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The year was 1999. I was at my cousins place and the 12-year-old me didn’t want to sit at home. A cricket-crazy kid, I wanted to play outside. My cousin (he is a year younger to me) said “Let’s play soccer”. I frowned and said “Who plays football? Boring. Let’s play cricket”. “You watch it on TV and play it once, I promise you – you will forget cricket. Football is awesome” he argued. 30 min later we were out playing football. An hour later, exhausted we came back home and he switched on the television. That my friends, was the first time I saw Arsenal Football Club. I vividly remember me telling him “This is so nice to watch. They play amazing”. He went to list the important teams back then (Manchester United, Leeds United, Newcastle United, Liverpool…..) how the league works etc. and ended the sermon by saying “Arsenal is better than Manchester United“. It was matter-of-fact, No questions asked. That’s how it was. (I’m not going to embarrass myself by telling you all I thought there was a relation between the man managing the team and the team name) That day in 1999 – in the beautiful city of Bangalore – a Gooner for Life was slowly being shaped! And when Hansie Cronje was convicted for match-fixing, it sealed my interest with cricket, save, watching Sachin Tendulkar grace the pitch. The moment Sachin was out, off went the TV. If he didn’t play the game, I wouldn’t even know the score. Tennis, F1 and Basketball were the only other distractions apart from Arsenal Football Club!

14 years later, I am still immensely proud of “my” club and The Man Behind Arsenal. This post is my first on Arsenal Football Club, so I want to highlight not just our success until 2005 but attempt to answer at least 1 lingering question most people have had post 2005 – Finances. I hope despite the criticism and lack of trophies in the last 7 years you will see a reason of Why “In Arsene We Trust”.

Let us first have a look of how we have finished in the Premier League since 1997 in particular.

Arsenal League Position

Arsenal in the ‘Wenger years’

Next up, a roundup of our performance in the Champions League and the UEFA co-efficient.

Arsenal Champions League

Arsenal’s performance in UEFA Champions League

Now let us sum up the calendar year of 2012.

Arsenal 2012 performance

The Arsenal 2012 calendar year

Why am I showing you these pictures? To get a little context on how we are performing. There is a certain degree of consistency we have been able to maintain. I think we can agree upon that. Is that consistency being mediocrity? I would say no – but you can feel free to disagree. Of course, if we are the best we need to pit ourselves against teams like United, Barcelona and Bayern (considered in the list of the successful and the best). Not say a league two team (no disrespect intended), like Braford City…. Oh wait a minute, why did I pick this name up!

While we see Arsenal finishing consistently within the top 4, what concerns me is not the fact that we are not winning trophies, oh I am honest about that, my concern is the widening gap between the “champions” and us. The question I ask myself, like most people do – are we losing the competitiveness to win the premier league? Since 2005, something’s have fundamentally changed in football. To point two of them – the way money is spent and the wages a footballer can ask/get.

Arsenal Vs League Champions

The point difference on the League Table

Are Arsene Wenger and Arsenal taking an incorrect approach? I don’t think so! We don’t need to spend absurd amounts of money to win the league (although at least 2 teams we all know have managed doing that in the premier league). Except 1 season since our drought in trophies, we have had a pretty good chance in at least 1 cup every season. Either it was the champions league, the league cup or even the premier league. So what is it that doesn’t make us click? Why do we fail? At different times over the last 7 years I have seen, Arsenal have lost some of the more significant points/games because we were missing one of these 4 attributes in those games – Rhythm, Individual match-changing performance, Faith or Tenet/Conviction-cum-Aggression. Perhaps sometimes we got the wrong combination / a tactical error, but I believe the 4 attributes are more significant. [I have deliberately left out Arsenal Injuries because that topic truly deserves a mention in itself] This I think is the R-I-F-T over the years! These 4 observations astound me because every single player at Arsenal Football Club has shown at different times these very same attributes and won us a game. When in rhythm, we can stream roll any opponent. Few teams can match the fluid game-flow and the wrath of Arsenal’s offense. We have missed a leader like Patrick Vieira but we have seen Jack Wilshere capable of standing up and staring the opponent in the eye. We’ve had Cesc and Van Persie who got us those invaluable 3 points many a times alone. Most of our squad at Arsenal are exceptional players. Every player on the pitch is very talented. I might not agree to every signing, but I believe I’m not fickle minded like so many others who go ga-ga before/immediately after the signing of a player and couple of months later change their opinion. What we cannot ignore is how different the squad looks almost every 3 years. Check the squad out in 2005 Vs 2009 Vs 2012. There lies a greater concern for me.

