain his ownership share, and Usmanov would likely Hoover up all the shares where current owners did not take up their option.
However, ultimately this is a result of the fuck-up at boardroom level, that's created this strife to begin with and given the MO of other owners in this league, as an interested party I think it's something Kroenke should be considering.
f) straight-up cash injection from the owner. I know, I know, but fact is other clubs are doing this, and our owners are more than capable. Isn't necessarily money down the drain, either, from an owner's perspective - increase the perceived value of the franchise, increase the resale value, and back to the same point I made above.
This is about as far as I can go whilst typing on my phone, and without bringing actual numbers into the mix - in meetings all day, so going to struggle to actually pull up the figures, but from what I've researched in the past, and the brief refresher I did on the interim accounts a couple of days ago, I'm very confident of all of the above.
