Before I dive in to all this, I have to start with a whole lot of caveats. First: I am not a financial analyst in any way, shape, or form. I can pay my mortgage every month but beyond that, money is a very large mystery to me. Second, these numbers are not complete - they only include the football side of operations, not the property side, so it’s not a 100% comprehensive view of the state of the club’s finances.
With all that said: Arsenal released their 2018/19 numbers yesterday. It does not make for good reading:
Arsenal accounts released today are only for the football club. We will only see the full picture when club publishes consolidated accounts. This is important, as these include property, interest payments, etc. In short, loss will be even higher (£27m difference in 2017/18) #AFC pic.twitter.com/wmr4FgaSGI— Swiss Ramble (@SwissRamble) December 7, 2019
Woof. Arsenal have gone from a team that is relentlessly profitable to one that, well, isn’t. To my untrained eye, there are two things that seem to be driving that:
- Revenue from player sales. In the 2017/18 season, Arsenal said goodbye to Alexis Sanchez, Theo Walcott, Alex Oxlade-Chamberlain, and several others, and ended up with £120M to show for it. In 18/19, by contrast, player sales totaled £12.2 million. That is a huge drop and shows the need for Arsenal to have consistent revenue streams that fill that gap, because those £120M sales summers don’t happen every season. Which leads me to...
- Match day revenue. This dropped from £99.8M in 17/18 to £69.3M last season. That drop can be partly explained, according to the club, by “being mainly attributable to lower receipts of appearance fees from a fellow subsidiary”; in non-business English, that’s where the Europa League hits Arsenal in the wallet. According to Swiss Ramble, this number will change when the complete numbers for the holding company (not just the football side) are reported (I don’t know why that is, but I trust Ramble when it comes to these things), and should be similar to last year, but still, that’s an alarming drop.
Again, I’m not really equipped to do any serious analysis of these numbers, outside “money good me want more please”-level work. But it’s clear that Arsenal depended heavily on their Champions League revenue stream, and at this point, given who they are as a squad, they’d best start preparing for a life without that revenue stream. And I don’t mean “get back to the CL as quickly as possible”, because, well, have you seen this team?
No, I mean that Arsenal need to adjust their reality at this point and come to terms with the fact that they are not Champions League regulars any more, won’t be for a while, and their financial setup - particularly their wage structure - needs to reflect that. That doesn’t mean they should only go cheap, but it does probably mean the end, and rightfully so, of the £250-300K/week megacontract at Arsenal, because that level of spending is not smart for a team in Arsenal’s position.
Their wage-to-income ratio is 62%, which is a bit high, but I also don’t know in what context that lives, because I’m not sure what other Premier League teams’ ratio is. I know most US sports try to keep that around 50%, but maybe it’s higher in the PL - either way, that number did jump out at me a bit.
What’s unknown, of course, at this point, is what the club thinks of this, and what they’ll do as a result. Will this mean they only go after second-tier or young managers, thus avoiding spending big money on a Pochettino or an Allegri-level boss? Will it mean they no longer make Nicolas Pepe-level signings because, even with creative accounting, the price tag is too much? We shall see.
As I’ve said a few times as regards the playing side of the club, buckle up - things are going to be choppy for a while, it seems.