“Call premium” time
By Ivan Merc
Many renewing season ticket holders are paying for the future, not the present
Do you really think that Arsenal performances in recent years have been disappointing? Me too. But the biggest Arsenal shareholder is probably of another opinion.
One year ago Stan Kroenke owned 40% of St.Louis Rams when his partners decided to sell their 60% and they already had a buyer - Shahid Khan. But suddenly Kroenke made a decision to exercise his right of first refusal to purchase the stake that Khan wanted.
The team itself at this time had lost 88% of their games in past three years
Nine out of ten games! And Kroenke bought it out. Why? Because even at this bad point the team was still generating EBITDA of $29m (that’s earnings before interest, taxes, depreciation, and amortization). Is it now clear why he bought an extra 37% of AFC this spring?
He doesn’t care about sport results. He cares only about profits. And Arsene Wenger is the ideal manager for Kroenke as he generated club profits. The only chance for AW to be sacked is if he make several consequent annual financial losses. Kroenke doesn’t care if Arsenal play in Champions League or not. He cares about profits. If 10th place brings the same money as 2nd – it is ok for him.
Let’s say Arsenal offload several hugely overpaid losers, reduce the wage list to £70m a year and do not need European competition to make profits. We all know that this is very possible – the same (but new) mediocrities with reduced wages under AW’s management can achieve the same profits.
So trophies are a bonus but not a goal. The ultimate goal is profits. What kind of profits? If Kroenke spent £400m and bank interest is 4% then AFC must generate at least £16m profits to cover interest. And let’s say 1% for pocketing. So £20m annually. And manager is (and was) able to operate with all other club resources.
I guess this model was created by Fiszman and the new stadium was the easiest way to reach stable profits (compared to winning trophies). And that is why David Dein was kicked off the club – because he was the only director who is keen to bring sport success to the club. And who preferred sport success to profits.
So you can forget imagining Dein coming back with today’s regime. And we can forget that AW could be sacked by today’s regime as long as he is bringing profits.
The 2011 Deloitte Annual Review of Football Finance stated that in last five years Arsenal spent £500.1m for wages plus net transfers. Man United spent £609.6m at the same period for the same budget items. It means that in average Arsenal was annually only £22m short of Man United’s spending, but spent much more badly than Man United.
The Board’s responsibility – as they understood it – was to make profits. Arsene Wenger had full credit to spend profits before and he spent a lot. But after onlinegooner even the Daily Telegraph now admits that “Arsenal’s general transfer policy has been to invest heavily in the player contracts of the existing squad but pay relatively less on transfer fees.”
All transfers and wages decisions were made by manager. All the current team is his handmade achievement. Denilson / Diaby / Bendtner / Almunia / Squillaci / Eboue / Fabianski etc. is “the best ever” Arsene’s Arsenal.
£60K a week for unsellable losers is Arsene’s Arsenal. A mentally defective team is Arsene’s Arsenal. A provincial-minded transfer policy is Arsene’s Arsenal. Happy as second best is Arsene’s Arsenal (to be honest I have forgotten when we were second best and played Community Shields).
“I didn’t buy Xabi Alonso because it would kill Denilson” (AW, autumn 2008). Denilson was finally killed, but not by Alonso’s arrival of course, but by the “incubator” policy, which failed in two out of two episodes – in Monaco and in London. (Who knows – maybe the Brazilian lad could have successively played all these years for the likes of West Brom if not told that he is under AW’s protection and not to fight for a place in the Arsenal team.)
But AW’s “incubator” obsession is not only useless, but dangerous for AFC now. And AW’s sport debility involves a serious lack of commercial revenues. And therefore it forces Gazidis & co to get money from every source they can imagine. The recent season ticket price rise is one of them. They are afraid of not getting serious sponsors’ contracts with a losing team. So the attendees must compensate.
I always thought that Gooners are some kind of community and not clients. But the current AFC policy shows that Gooners mean nothing for the club and the club started to replace loyal Gooners with so called “plastic” fans who can pay more but have no roots with the club, no knowledge of club history and no emotional connection with the club. The problem is that “plastic” fans will easily leave the club when concluding that for this money they can buy winning entertainment.
This is a huge danger – losing loyal long-term supporters and their families. But our Americans don’t realize it. They treat Gooners as consumers.
Did Gazidis & Co ever hear Stanley Marcus’s phrase? Consumers are statistics. Customers are people. I guess never. But Gooners are even not customers, they are more.
So the current Board and ownership are destroying Arsenal Football Club.
At the same time it is not the Board and Kroenke, but Arsene Wenger to blame for all sport failures after moving to the new stadium. And Americans and French are currently happy with each other. That’s it.
Is there light at the end of tunnel? Yes, there is. But it may be the lights on the front of an oncoming train.
If you buy a business after being several years on the Board you definitely understand what are you buying and how you (or your management) are going to run this business. If you don’t tell the interested parties about your intensions and you don’t reveal any plans it often means that you need full control and you don’t want to co-operate with a blocking stake.
