No, Kroenke Isn’t Stealing From Arsenal, He’s Just Mismanaging Them

 

Enos Stan Kroenke is the largest shareholder of Arsenal, and partially to blame for them falling out of the top 4 in the Premier League. Arsene Wenger, the 22-year manager of Arsenal turned scapegoat has left the club, with a new manager on the way: former Sevilla and PSG boss Unai Emery. Emery will be the new “scapegoat,” unless he can turn around Arsenal’s recent misfortunes. The best way to turn around misfortunes is with fortune, as in, transfer money.

It is reported that Arsenal have a “pre-sales” transfer budget of around £50million. In March I wrote an article titled “ACCOUNTING FOR ARSENE: DOES ARSENAL’S FALL FROM GRACE HURT THEIR BOTTOM LINE?” In it, I discussed that because of a loss of Champions League revenue, their profits would be a bit less, but because of the vast amount of television revenue, they should be fine.

Lack of success doesn’t mean that Arsenal will struggle financially. Hell, Arsenal will likely continue to turn a profit and allow Wenger to use his often-mentioned “war chest.”

I incorrectly assumed that their commercial revenue would continue to grow because of globalisation. It is likely Arsenal’s commercial revenue will grow, but not at the rate that can sustain large spending, in light of missing out the Champions League two seasons in a row. Nigerian and East Asian jersey sales don’t pay for Ozil or Lacazette’s contract. Arsenal failed to pull a Manchester United and win the Europa League in order to qualify for the Champions League despite missing out on the top 4 in the Premier League. What I failed to factor into my conclusion that Arsenal will have to do battle with an FA rule called “Short Term Cost Control (STCC)” that does not allow top flight clubs to increase their wages by more than £7million per season.

While that sounds like a decent amount of money, it equates to a mere £134,615 per week. That’s not a lot, and the reason they had to get rid of Alexis Sanchez because he wanted increased wages. His increase in wages and Ozil’s increased wages would have completely shattered that £7million threshold. There are ways to somewhat circumvent the £7million limit: commercial revenue, ticket sales, and player sales. This Daily Mail article from June 2017 explains the situation for Arsenal.

Premier League rules allow for overspend, should clubs be able to show that it comes as a result of increased commercial or matchday revenue, or player sales. However, Arsenal are unlikely to see a significant upturn in commercial or matchday revenue – which includes TV money, ticketing and merchandise – given Arsene Wenger’s side have missed out on a place in the Champions League.

The key change to this quote from June 2017 is that Arsene Wenger is no longer at the club. Why he was forced out is a multitude of reasons, but one important theory is that Arsenal have the highest ticket prices in the league and their upcoming season ticket numbers were looking less than stellar. In order to increase match day/season ticket revenue, they are ushering in a new era. Exciting change is the best way to sell tickets. An increase in ticket revenue may just be enough to squeeze a bit more in wages.

The entire issue though is that Arsenal only have £50million to spend “pre-sales.” That implies there is intent to sell Arsenal players. I’m not going to try to give my analysis of football players and who should go into and out of Arsenal, but I would argue I don’t see too many “assets” at Arsenal that can be sold for much.

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The deficiency comes from Arsenal’s board mismanaging. Handing out massive contracts like candy and failing to pay for them via sponsorship and commercial deals. We all make fun of Ed Woodward (the CEO of Manchester United) for his deal-making East Asian noodle sponsors and tractor companies, but they are completely outclassing Arsenal in terms of sponsorship’s and commercial revenue. To show how massive the gap between Arsenal and other top flight clubs has been in terms of commercial revenue, we turn to the figures from this Guardian article from June 2017.

Revenue from commercial deals:

  1. Man Utd: £268m

  2. Man City: £178m

  3. Liverpool: £116m

  4. Chelsea: £122m

  5. Arsenal: £82m

It’s clear that majority shareholder Kroenke isn’t doing well on the commercial side of things, hampering Arsenal’s ability to spend and give competitive contracts, which makes future success and healthy revenue streams less likely. However, accusations from ignorant Arsenal fans accusing Kroenke of taking profits from Arsenal and using them for his American sports ventures is not true whatsoever. (He is the owner of Kroenke Sports & Entertainment, which is the holding company of the Los Angeles Rams of the NFL, Denver Nuggets of the NBA, Colorado Avalanche of the NHL, Colorado Rapids of Major League Soccer, and Colorado Mammoth of the National Lacrosse League.) Arsenal’s financials are available for all to see, and the profits are not distributed to Kroenke in any extreme way, most of the profits are reinvested into the club and used to pay down debts. So while it can be argued that he is mismanaging the club, it cannot be argued that he is “stealing” and using Arsenal for profits to fund American sports teams.

However, I will leave you with this parting bit, with the potential to be newsworthy: Kroenke’s American football team, the Los Angeles Rams, are building a new stadium at an estimated cost of $4 Billion (£2.96 Billion). Aside from the extensive costs picked up by taxpayers, massive loans will have to be secured by the LA Rams. These loans by Kroenke could be backed by Arsenal’s profitability. I’m not aware of that happening, and I am not making any accusations. However, I believe that is an angle that reporters with sources close to Kroenke and Arsenal should be looking at.


Other Arsenal-related articles you may enjoy:

How Would Arsenal’s 2003-2004 ‘Invincible’s’ Team Perform in Modern Football?

Accounting for Arsene: Does Arsenal’s Fall From Grace Hurt Their Bottom Line?

The History of Transfer Records


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