So, does it mean we have a ‘bad squad’? Does it mean we have a set of players who have not a ‘winners-mentality’? Why is Arsene Wenger so stubborn and not spending money? Is Arsenal a rich club? Do our players get paid 😉 Can’t we afford the likes of Messi if we want to?

I won’t go into answering if players are ‘bad’ or not. Thierry Henry was not exactly “special” when he came in. I am sure if you look back, many people had written RVP off saying “He’s injured all the time. No point having him”.
Instead I am going to direct my answers to something more tangible. Let’s start with the debt of the teams in the premier league. This report from the Mirror tells us it is £2.4b. More insightful data comes from the Football Money League 2012 by Deloitte. I found an update that gives a more recent outlook.
But do we really understand this term ‘Debt‘? Let me explain – Debt is the amount owed to a person or an organization for the funds borrowed from them. This amount needs to be paid back in a particular period of time under certain terms and conditions.
So is debt good or bad? It is both! If you took on the debt to purchase something that will increase in value and can contribute to your overall financial health, then it’s very possible that debt is a good one. The problem begins, when you start spending more than you can earn and debt encourages such a feeling of spending more now and have that ‘i’ll-pay-later’ feeling. A little glimpse into the Financial crisis in the world and more recently used term – ‘Fiscal cliff’ – in the US have it’s roots stem to this. Beware of spending more than what you can earn! It brings in ‘interest rate’, it eats your future income, it puts you at greater financial risks – and any responsible organization and human being will not want to take unnecessary risks.

Arsenal responding to Debt

Arsenal’s balance sheet (check the net cash flows)

Let’s step back a bit to understand what Arsenal did. An extremely successful club after Arsene Wenger took over the reigns, they decided to build a new stadium after growing rapidly. A recognizable brand name, ability to attract top talent, a revolutionary philosophy – things seemed in place. Making more seats available brings in more matchday revenue. Bringing in good players and talent would mean good commercial/merchandise revenue. Combine the two, and you have a larger fan base – giving you more bargaining power during broadcasting revenue negotiations. Taking that debt doesn’t really hurt does it? Things have not gone exactly as planned but the net debt has come down from a staggering £318m in 2008 to £97m last year, which means we have a safer financial future in this extremely volatile global financial climate. I deliberately leave out property-development revenues so we can focus on football – anyway, I’m not auditing the financials – but giving you a possible insight into what Arsenal is moving towards. Today we have a great stadium, one of the best in the world, we have good players (although you might argue we see that aspect when they leave the club – courtesy the transfer fees) and we have a manager who is not giving up. I hear a few groans and wise cracks saying “Please give up”, but for a minute just begin to understand his passion and commitment to the club. If someone has been responsible in behaviour and use of funds – it is Arsene Wenger. We’ve had turbulent board changes and then of course there is the FFP – both of which, most of us probably do not even begin to understand the implications. I can’t help but see truth in these words of Alisher Usmanov, “The greatest achievement of Arsene Wenger is to have created two teams – the one that now plays for our rivals and the one that is trying to be among the best in the league“. Although it is hard, I will still say, Ignoring some eye-raising decisions (such as RVP’s move to Utd and the sudden change in the Arsenal board) We have paid a large amount of our debt back – now is when we can start flexing our muscles a little and leverage our financial position. For those who are willing to take the effort to understand this situation objectively, will appreciate what has happened. Although, it has come at a cost of not having our cabinets laden with trophies, the consolation is we have remained very competitive. We’ve challenged right until the very end.

Do not underestimate Wenger’s want, the board’s need or the squad’s will to succeed. Our qualification into the Champions League (for instance) is of out-most importance. Crashing out of Champions League means more than just not playing in an exceptionally competitive tournament. It means enormous losses in revenues. Ticket prices cannot be the same for Europa league – hence broadcasting revenues are reduced. The onus lies on Wenger to solve this. Hardly a task that would be given to ‘a stubborn old fool who is going senile’. It’s shocking to see people like Ian Wright talk nasty things about the Arsenal boss, but there are reports on a historical personal feud. The otherwise appreciable Piers Morgan is another one I do not agree to here (I’m sure he cares for my opinion and would find it heart-breaking ;)). In fact I find it highly disrespectful and disheartening that he leads campaigns like #wengerout on Twitter. Many of us who talk about tactics or about spending on players neither have 40+ years of footballing experience nor are we adept in economics and finance to give ‘expert advice’.
Yes, I am well aware that one of the worrying aspects in our financials is 40% of the revenue comes from Matchday. A very similar % from broadcasting and a mere 20% is commercial revenues. Arsenal’s healthy balance sheet has had a major dependence on player sales, a sign of caution for the moment, because our revenue generating engine should not be entailed to this factor to such a large extent. And if this 26-year-old can see it, I am absolutely certain that a 63-year-old ‘Frenchman‘ can surely spot it too 😀