So I guess silent Stan would do his best to get extra shares up to 75%. And then he would be able to de-list the club from the plus markets exchange and put extra debts on the club. And nobody and nothing (such as promises during the takeover bid) could stop his attempts to do it. But as it stands today Usmanov will not sell and Kroenke will not get full control.
The takeover bid valued the club at £731m. By offering £14K per share Usmanov showed that he is ready to pay around £870m. I can’t imagine who else could even think about buying the football team for this amount of money. Especially a losing team.
Usmanov bought most of his current stake at a significantly lower price than £14K per share. So he would not need to spend £870 billion, but around £630m for 71% of the club.
Why would he want to buy? Because he needs publicity in western markets. Usmanov’s Metalloinvest will launch a 20% flotation on the London Stock Exchange. So Usmanov needs more recognizability for better flotation results. They say good results means that Usmanov and Co will get around £2.5 billion for this 20%. That would cover the Usmanov’s AFC cost easily.
So we can assume that Usmanov is able to buy. And that he is the only one who has the potential to get full control. Not Kroenke, but Usmanov. And he will buy and Kroenke will sell. I guess it could happen quicker than we can imagine. (Ed’s note, Kroenke gave an undertaking when buying the shares of Lady Nina and Danny Fiszman that he would not sell for 12 months, so we are looking at April 2012 at the earliest)
You could argue that Kroenke never sold his sport assets. But Kroenke never found himself in the market with only one other player. What will happen after the re-sale? The future will show. Maybe somebody will sell 0.6% to Usmanov now and we will discover the future very quickly.
Another opportunity to change things is if the E******s were 40% unsold. But I don’t believe that will happen.
And I can’t blame the Gooners who renewed season tickets as I understand that most of them pay for the possibility to watch Arsenal in the future. To watch Arsenal without the “special values”, without current Board duffers and without Arsene Wenger. So season ticket renewing now is a form of tax. Or “call premium” in business terms.
The Black Scarf marchers were singing, “We want our Arsenal back!”
They will never get it back in any scenario.
The more realistic chant would be “We want our Arsenal to win!”
But it is not possible with current regime.
4th July 2011
User Comment and Reaction
User comments on this article are now closed. If you want to continue the debate, why not do so on the Gooner Forum.
danalovAFCXI 11:53am 4th Jul 2011
so the gist of this article is whoever wins control of the club we the fans lose. Oh happy day. - Post No. 10415
gooner1 12:23pm 4th Jul 2011
if every season ticket holder boycotted one game it would be enough to get the boards attention. - Post No. 10419
Dan 13:10pm 4th Jul 2011
Brilliant piece, certainly tallies up with the stories I heard as to why Dein was sacked (stabbed in the back). I think a lot of the blame lies with the board to be honest but a certain amount has to lay at Arsene's door, if he is being made to tow the party line then he has to be strong enough to come out and say it for the sake of the club. Heard over the weekend that Sky have pulled out of showing the Emirates cup, again as you say we are simply less and less marketable as every season passes, so expect further price rises I guess. - Post No. 10433
CD 13:31pm 4th Jul 2011
You are completly right Ivan, we have simply become a commodity. Remember everyone who it was who sold us down this river, the very supposed "custodians"!!!! - Post No. 10436
Richard Ansell 13:37pm 4th Jul 2011
Too right Ivan - it's all about profits now and winning a trophy comes a poor second. Granted it is good to keep the club on a sound financial footing, but for Christ's sake we have two billionnaires as major shareholders and yet behave like Blackpool. Again Wenger is doing nothing, saying everyone is playing a waiting game - bollocks I say. All he is doing is convincing Fabregas and Nasri that they are right to jump ship to a team that actually cares about winning trophies. Wait for RVP to start thinking about his position too. Wake up Wenger, the good ship Arsenal is heading for the rocks and I suppose you will do the honorable thing and go down with her. I would rather you just gave the tiller to someone else before it is too late. - Post No. 10438
Boris 13:51pm 4th Jul 2011
Very good article, so so True. We want our Arsenal back!!!!!!!!!! - Post No. 10442
Dan h 14:00pm 4th Jul 2011
It's obvious every year we listen to promises of investment in the squad but it never comes to fruition.The money made from transfers has been invested in contracts to keep squad players happy the £40m from the Adebayor/Toure sale was never fully re-invested in the team. I think investment coming from the USA is down to one thing only they believe there is a gap in the market for PPV t.v & fully intend to expore these revenue streams..Time will tell i supose our board are just happy to come in the top 4 & bank the CL money buying young players & selling on for a profit.I have a feeling 2011/12 isn't going to be a season for the faint hearted umongst us gooners! - Post No. 10446
JM - LONDON 14:59pm 4th Jul 2011
