Previous names: Dial Square, Royal Arsenal, Woolwich Arsenal

Wednesday, March 30, 2016

Wenger will splash the cash next season but not for the reasons you think

By 1970's Gooner

Wenger's reluctance to buy big in the last windows has come back to haunt him and us of course. Maybe he thought that with the addition of Cech it would prove enough to win the League. He was deluded of course.

But imo the major reason he did not buy was a financial one. And the major reason he will splash the cash next season big time will be for financial reasons again.

Let me explain.

The major reason he did not buy big this season is because Arsenal's profit and loss is at break even point. This means that all the revenue that the stadium earns (about 3m per game, the biggest of all stadiums in England) and all the revenue that commercial and other sales bring in just about cover the players wages and all the other expenses.

In fact Arsenal's revenues are quite high up the European League (around seventh). But for all that revenue NO PROFITS (or losses) are made. This is because no profits were made from the sale of players as was happening in previous years. as we all know. And this is because Wenger no longer sells star players. He has been buying them instead which bloats the wages bill and eats away at the revenue earned.

But this season, with the wages bill so high and no profits made, Wenger could not add any major stars on the wages bill as the club would have started making losses. Especially when there is a lot of dead wood around earning quite high wages whilst not playing. And losses are anathema to the shareholders like Stan Kroenke who are not in it to win trophies necessarily but to make profits.

Next season however the situation will change and Wenger will splash the cash.

One reason as explained above is that a substantial amount of wages will be saved from not renewing Rosicky's , Arteta's and Flamini's contracts.

The other reason is that next season there will be an even more competitive scramble for the top 4 places. This is of course because Man Utd, Man City, Chelsea as well as Spurs and West Ham will get stronger. Simply standing still may mean you go backwards.

But another equally significant reason is that if Arsenal is to make significant profits (and satisfy the shareholders) it has to substantially increase commercial, rather than stadium revenues which are anyway at their maximum. This is what the top German teams are doing and the Manchester clubs are achieving which are all quite above Arsenal when their commercial revenues are compared (some are twice as much as Arsenal's).

But in order to increase commercial revenues Arsenal have to become successful on the pitch. They have to win trophies both domestically but more so in Europe so as to tap in to the huge world wide commercial market that is there to be exploited.

Wenger and Arsenal can no longer buy enough quality players just to finish in the CL places. With the finances being at near break even point that is just not enough. It will also not be enough with the increased revenue teams will be getting next season from the sale of the Premier League rights.

Arsenal will get about 45m a year plus another 10m that will be saved from the release of Flamini, Arteta and Rosicky. But out of that a lot will have to be paid out for increases in players salaries (eg Ozil's and Sanchez's, if they agree to renew and for others) as well for the salaries of any new signings.

And more importantly the shareholders will be demanding that the club shows a profit. They are not in it to break even every year are they? The 3m paid out to Kroenke's company every year for services rendered without  going to tender may indeed be a way of appeasing him for the lack of significant profits and dividends.

The more profitable but of course more risky solution is for Arsenal to buy enough big players, win the Premier League and compete at the top of Europe. Only then will Arsenal upgrade its international profile, boost commercial revenues and make the business model profitable earning a high enough return on the shareholders' initial investment.

In other words taking into account Arsenal's cost base structure it will pay to think and act big. 

And this is why the Arsenal Board will be pushing and have been pushing Wenger to spend big next season.


bakrima said...

The big issue is that Arsenal have over twenty players who are not good enough to win. After twenty years at Arsenal Wenger ( the specialist in failure) failed completely to build a balanced squad . Leicster and totteham do not have more money than Arsenal , but they have the right managers to sign them the right players, not necessarily big names , but wining young players. It is too late for wenger to learn how to bring the right players to Arsenal and therfore he is the main problem that Arsenal failed to win trophies for more than a decade.

Anonymous said...

Wenger will pull out all the stops to go for it next season as it is his last at the club. He will then move upstairs