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Arsenal’s latest financial report sounds an ominous note

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The good news is the club will still exist. The bad? Well...

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Arsenal released their six-month financials last week, and without getting into the gritty details behind the numbers, the club is operating just fine and it’s as safe to say that they will continue to exist in a healthy manner as it is to say you will be taxed for the remainder of your life up until your eventual death. However, a few things stood out regarding how the club operates, how they view their current landscape as well as the league’s, and what we might see as a result.

The club has long had a fixation towards increasing their cash reserves to almost obsessive-like levels, but with last year’s expenditure of transfer fees the club is reporting the balance of cash available for footballing purposes has dipped to £100.4 million - a £35 million decrease since this time last year. The reason for this is that the club committed a total of £110.5 million in transfer fees (through amortization) last summer versus a net £6.3 million in player sales, which should be encouraging as a supporter to see them dip into this fund, something that they’ve been heavily criticized for not doing throughout the years.

Arsenal spending money they’ve long had, though, isn’t nearly as eyebrow-raising as a few of the comments from the financial release itself. Based upon the language used and what we know about the current tenuous contract statuses of Mesut Özil and Alexis Sanchez, we might have a clearer idea of how the club has and probably will continue to position itself in any further talks with the players.

As evidence, below are a few excerpts from the release:

“As expected increased Premier League broadcasting revenues have had a direct impact on player costs both in terms of transfer prices and player wage demands. Whilst these are the market forces that have contributed directly over time to the success of the Premier League I would sound a note of caution in light of the very material contractual commitments to future wages that clubs are taking on.”

“Higher player wages are, once again, the single largest contributory factor in the Club’s increased operating costs.”

“Further work is required in the area of contract renewals and we will continue to invest rationally in our squad retention as we move forward.”

“The start of a new broadcasting cycle has, once again, signalled a strong upward pressure on our player costs and it follows that our operating costs for football were increased by £11.2 million. The main component of this increase was payroll with the new players signed in the summer adding to the impact of certain contract extensions within the squad. It will take some time, as player contracts fall for renewal, for the wage bill to be fully recalibrated against market rates which are informed by the increased broadcasting revenues available to Premier League clubs and so we must expect further increases in this area.”

The club - specifically Chairman Sir Chips Keswick - covered other important and relevant financial topics in the release, but you’d have to be a fool wearing red-and-white tinted glasses to not see the above passages as purely coincidental. As a result, we now have a pretty good idea how the club views the widely-reported wage demands of Özil and Alexis and, well, it doesn’t look too promising.

Arsenal have been a financially conservative club for a good chunk of the last 12-13 years, thanks initially to the stadium construction project and then thanks to, well, just being that way basically. These quotes from the club would seem to reinforce that conservatism as a club philosophy in a way that might not be what we want to see from a playing perspective, but from a sustainability perspective they’re right in line with recent years, even those that saw relatively expensive players purchased.

The darkest timeline reading of those quotes, if you’re feeling bleak, is that at least one of Mesut Özil or Alexis Sanchez are definitely leaving this summer; the other thing to consider is the domino effect.

If the top earners blow Arsenal’s current wage scale out of the water if they renew, what does that mean the next level below them - the Xhakas, the Ramseys, the Koscielnys - will ask for when they renew? This isn’t an uncommon problem in sports - it happens everywhere, all the time - but for a club that is proud of its financial conservatism almost to the exclusion of other considerations, it could definitely have an impact on the players that the club keeps.