I think your spot on mate, I doubt Stan Kroenke got driven around Highbury and Islington one wet Monday morning and thought 'Oh what a lovely place and full of lovely people, I must get involved in this part of London and invest in the local football team'. Personally, for me, the jury is still out on Stan Kroenke but you only invest in things to make a profit - thats just plain and simple, we all do it to some extent or other. Occasionally however we might buy a mates young son an Arsenal shirt or similar just to ensure their committment to the Arsenal at an early age, maybe Stan Kroenke might feel a little generous and and invest like this too?. And your dead right on the season ticket front, I don't have one (shift worker, wouldnt get to half the games anyway, hence have never bothered pursuing one) but if I was honest and the box office emailed me offering one (or two), and even given my work commitments, I would be very reluctant to turn them down. And finally, I desperatly hope CESC stays, the other 2 jack ******* aren't in the same league should be sold immediately to the highest and preferebly a club where neither actually wants to go. - Post No. 10458
Sam 15:58pm 4th Jul 2011
The American franchises are completely different to English football. An NFL franchise can move cities and is almost certainly Kroenke's motivation with the Rams, who are a leading candidate to move to the huge revenue generating Los Angeles market. The Glazers own NFL's Tampa Bay and much has been made of how the Buccaneers spend the least of all 32 NFL franchises and a potential correlatation and restriction of spending at United. However, Manchester United's spending has not been restricted despite the club's debt mountain or the Glazer's businesses in the struggling mall sector. - Post No. 10466
Jekyll 16:10pm 4th Jul 2011
Your key paragraph is the fifth one. Perhaps Wenger's plan this summmer is to sell the star players and bank the cash, thus making up the cash shortfall of missing out on top 4 next season that way, keeping Kroenke happy and therefore keeping his job. - Post No. 10468
Steve 17:13pm 4th Jul 2011
At the point Kroenke exercised his right to buy the Rams they had just drafted the number one quarter back of that college year. Who they will build a team around for the next 10+ years. In fact, in his first year they narrowly missed out on the play-offs and look good for making them next year, lockout permitting. - Post No. 10470
goonerpearty 19:14pm 4th Jul 2011
All red and silver members should just renew there memberships but dont go to any games.And all season ticket holders should sell there tickets back to the blood suckers.do that and see what happens.they might listen to us at some point. COME ON YOU REDS. - Post No. 10478
Rob 19:25pm 4th Jul 2011
This is a first class article. And if you think it through - 'Frightening' in it's implication for our future. - Post No. 10479
Cornish Gooner 19:53pm 4th Jul 2011
This is the sort of article we need to read - well argued and difficult to counter. However, is not the real villain behind all this, the vehicle that makes it all possible, the emergence of London as a quasi City-State where the majority of the desirable properties are now bought by non-doms? London is now an unrecognisable country to that where the majority of us live. The only hope for us supporters is either to own up as "Arsenal Alcoholics" and go for the cure OR for those "plastic fans" to surprise us all and move their "loyal support" elsewhere. - Post No. 10482
GaryFootscrayAustralia 20:03pm 4th Jul 2011
Ivan, a very well constructed piece...and going by the other replies to your post, hitting the right notes with those of us willing and able to read into the machinations of Arsenal PLC as opposed to Arsenal Football Club...but best of all, it's way, way over the heads of the dills who would normally tell you to "f**k off and watch Spuds / Chavski / Orient / Barnet" for daring to speak the truth... - Post No. 10483
Block G Gooner 21:23pm 4th Jul 2011
The longer this summer goes on the more I am regretting renewing my season ticket...............the club we love has died the day we the fans are talking about EBITA....christ its like being at work now being an arsenal fan. I just want my old club back. - Post No. 10489
Seven Kings Gunner 21:33pm 4th Jul 2011
A disturbing read - however with the sums of money to be made for just achieving mediocrity, winning trophies will be the last item of any of the board's list of priorities. The clever bit is the fight between the "AKB's" and the "AMG's" - this sideshow allows the board to continue mopping up our money whilst Wenger takes all the flak. The fact that AW is a willing accomplice, makes the task of jolting the board back to a more results driven business more difficult. As fans we all need to be of one voice and that looks like an even tougher job than buying a proper centre half! - Post No. 10491
jim 1:21am 5th Jul 2011
Well said. too many plastic fans with no ties to the club. People from Islington & Hackney have a right to a ticket, nopt some numpty from cornwall - Post No. 10504
Oxy-Moron 9:09am 5th Jul 2011
Excellent, thought-provoking and slightly scary article. I have stated before that this man is known as "Silent Stan" because if he did open his mouth we wouldn't like what we heard. - Post No. 10525
jonbromano 12:37pm 5th Jul 2011
May be a cynical view but definitely a well thought out view of the club's current state. Who is the lesser of the two evils? I say Usmanov as no matter what he will want to win! - Post No. 10538
Al 14:40pm 7th Jul 2011
Wenger needs to back his mate and speak out against the board it's unacceptable the demise of our good name. In my opinion afc is in debt to David Dein for the excellent work he put into our club and I think he needs to come back he galvanised afc and we need him back now true gent and true gooner. - Post No. 10632
25th November 2015
Online Ed: Arsenal re-find their mojo v Dinamo Zagreb