arsenal finances thread: Page 23 - The Arsenal discussion forum and community: One More in the Tolly

arsenal finances thread

Meatwad

transfer budgets can be massaged (fees aren't paid upfront and they're amortized anyway), wage bills can't. that's what tells the story. we don't have the wage bill of a tin pot club.

Gazza M

that's why when i read we're considering handing out 75k/pw to guendouzi, it gives me pause as to the santiy of the people in charge

Anzac

Reducing the wage budget has a double impact in the way our finances are structured.

Firstly we look to cover all the known overheads for the season from the money we have in hand, and without counting any revenues we have not received. The remaining funds are then available to be used for transfer fees, new player/staff wages, increased wages for players/staff already at the club, any new infrastructure such as training/medical facilities etc.

So any reduction in our known expenditure (wages) automatically frees up the scope to increase wages per the allowable 7% in relation to the TV revenues (not including the increase allowed as a result of the new kit deal). Further to this it also allows for an increase in the transfer budget on the cumulative impact of the reduced wages for the full season. If we reduce the weekly wages by 1m then that givers us potentially an extra 52m off the known overheads for the season that can then be added to the transfer budget at the start (if all else were to remain the same) = a win-win scenario.

Then we can begin to talk about the new kit deal worth about an extra 30m+ per year. If the first season is front loaded as we saw with the Puma deal, then we could perceivably have a transfer budget of about 100m+ even without CL revenues(which wouldn't count amongst the initial budget figures as those revenues are not yet received).

jones

We dont have a tin pot wage bill but it's not like we're paying United or Barcelona levels of wages either. I dont have the figures ready but I think the wage bill to turnover ratio was average compared to other PL clubs yet we must be consistently spending the least amounts, not even taking into account windows where we faffed about and signed no one

Claudius

We’ve had rapid wage escalation due to the higher forwards we signed and that insane Ozil contract that pays him like he’s 3 players. That’s what is killing us. It wasn’t augmenting the other players. It was these moves particularly in summer 2017 and January 2018. That was compounded by impact of two straight seasons without Champs League.

Champions League + cull will set us on a path to health. I don’t think we can build to win league in 2019-20, so my inclination would be to go aggressive with cull, replacing with quality younger players like Konate, Neves. The capex impact will be material, but combined with cull, should be fine on income statement.

JazzG

jones wrote:
We dont have a tin pot wage bill but it's not like we're paying United or Barcelona levels of wages either. I dont have the figures ready but I think the wage bill to turnover ratio was average compared to other PL clubs yet we must be consistently spending the least amounts, not even taking into account windows where we faffed about and signed no one

I believe there is some restriction on how much you can increase your wages every season, I think it can only go up significantly if your turnover increases proportionally. Also while Wenger was there he had some bullshit socialist wage structure meaning players like Jenkinson on like £50k a week. We then struggle to offload these players

It has been speculated for a while the way we pay our wages is different to other big clubs, basically they’ll pay a set amount which goes from the wage column from their accounts and they’ll pay bonuses from another part thus artificially reducing their wages to turnover ratio.

Ozil, Mkhi, Cech & Jenkinson alone on approx £33m a year/£650k a week, we will struggle to get rid of Ozil & Mkhi though.

jones

Yeah and the turnover did increase in the last few years by grace of the ridiculous TV deal alone.

Not sure which socialist country would pay Jenkinson 50kpw. I thought we stopped using that term in 2015

Agree however on the wage structure, I'm almost positive we have some stupid basic accounting rules in place which make our wages look way worse than our competitors. It would fit perfectly with the rest of the club's setup to seriously hamper our chance for progress without any need at all.

Gazza M

there's restrictions on how you spend the tv money as it relates to wages. you can't pump it all into wages iirc. you can put some of it towards wages, but the rest of the wage bill has to come from other revenue streams i.e sponsorships, gate receipts etc

Claudius

Remember the top clubs have similar wage to turnover ratios, with Spurs being the lowest historically. The difference is that there is a massive spread in how much these clubs make, with United making revenue of some £150m more than some clubs. So they can account similarly and just have significantly more space

I expect the ratios to change this season. The other big clubs will probably stay more or less the same. Spurs will fall to a record low. And we will continue to go up slightly due to paying in a lesser competition.

Kel Varnsen

Doesn't Ornstein just say whatever the club wants him to say? Who knows how much money is available for players. What we do know is that if we win the EL and get rid of a few players (Ozil, Cech, Mkhitaryan etc) our situation looks a lot better immediately.

Anzac

The FA's restriction re TV revenue v wages is an allowable increase of 7% per annum if the only increase to revenues is via the TV deal. The figure can increase if there are increased revenues received from other sources - sponsors, prize money, player trading etc.