Arsenal Revenue Comparision

The Rich Football Clubs

This is unlike the most successful English club (Manchester United) despite that heavy debt they carry. Arsenal have slipped to 6th place in the last 2 years (from 5th) and Man City is a very close spot behind. Unless, Arsenal confirm their spot in the Champions League for next season, finish better in the League, FA cup and beat Bayern – this is a massive uphill task. We have a few commercial deals to renew and perhaps we will get some great commercial deals. Arsenal do not have a great contract with Nike at the moment (as compared to United which is three times what we’re getting). The ideal situation is to increase revenues with an almost equal split in the 3 categories. One cannot ignore that the operating expenses are increasingly very very rapidly and steeply. In fact, the Arsenal players are respectably paid as compared to their peers. The last financial statement I saw showed us the rise of wages from a 124£ m to a 142£ m. Does this have a correlation to our late negotiations / transfers and end of contract period talks? Maybe. Sign a long term contract and maybe you pay too little for a very good player or overpay for a not-so-good player. Sign too late, run the risk of losing the player or paying too high! This again is not such a problem if Arsenal makes larger revenues, because the revenue generated is offset with the wages. The problem lies when you spend more than you earn. Arsenal cannot and need not compete with Chelsea and Manchester City on spending in the market, but they perhaps need to re-look at how they spend the cash. Players are becoming increasingly demanding and absurd numbers are thrown out as prices.

It’s exceptionally complex to calculate how to use funds and the effect of a transfer. Imagine signing a player for 10£ m on a 5 year contract at salary of 75,000£ a week. This means you need to keep aside (10m + [{ 75,000 * 52 weeks } * 5 years]) = ~30£ m of cash. Of course this is too simple. We have a whole squad of players, coming in and going out and staff wages etc. It’s incredibly mind-boggling how they keep up the calculations and see the optimum time to sell a player.

What we have to think is – How can Arsenal grow their revenue? (without selling players every summer like what happened with Nasri, RVP, Cesc, Cole (let’s not forget, he was one of the first to run away)) Arsenal have amongst the slowest and lowest revenue growths in the last 3 years. The gap has widened in the last 3 years.
Another point – How can they reduce the gap in the table with the Manchester-duo – and increase the gap with several new competitors. Is spending more money the answer? Think before you say – yes!
The 2 questions are a puzzle and something like a chicken-and-egg. If you reduce the gap, there is a higher probability to get more money to spend and if you get more money to spend, there is a higher probability to reduce the gap. By increasing debt (giving players higher wages and spending incredible amounts of money on transfer of a single player) there is still no guarantee of success. Look at Fernando Torres for Chelsea. But there’s also Cristiano Rolando for Real Madrid.

I can imagine many of you saying, “It’s easy for you to speak. You’re not paying 950£ to 1950£ per season (the membership fee depending on the level). Let’s have you pay this and every match ticket and then speak such words of wisdom”. Do I have an answer to that now? Maybe not. Yet I believe, if we can give something back to the club, it is to stand strong behind our players. It is to cheer them come what may. It’s ok to be critical but let’s not lose hope. We sang loudly while we were down 8-2 against Manchester United. We backed them when they slammed 5 past 2 against our neighbours  those deluded souls who think they’re better than us 😀 What I know is if we stand strong, if we stand united and if we back our squad up, no player will want to leave. They will stick together and that’s the big factor missing today in Arsenal. If we have a same core team that sticks together for more than 3 seasons we will WIN. Think of our team composition before we became Invincibles. It was a fairly stable squad. A team that was playing regularly with each other and knew the style. The team perhaps needs to have the confidence to play again and understand each other.

Arsene Wenger is not Arsenal. There was Arsenal before him and Arsenal will continue even without him. I do not say don’t criticize him. I would say, as a responsible Gooner we should rather come up with well thought solutions. Constructive criticism is one thing. Criticizing for the sake of criticizing, or being a cynic is another! It’s easy to win 6-0 against Real Madrid with Stoke City on the X-box, it’s a different ball game in real life. It’s easy to work with money and transfers in the virtual world, it’s another thing in the real world. It’s easy to say “buy him, him and him”. Then what? The first “T” in “In Arsene We Trust” has dropped for many people and even true Gooners. I hope you will put it back again – stand behind Le Professeur and those playing on the field. I’d like to think that in the case of Arsenal – ARSENE KNOWS BEST. Being an Arsenal fan is not easy. It can have major impact on your health 🙂 The number of times they leave everything for the last-minute or have a spectacular collapse – I would say every Arsenal fan must meditate and take a deep breath to stay healthy and still smile!