When Arsenal CEO Ivan Gazidis spoke to the AST a few weeks ago, he mentioned about Arsenal's self-sustaining model many times. In simple terms, he was describing the corporate side of things, which is to run and grow the business on its own. Football is not just about winning trophies, it's also about making money so that the success could be sustained in the long term. You can win the league but if the club is insolvent, the likelihood is the club's future will be in doubt, players will be sold, points will be deducted and the club could go down for a long time (Leeds is a good example and luckily their fortunes have changed in the last few years).
A self-sustaining model is a business model that relies entirely on the business' operations and retained earnings for growth. In Arsenal's perspective, the business grows by the profit it makes from football which includes TV rights, gate receipts, sponsorships, merchandise and others. This is in comparison to the other extremes like Chelsea and Manchester City, whose businesses are built on the wealth of their owners. They sign very expensive players, pay top wages and expect fast results. Do their business' make a profit? Unlikely. With exception of Man Utd and Real Madrid which have much higher revenues, even top tier clubs like Arsenal do not make anywhere near that much profit to cover those big signings like a 50m Torres or a 32.5m Robinho. But teams like Chelsea are able to service their debts and continue to make extravagant purchases as long as their owners are happy to pump more funds into the business. The high level of spending can't continue in long run but in the next few years the billionaires from the Middle East and Russia still have large buffers in their coffers, which will not stop them from continuing their transfer market frenzy.
Obviously if these owners continue to lose money year after year, they might be fed up and could sell the club, which 'rich' clubs are at risk of. But the owners are mostly quite intelligent people who are aiming to tap the growing revenues of football clubs, thus they are willing to spend these huge 'outlays'. Chelsea and Man City's spending in the transfer market has changed the game entirely. They might not be financially efficient in terms of a "return on investment ratio", but they have transformed into a top footballing clubs in Europe. Money does make things happen, but is this what the football world has become today?
The Cost of Winning
Football is a sport and the aim is to win. Clubs should do all they can to win, but does it mean "all they can"? Real Madrid has spent mind-boggling sums of money to recapture the title of European Champions, but they have not done it. Player after player, manager after manager, payouts after payouts. They should be going bust by now right, they have only won 1 trophy in the last 8 years! But NO, they are the richest football club in the world and today they are still spending huge sums of money. What does this mean? Real doesn't need to win to become rich and famous. But does wealth make a football club great?
To another Spanish club Barcelona. A cabinet full of trophies, sensational players and tremendous quality of football, but stricken with 400m of debt? Considering all the prize money, TV rights and their popularity, they are in truckloads of debt! And they've got no stadium debt as well! A winning club but in poor financial state, is this admirable and ideal?
One of the biggest conflicts Arsenal's supporters have with the board is whether Arsenal should do 'more' to win trophies. Is the aim ENTIRELY to win? The fans seem to think so and I would kill to see Arsenal win a trophy to be honest. Is the benefit of silverware more than offset the cost of obtaining it? If Arsenal spent 50m, will the DIFFERENCE of winning the league compared to being in top 4 be enough to cover that 50m? If winning does not cover that cost, why win (in the context of running a business) ? This is a business issue and so far there's no perfect answer to this. Had Arsenal won trophies over the last few years, Arsenal could say they have the best football with the best business model and everyone can shut it. Unfortunately Arsenal only has a good business model with no results on the pitch. As mentioned, football is a sport and it is about winning, so is Arsenal a complete failure? If judged on silverware, Arsenal are worst than Portsmouth, although they are relegated, they have more silverware than Arsenal in the last 6 years. Is Arsenal worst than Liverpool who has not finished in the top four in the 2 years running but managed to win the Champions League in 2005?
The Balancing Act
It's an absolutely fcking torture to be an Arsenal fan. We've got issues in ownership and we got stadium debt to add to our woes. We are so close every year but we lack the few percent to pull through. Although the change in ownership is not changing the club's financial state, the stadium debt in costing us 20m a year. There's the extra money we could have had for transfers, instead it's used for servicing the debt. How long more will it take? If the sources are correct, it's another 20 years! But in the larger perspective, we've needed a bigger stadium for a long time to capitalise on growth and to compete with other top teams. It can also be said we are unlucky compared to the other clubs which already have larger stadiums. In the short term, the stadium obviously has not 'broke even'. It is still costing the club more than the additional revenues generated. This means our transfer spending is reduced by this. In the long term, probably when revenues grow much higher or at worst when Arsenal pay off the stadium debt, that is when we could fully realise the benefits of the investment. It's a painful wait unfortunately.
Our extremely lower level of 'net spending' in the transfer market has been the most popular causal variable to our lack of success. I have to admit there is truth in this as the team has not replaced the big players it has sold in the last few years. The manager has made some gambles trying to develop youth and buying unknown players, financially it has been great, but in terms of success, it has been a big letdown.
The club's attempt to balance success on and off the pitch has been a failure. We've tried to work around our limited resources (transfer funds) but it hasn't been enough for success. Many would agree Arsenal are doing very well and being very efficient in terms of achieving what they have with so little money, but the measures of success in the world of football is trophies, and Arsenal hasn't got any to show for.
Is it time for Arsenal to start splashing the cash and possibly compromising the club's finances to please the fans and critics? Should Arsenal change the way they measure success towards winning trophies? Of course ideally Arsenal would want to be able to achieve success with their present finances, but time has gone and this plan has failed. Is it time for Arsenal to take a step back in terms of their pride of having a self-sustaining model and deliver trophies even though it is not beneficial financially?
There are a few solutions
1) New investment. Arsenal could get a new owner or the present owner to inject cash in the club to facilitate transfers to buy more experienced players. This would turn the current model on its head but could finally deliver silverware.
2) Be even better at what they do. Arsenal has an extremely tight purse string and they spend very prudently. The solution here is to uncover more and even better talent (like Fabregas) and buy players that has not been noticed. Disadvantage... still sticking to the old policy which is currently not working.
3) Change the manager - Wenger has done extremely big things for the club and it hasn't occurred until more recent times he doesn't quite deliver as well as he used to. His strategies in transfer dealings and style of football has epitomised what the club stood for in the last 15 years. It's clear things are no longer the same as they were used it, is his time finally up?
I would love the discuss the possible transfers this season but I'll leave it here. This post is about the balance of success in terms of a business and footballing capabilites and I can only hope the club can find a solution and balance to this that includes silverware.
On a lighter note, Arsenal supporters should be proud to have a supermodel supporting the club (I was definitely not using a model to coincide with my title).Thanks for reading.
~deyao~
