"Arsenal's board cash in...after 30 expense free years"

Discussion in 'Arsenal Talk' started by TheEconomist, Apr 20, 2011.

  1. TheEconomist

    TheEconomist Well-Known Member

    Heres an article I found earlier on The Guardian, I found it interesting because it highlighted a few issues which have been on my mind a lot during the course of the season,

    None of the imformation is particularly new, its all things we already know, but its summarised nicely



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    Arsenal's board cash in from Stan Kroenke after 30 expense-free years

    Cesc Fábregas's pointed questioning of the "Arsenal way" and the sudden outbreak of fans querying the club's direction are coming, in a neat coincidence, just days after Arsenal's chairman, Peter Hill-Wood, sang his and the board's own praises as they sold their shares to Stan Kroenke.

    Arsenal's "self-sustaining business model", as Hill-Wood and his fellow directors have come to call it, has been paraded to the parliamentary select committee's inquiry into football and to Uefa as the embodiment of virtue, compared to the plutocrat-subsidised loss-making at Chelsea and Manchester City. In a nutshell it means that Arsenal spend what they earn, from the 60,361-seat Emirates Stadium and other income they make, and the directors or shareholders do not put their own money in.

    It is the sensible way for football clubs to be run and what Uefa requires in its financial fair-play rules, but there are some serious problems with the fairness of the self-congratulatory Arsenal "model". Over almost 30 years not one director or shareholder of Arsenal has put a penny into the club itself, while they have made vast personal millions for themselves out of selling their Arsenal shares.

    Hill-Wood last week said that as directors, "protecting the ethos and spirit" of the club was "a key responsibility", so they were selling to Kroenke because they are confident he will be a "safe custodian". Secure that they were doing their duty, Hill-Wood banked £4.7m for his shares, Lady Nina Bracewell-Smith £116m and Danny Fiszman, who was terminally ill by then and has since died, £117m for his family.

    None of that money is going back into Arsenal, whether to buy and fund the wages of some senior experienced players Fábregas argues they desperately need – that would be contrary to the "self-sustaining model" – or to keep ticket prices the right side of extortionate. It is all for the custodians to keep.

    Arsenal's self-sustaining model now apparently requires prices to rise again, 6.5%, at the stadium that already has the most expensive tickets in the Premier League – and therefore the world. Arsenal Supporters' Trust, managing creditably to campaign for the club's soul while diplomatically seeking an influence, is challenging what these price rises are to be spent on, while other fans are simply, angrily, objecting to forking out more.

    Arsène Wenger's resistance to signing the kind of colonels Fábregas is calling for is said to be due to the manager's own philosophical insistence that he wants to win things with kids. Hill-Wood and his fellow board members, all senior citizens, appear to have left that to the manager over the years, using the club's money to pay down the stadium debt rather than buy players. While sensible, of course, to reduce the debt, that also made the trophy-less club, and the directors' shares, more attractive financially for Kroenke to buy.

    Arsenal's status as the club whose way set an example to all does deserve to be challenged. It never was a "sustainable model", which other clubs could follow, if a 60,000-seat stadium, in the nation's richest catchment area – London and the south-east – is what football now requires to be competitive.

    Now, though, the model appears to be to hit the fans with another 6.5% ticket-price rise, while the directors, who put no money into the club, pat themselves on the back as they put multiple millions into their own bank accounts.

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    Now im no expert in business/finance or Economics by any means, but it has been on my mind for a while now, is this whole "project" idea really for the benefit of AFC, because, while it may be beneficial, it looks like a significant factor was the benefit of the shareholder/s

    Another thing which I think is a bit strange, is that PHW is selling his shares? the other board members selling their shares makes perfect sense, but I dont see why someone, who is our chairman would chose to ?
     
  2. dpt49

    dpt49 New Member

    This is what I've been saying for ages.
    Hill Wood and co. have been doing this for years, even in the Graham era.
    We have the greediest board, who are not willing to put the club before making vast profits
     
  3. NWgunner

    NWgunner New Member

    Good link. I rate David Conn quite highly, but there are a couple of things I disagree with.

    If the board were looking to cash in, why have they never taken dividends? We've had massive unused cash reserves since we paid down the expensive Emirates debt, and the long term bonds are on a long term repayment plan so over the last couple of years they could have taken some "spare" cash. He neglects this point which is a shame as he's normally very thorough.

