Arsenal, Premier League

Why Gazidis Statement That Arsenal Can Compete With World’s Best ‘Within Two Years’ Is Wrong

Arsenal will be able to compete with the world’s biggest clubs “within the next two years,” chief executive Ivan Gazidis has told shareholders at the club’s annual general meeting.

Once again Gazidis trotted out the line that Arsenal’s financial philosophy will pay off when UEFA’s Financial Fair Play regulations become more rigorously enforced.

“In the next two years, we will have the financial resources to sit and compete among the leading clubs in the world, which is an extraordinary achievement,” Gazidis said.

“Financial success is relevant because it supports our football vision… the money we make is made available to our manager and he decides how to invest those funds.

“Arsene has done a magnificent job against the spending of our major competitors.”

When Gazidis is saying wait two years, what he is referring to is Arsenal’s shirt sponsorship and kit supplier deals are up for renewal.

When Arsenal was financing the move to the Emirates they signed a long-term deal worth £90 million that covered 15 years of stadium naming rights (£42 million) running until 2020/21 and 8 years of shirt sponsorship (£48 million) until 2013/14. Following step-ups means that the shirt sponsorship deal is worth about £5.5 million a season, which is well below market rates.

Consider that Liverpool, Manchester United and Manchester City all earn at least £20 million from their shirt deals, you would expect that Arsenal’s new shirt sponsorship deal will be worth over £20 million a season, which will add another £15 million a year to the club’s turnover.

image from Swiss Ramble

The news is no better with Arsenal’s kit supplier, where the club signed a 7-year deal with Nike until 2011, which was then extended by three years until 2013/14. This Nike deal is worth close to now £8 million a season, which is nothing compared to the £25 million deal Liverpool has with Warrior Sports and the expiring soon £25.4 million deal Manchester United has with Nike.

image from Swiss Ramble

I would expect that Arsenal’s new deal would be in line with these two, meaning around £20 million a year, a nice £12 million jump from current levels.

So in two years, Arsenal’s commercial revenue should jump by at least £27 million due to these two new deals. That is the equivalent of being able to sign one top player per season.

The problem with this thinking, is that the other top clubs are not standing still. They are also increasing their commercial revenue. And often at a greater rate than Arsenal are.

Yesterday I wrote how Manchester United were looking to take that £25.4 million kit deal with Nike and increase that to £138 million per year. That blows away any gains that Arsenal make with their new deals.

And that is the problem that Arsenal has. Then financial gap between themselves and the top teams in Europe is getting wider. It is not shrinking.

image from Swiss Ramble

Only four teams in Europe generate more revenue than Arsenal each year. The problems for Arsenal fans is that the (a) the gap to the top four clubs is huge; (b) Arsenal’s revenue has hardly grown at all in the last few years; (c) other clubs have continued to grow their revenue.

Arsenal is in that uncomfortable position of not having the cash flow of the truly big European clubs, and seeing Premier League rivals like Chelsea, Spurs, Man City and Liverpool growing revenues faster than they are. So the gap that Arsenal has over its domestic rivals is shrinking every year.

That can be seen in the table below where Arsenal’s £53 million in commercial revenue is less than half of Manchester United’s £118 million. While Arsenal has barely registered any commercial growth since 2009 (just £4 million), Manchester City have grown their commercial revenue by £41 million and Liverpool by £17 million. The discrepancy will be even worse when those two clubs publish their latest accounts, as the 2010/11 figures do not include the increases for new sponsorship deals with Etihad and Warrior respectively.

image from Swiss Ramble

So I have to respectively disagree with Ivan Gazidis statement today that Arsenal will be able to compete with the world’s biggest clubs “within the next two years.” It is simply not true.