The baseline figure for starting wages is drawn from the wages established from a baseline season that the FA gave notice of prior to the date - it may have been the start of the new (current) TV deal which was about 2014. One article I read highlighted that most of the top6 made sure to inflate their wages to the max so as to have a higher starting point, and needless to say the obvious exception was AFC.

The season we only signed Cech and didn't sign any starting outfield players (2015) is significant as it also coincides with both the wages baseline and the start of the new TV contract. The key factors here are our own financial strategy (particularly that we do not count any revenues not already received), and if there was any advance payment made at the start of the new TV deal. Regardless of this most clubs took advantage of the already known increased revenues (based upon 50% of the revenues being shared equally amongst the PL clubs regardless of finishing position or number of live games), and spent their known revenues in the summer at the start of the new deal.

Anzac

Kel Varnsen wrote:
Doesn't Ornstein just say whatever the club wants him to say? Who knows how much money is available for players. What we do know is that if we win the EL and get rid of a few players (Ozil, Cech, Mkhitaryan etc) our situation looks a lot better immediately.

Read a blog that identified the following new revenues we will receive next season as follows:

New club level seating increase - 5m
New kit deal - 30m
Emirates - 12m
Visit Rwanda - 10m
New TV deal - 10m

Combined to the reported budget gives a ball park figure closing on 100m before player trading. It also greatly reduces the need to sell players to reduce wages or to increase the budget revenues. That said the 'real' reason as to why we may still find ourselves with a restricted budget may well be as the result of the operating loss we are looking at for the current financial year, a big part of which comes from player transfers and wages.

EDIT - The reported figure for the projected losses is around 60m, which then explains the projected 40m budget as being the residual from the figures above.
It also means that next summer our budget could increase by at least 60m if all things stay as is.

Bold Tone

Arsenal are listing 9 less partners on their website compared to just a couple months ago

https://theshortfuse.sbnation.com/platform/amp/2019/6/3/18650995/arsenal-losing-sponsors-ivan-gazidis-vinai-venkatesham-gatorade-adidas?

HomeSteak

I'm sure new ones will sign up fast.

Claudius

That is such a dumb tweet. Do these guys think it is hard to find tier 2 sponsor for a global club? It’s the marquee shirt and athletic sponsorships that are a headache. The rest you can just tag on. It’s teally up to us what strategy we want to pursue. I’m just annoyed that we aren’t looking at China (Chayna, Chai-na)! Huawei, alibaba, Tencent. The size of these companies, and their global reach.

Meatwad

the stupid is strong with that one.

Anzac

Claudius wrote:
That is such a dumb tweet. Do these guys think it is hard to find tier 2 sponsor for a global club? It’s the marquee shirt and athletic sponsorships that are a headache. The rest you can just tag on. It’s teally up to us what strategy we want to pursue. I’m just annoyed that we aren’t looking at China (Chayna, Chai-na)! Huawei, alibaba, Tencent. The size of these companies, and their global reach.

IIRC both MU & LFC have Chinese businesses as sponsors, one being a credit card provider and the other being a media provider?

Anzac

https://arseblog.com/2019/05/can-arsenals-owners-improve-the-clubs-fortunes-by-investing-their-own-money/

Don Pacifico

Playing devil's advocate here, is the fact that we have an owner committed to not spending beyond our means such a bad thing?

Within the context of football, it's difficult to comprehend a scenario where not spending money doesn't seem hugely unambitious, but in any other industry they'd take a similar approach to balancing the books. The fact we're not in the CL for the third consecutive season logically supports a tightening of our belts.
Added to that, my experience of having worked for an American company is that they're big on forcing their employees to find efficiencies. Again, being used to the way football financials are, I think we get blinded to a reality that bloated expenses is just part of the game. By contrast, Kroenke has come in and challenged the club's staff as to whether they are spending their money as wisely and as prudently as they could be. Again, in any other industry, this would be considered acceptable practice and if you're looking at the longevity of a club (or company), it's difficult to argue with the logic employed. I have no doubt in my mind that despite Arsene's frugal nature, there have been massive inefficiencies in the club (eg. Ozil's contract, the contract renewal process, the amount we pay youth team players) and that we can definitely improve in this area, including the recruitment of players (ie. there is still value to be had in today's market if you know where to look and even if get it wrong, the risk is much lower than spunking £35m on a Mustafi or a Xhaka, meaning we can dip back into the market and try again...something we have not been afforded given the sunk costs in the aforementioned players).

All in all, I'm not saying we are definitely taking the right path but I can see the logic. I'm also willing to give it a chance to see how it pans out.

Meatwad

that's exactly my position and the corporate culture i was raised in. you don't give wasteful people more money until they prove they can spend what they have wisely. you don't get to spend 70m on mustafi and xhaka, give ozil 350k a week and then cry "we don't have enough money". and it may not have been you who committed those misdeeds, but having experienced it we won't be fooled again, prove you're different.

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