Tuesday, February 28, 2012

Arsenal's Mystery Dance

So North London remains red after Arsenal put Spurs to the sword with a scintillating comeback in a memorable derby. This was a performance to give hope to the club’s long-suffering supporters, who have endured a troubled season to date, as the Gunners have misfired on all too many occasions.

There is still much to play for, as the victory over their neighbours took Arsenal back into the top four, so they still have a chance of maintaining their remarkable record of qualifying for the Champions League for 14 consecutive seasons. However, barring a miraculous comeback against Milan in the last 16 of that tournament, it will be the seventh year without a trophy – a poor return for a club of Arsenal’s plentiful resources.

Although there have been signs of promise, it is fair to say that overall this has been one of the worst seasons in recent memory for Arsenal. Eliminated from the Carling Cup by Manchester City and (less understandably) from the FA Cup by Sunderland, they are currently a massive 17 points behind the leaders in the Premier League and (whispers) seven points behind Spurs.

"Ground control to Major Tom"

They have already suffered eight defeats in the league, most painfully a humiliating 8-2 drubbing by Manchester United, but also including losses to lesser lights like Blackburn Rovers, Fulham and Swansea. The inconsistency has been maddening, because at times they have demonstrated their potential, notably during a thrilling 5-3 away win against Chelsea and a 7-1 demolition of Blackburn in the return match.

Much of the blame for the uneven displays can be laid at the feet of last summer’s activity in the transfer market, when they lost two of the club’s best players, Cesc Fàbregas and Samir Nasri, and replaced them with inferior talents. The problem was exacerbated by the protracted discussion around these movements, so that the numerous arrivals in the latter stages of the transfer window resembled football’s version of a supermarket sweep, rather than any form of coherent strategy.

Even though the likes of Mikel Arteta, Yossi Benayoun, Per Mertesacker, Gervinho, André Santos have all had their moments, none of the new purchases are really the type of player to take Arsenal to the next level – with the possible exception of the gifted Alex Oxlade-Chamberlain, who is one for the future. Certainly, they do not raise the pulse rate like Mario Götze, Eden Hazard or Juan Mata, who were all mentioned in dispatches as possible buys.

"Money in the bank"

Even Arsène Wenger admitted that last summer was one of his worst periods as a manager with his plans badly affected by players leaving for the first time just as they were reaching maturity, though he argued that some of the last minute buys were also necessary due to the injuries suffered by Jack Wilshere, Thomas Vermaelen, Abou Diaby and Kieron Gibbs (though the latter two could hardly have come as a great surprise).

Despite all the new signings, Arsenal yet again managed to make money on the transfer comings and goings, something that is difficult for most fans to understand, given the strength of the balance sheet. As they see it, while the squad weakens, the club’s finances continue to prosper. Worse than that, the executive management seem to be in a state of denial, as shown when chief executive Ivan Gazidis claimed that Manchester City would love to be in Arsenal’s position. This seemed a foolish pronouncement at the time, but Gazidis must have cringed as the reversals at Milan and Sunderland nailed that bizarre claim in a few short days.

Eyebrows were further raised when the club proudly announced a thumping great profit of £49.5m for the interim accounts (covering the six months up to 30 November 2011), which was £55.6 million better than the £6.1 million loss reported a year ago, though all of the improvement was effectively due to the significantly higher profit on player sales, which increased by £59 million from £4 million to £63 million (primarily Fàbregas, Nasri and Gaël Clichy).

Although turnover from football was up an impressive 16% (or £16 million) from £98 million to £114 million, this growth was eaten up by an increase in squad investment with wages up £8 million and player amortisation £7 million higher.

As anticipated, there was a slow-down in the property business, where revenue dropped £19 million to £3 million, though the reduction in profit was much smaller – from £3.3 million to £0.6 million.

It should be noted that much of the revenue growth is down to timing, e.g. the increase in match day revenue is mainly due to four more home games being played than the same period last year. Assuming that Milan complete the Italian job in the Champions League, then the difference for the full year will be only one match. Furthermore, not all of a football club’s business is evenly phased, so half-year results can be a little misleading. That is why much of the rest of this analysis will rely on the annual trends to glean some insight into what is happening at Arsenal.

What we can say is that these excellent half-year results continued a record of financial success that is the envy of most other club chairman. Even though the annual profit before tax fell from an amazing £56 million in 2010 to £15 million in 2011, that is still a very impressive figure for a football club. Arsenal’s expertise can be evidenced by two great statistics: (a) the last time that they reported a loss was way back in 2002; (b) in the last four years alone, they have accumulated staggering profits of £153 million.

This sort of business prowess is very much the exception to the norm in the highly demanding world of football, e.g. in 2010 only four clubs in the Premier League were profitable. However, Arsenal’s willingness to swim against the tide is perhaps best shown by comparing their financials against the leading clubs over the last two seasons.

At one end of the spectrum, we have Arsenal’s £71 million of profits, which is in stark contrast to the enormous losses at Manchester City (£319 million) and Chelsea (£137 million). Liverpool have not yet reported for 2011, but made a notable loss of £20 million in 2010, while even the fiscally prudent Tottenham registered losses of £6 million. Only Manchester United joined Arsenal in being profitable, as their ability to generate cash more than compensated for their hefty interest payments in 2011 (though they still made a loss in 2010).

