Stan Kroenke's blueprint for Arsenal future
Where do you go to find the best example of how to run an English football club?
New man: Stan Kroenke will look to exploit Arsenal's global brand after taking over the club Photo: GETTY IMAGES
By Duncan White 11:59PM BST 16 Apr 2011
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When the Fenway Sports Group made their move to buy Liverpool last year they went to Arsenal, Sunday’s opponents, to see how it works at a club that is seeking a marriage of success and sustainability.
When members of the parliamentary select committee inquiry into football governance wanted to see a Champions League club seeking to live within its means, they were taken round the Emirates and met Arsène Wenger and chief executive Ivan Gazidis.
Opposition fans can find Arsenal sanctimonious and an element of their own support is frustrated that pride in financial projections has not been matched in trophies in the past six years but there is no question, though, that on the eve of Uefa’s Financial Fair Play rules coming into force, Arsenal have become European football’s model club.
While so many, including Liverpool, seek to emulate Arsenal’s example, what now for Arsenal themselves? From Monday Stan Kroenke, the American property billionaire who has agreed to buy the shares of Danny Fiszman and Lady Bracewell-Smith, has 28 days to send out his offer document to the remaining shareholders, detailing his takeover bid. That document will make clear he intends for the club to keep running along the same lines. But what is the destination?
At a meeting in February, Gazidis gave a detailed presentation of the club’s five-year plan to board members, including Kroenke. This plan, which met with unanimous approval, is the second phase, after the move to the Emirates from Highbury, of the club’s 21st century development.
So, what’s the plan? In commercial terms, Arsenal want to go global.
One of the factors that motivated Kroenke to buy into the club is the cross-border potential of football. American sports are as bad at travelling as football is good at it. With Arsenal, new markets have opened up to Kroenke that would be impossible to crack with the Denver Nuggets. Over the next five years this is the area in which Arsenal need to improve.
There certainly is scope for substantial improvement in commercial revenues. Clubs have three main revenue streams: broadcast (television rights), match day (tickets etc) and commercial (sponsorship, merchandise). Of these, broadcast is yoked to the Premier League’s television deal and Arsenal’s performance in Europe while match-day revenues, swollen by the corporate entertaining that goes on at the Emirates, is impressive.
Commercially there is a lot of catching up to do. Manchester United will be the first club to break the £100 million mark for commercial revenue alone while Arsenal made a reported £44 million in 2010. United are so far ahead because they have been capitalising on the strength of their brand overseas.
Arsenal have done research that shows their ‘brand awareness’ is not that far behind the likes of Manchester United, Real Madrid and Barcelona. They have more than five million ‘followers’ on Facebook and 500,000 on Twitter. The problem is making money out of this global popularity.
Gazidis hired Tom Fox, previously with Nike, Gatorade, and the NBA, to be the club’s chief commercial officer in August 2009, which has been followed by a raft of executive appointments with a focus on marketing. This team is looking to set up partnerships with companies, in Europe, the Far East and the US, that fit the club’s profile. A new shirt sponsorship deal next season is expected to bring in an extra £15 million per year.
The club is being very careful not to make it seem they are forgetting about the supporter who attends the Emirates — home of the first £100 ticket remember — but the logic is that the more money that can be brought in from overseas, the less pressure there will be on the club to generate revenue from match day. Knowing football, that probably means at best a slowing down of ticket price rises in the medium term.
What does all this commercial expansion mean for Wenger? In the context of Kroenke’s takeover, he has made it clear that he will stay in control of the “technical side” of the business, but this kind of ring-fencing will become increasingly difficult. While the club is intent on maintaining their policy of investment in wages (Samir Nasri, Gaël Clichy and Johan Djourou are expected to sign new deals this summer) ahead of transfer fees, Wenger knows he will have to compromise in other areas. This summer, for example, he will take his side on a pre-season tour, of China and Malaysia, for the first time since he joined the club.
“The Far East tour is a compromise with the financial department,” Wenger said. “It’s the real world because we do not get any other income other than what we produce so we have to produce as much as we can. I compromise as long as the tours respect our preparation.
“Ideally I wouldn’t want to go but I go because we get sponsorship money that is higher than in Europe. We will go to Malaysia and China. We have less financial potential than the others so we cannot fall behind with commercial income.”
It was not quite clear what he meant by “financial potential” but it is safe to assume it is his old bugbear: what he calls the “financial doping” of Manchester City and Chelsea. Despite Kroenke’s wealth — Forbes estimate his net worth to be $1.8 billion (£1.1 billion) — he is unlikely to disrupt the current model with a sustained burst of spending and Arsenal, like Liverpool, are relying on Uefa making good on their commitment to enforce their financial fair play rules.
“We go to financial fair play next season,” Wenger said. “I want to sit here in September and see who respects the FFP rules. We will have a good test with Arsenal, Chelsea, Man City, United and Liverpool. Aston Villa can inject but I don’t think Tottenham will. We will respect it because it starts in June.”
If clubs are forced to live within their means then the future looks very promising indeed for Arsenal. While United are still commercially way ahead, they have to service the debt saddled on the club by the Glazers. With Arsenal’s own debt, incurred by the stadium move, smaller and shrinking and commercial revenues rising, the Uefa constraints could serve to liberate the club.
Ultimately it all comes back to Wenger. As they have not won trophies in the last six years, the Arsenal brand has been most strongly identified with their style of play, which, of course, is an extension of Wenger’s football philosophy. The club have been successful without winning silverware, in the sense that they have kept qualifying for the Champions League and have cemented a sense of club identity.
Without Wenger that identity could be compromised and the very brand the club is trying to sell around the globe will be weakened.
“I am not a brand, I’m a servant,” Wenger insisted. On this he is wrong: Arsenal and Arsene have become fundamentally intermeshed. No wonder the board were so pleased to get Wenger to commit to a new contract last August which takes him through until 2014. And he could even stay beyond that.
“I don’t know,” he said of his long-term future. “I have three years to go. I am 61. Nothing lasts forever that is for sure. If it’s not me anymore there will be someone else who can do exactly the same, if not better. I don’t know if I will stay with the club after I finish as manager. Right now I feel active and want to be on the football pitch.
“Once I cannot do it anymore I will try to be useful somewhere else, preferably at this club but if this club doesn’t need me than somewhere else.”
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