    He also implies that cash not spent on players paid down the stadium debt - that is factually incorrect. Stadium debt has been paid down by Highbury Square profits, unrelated to the football club's activities. For more on this read what I wrote here <a class="postlink" href="http://blog.emiratesstadium.info/archives/10230" onclick="window.open(this.href);return false;">http://blog.emiratesstadium.info/archives/10230</a>

    The shareholders can't stuff some of their profits on players either. That would simply raise the wage bill based on a temporary income boost (what Chelsea and City do) and we'd then have to make cutbacks later on to remain profitable. It's the same reason why the property profits won't be excessively re-invested in the squad - they arent a permanent income stream, whereas wages are a long term cost. I suppose if you could make space on the wage budget via player sales, and then used the sales proceeds + share/ stadium cash on transfer fees that wouldn't affect operating profits (the best measure of sustainability) in itself. But if Arsenal splurge massively on a player, we lose our reputation for frugality and hard bargaining, causing us to pay more for transfers in the future.

    As to your thoughts - look at the wage bill. If we'd wanted to cash in, we would have spent less on the team and the board would havehave taken some of the profit made by these wage savings. While this may have resulted in us dropping out of the Champions League, I bet the wage saving would've covered that, you could easily be talking 40m a year saved, plus transfers. In the short term, match day income wouldn't fall by much due to the waiting list etc, and comemrcial can't really drop much anyway!

    Also, the project was Wenger's idea, supported by the board but done by Wenger. Wenger doesn't profit - he doesn't get a % of bottom line profits, nor proceeds from player sales.

    I'm not quite sure about Hill-wood's sale. If he thinks Stan is a good owner there's nothing to morally prevent him selling up if the trade is from one "custodian" to another. He still stays on the board, his holding of shares doesn't really get him anything extra. It does leave him open to accusations of cashing in, but I don't know enough about the internal politics to speculate on that
     
  4. redwhiteAustrian

    redwhiteAustrian Tu Felix Austria Administrator

    I don't understand enough in that regard to have a reasonalbe and honest opinion, but what annoyes me the most are the ever increasing ticket prices.

    Does indeed seem to me, that our great "self sustainable model" requires such high ticket-prices to actually work, and as a result we've no money at all to spend on players.

    Just clutching at straws here though, simply because I don't know the whole background.
     
  5. Beksl

    Beksl Sell All The Youngsters

    This is the same thing I've posted a couple of weeks back. Our sustainable model is not the right way how every football club should be run. It's the right way for Arsenal, so it really shouldn't be presented as some miracoulous idea that will free the clubs from financial dependence of foreign investers.

    And one more thing, because our model is highly depended on ticket prices which are affected by yearly inflation and unbalanced transfer market where prices reach sky rocket levels every year, I think our self sustainability is limited in it's core structure. Simply put it, you can't rise ticket prices every year forever.
     
  6. dyeruz

    dyeruz New Member

    I guess Danny Fiszman was cashing in too wasn't he? Opportunity and circumstance conspired together to bring forth this scenario, it was going to happen sooner or later. It happened now. The papers are sh*t stirring, these are the same papers that praised us for having such a well run club, the last english club blah blah.
     
  7. duduspace

    duduspace New Member

    I agree with your analysis of the situation but totally disagree with your conclusion. The Arsenal model is held up only on one basis, the fact that the club spends what it makes and that would hold wherever it is whether in a slum or in the posh center of London, it is important to note however that the location could potentially have some part to play in how competitive the team would be as that might have a bearing on how much money it makes and hence the talent pool it can attract.

    The reason why there is a need for ticket price increases is because there is inherent distortion of the market by the big spenders, if all clubs spend within their means, that will self correct because there is only so much each club can make and borrow.

    How reasonable is it that Chelsea made a 70m loss in a year and yet is able to spend a further 70m in the next season and that is after the owner wrote off a debt of about 500m (more than the cost of the emirates stadium)just a year earlier when Portsmouth went under with just a 120m debt? How level exactly would you say that playing field is? can that be done in any other viable business venture which is not a charity?
    People really underestimate what the club has been fighting against for the past 5 seasons, its a bit like racing a bicycle in a formula 1 arena.
     
  8. a_fourteen

    a_fourteen Well-Known Member

    the writer of this article does not understand the principles of the free market. here's an attempt to clarify them: clubs are businesses and fans are its customers. the product is football and all the tchotchkes that go with it. people that invest in this business with their money (i.e. shareholders) benefit in its success. nothing new or surprising here. if a customer (i.e. fan) doesn't like it he can move on. the days of clubs being community organizations is long over.
     
  9. DanDare

    DanDare Emoji Merchant

    Our model will become more sustainable once prices of players go down from the FFP. Then our ticket prices won't need to constantly go up ahead of inflation like player prices did.
     
  10. qs

    qs New Member Elite

    If the board simply wanted to cash in they'd have sold to Usmanov who offered more money. Terrible article, all the Guardians articles on the business of things have been lately. You get a much better perspective reading Swiss Ramble and well informed posters on here.
     

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