All well and good so far, but this is by no means the whole story at Arsenal, as their profits have been very reliant on property development and player sales. In these interims, there was little impact from property development, but without the £63 million profit on player sales, the football club would actually have made a sizeable loss of £14 million, including an operating loss of £7 million.

In the annual results for 2011, property played a larger role, providing the vast majority (£13 million) of the total £15 million profit with only £2 million coming from the football business. Furthermore, if the £6.3 million made from player sales is excluded, the club made a £4 million loss in the football segment. Even the enormous £56 million 2010 profit would only have been £7 million without £11 million property gains and £38 million player sales.

This is concerning, as property gains will come to an end at some stage, while Arsenal would not wish to be seen as a selling club, even though this has been a major reason for their recent profits, e.g. £94 million (or over 60%) of the £153 million made in the last four years. That’s good business, but it makes it hard to build a winning team.

Incidentally, the graph above also supports Wenger’s mysterious quote about the club having to make £15 million profit each season, as this covers the annual interest payable. As the great man said, “We want to pay the debt back from building the stadium and that’s around £15 million, so it’s normal that at the start we have to make £15 million or we lose money.”

"Private Universe"

Although the property development at Highbury Square has not proved to be as lucrative as originally hoped, due to the market crash, it has generated money for the football club. This peaked in 2010, when revenue was boosted to the tune of £157 million, though the profit contributed was “only” £11 million.

Only a few apartments still remain to be sold, but there are other substantial developments at Queensland Road, Hornsey Road and Holloway Road, which should deliver additional cash, as noted by Gazidis, “Our property business is debt-free, so any new sales of property do accumulate cash, which is very positive for the future.” This could be worth up to £35 million according to an estimate made by the respected Arsenal Supporters’ Trust (AST), though is only likely to be booked in the 2012/13 accounts at the earliest.

So, to cut a long story short (as Spandau Ballet once said), Arsenal's financial performance has undoubtedly been impressive, especially compared to almost every other football club, but they face more challenges than would seem apparent on first glance.

"Meet the new Kos"

There are numerous questions that could be asked, but let’s restrict ourselves (Guardian style) to five that would probably concern most fans (at least those with an interest in matters off the pitch):

1. Where will the revenue growth come from?

2. What happens if Arsenal fail to qualify for the Champions League?

3. How much is Arsenal’s transfer budget?

4. How can the wage bill be so large?

5. Where has all the money gone?

1. Where will revenue growth come from?

On the face of it, Arsenal do not have a revenue problem, as they enjoy the fifth highest revenue in Europe according to the Deloitte Money League. In England, it is only surpassed by Manchester United’s £331 million and is way ahead of Liverpool £184 million, Tottenham £164 million and Manchester City £153 million.

However, the problem is that the gap to the top four clubs is widening, though that is partly due to exchange rate movements. The Spanish giants, Real Madrid and Barcelona, generate around £200 million more than Arsenal at £433 million and £407 million respectively. Similarly, Manchester United earn over £100 million more with £331 million, while Bayern Munich’s revenue of £290 million is a handy £60 million higher.

It’s difficult to compete with these clubs with such a financial disadvantage, especially if you consider that they receive the benefit of that substantial additional revenue every single season.

The reality is that Arsenal’s revenue has been essentially flat over the last three seasons at around £225 million, while other clubs continue to grow their business. In that period, Manchester United, Tottenham and Manchester City have all added more than £50 million income, while Chelsea have also earned an additional £19 million. Of the top six, the only club to have under-performed like Arsenal is Liverpool – and even they have actually delivered impressive commercial gains to compensate for the loss of Champions League football.

Why does this matter? Let Gazidis explain: “It is important to remember our business goal is to increase revenues for ongoing investment in the team.” That’s very true, so it is pleasing to see some revenue growth in the interims, though as we have seen, much of that is purely down to timing.

On a full year basis, Arsenal’s only revenue growth since 2009 has come from broadcasting, which rose £12 million from £73 million to £85 million in 2011, as a result of centrally negotiated deals by the Premier League and UEFA (for the Champions League), so Arsenal’s board cannot really take any credit for that.

Both of the other revenue categories have declined, most notably match day income from £100 million to £93 million, though this should rise in 2011/12, partly due to the price increase on tickets, partly due to an extra game. Commercial income has also fallen since 2009 by £2 million to £48 million, though there are some signs in the interims of the famous five-year plan beginning to deliver, as this surged 15% (£3.4 million) from £23.1 million to £26.6 million. However, this is still a fairly low return on the substantial investment in the commercial team.

As a technical aside, the 2011 revenue of £225.4 million in my analysis above is slightly lower than the £226.8 million used by Deloitte, as they include the joint venture turnover of £2.2 million, but exclude player loans of £0.7 million.

So, the TV money was helped by the new three-year Premier League TV deal that commenced in 2010 which meant that Arsenal’s share of the central distribution rose £4 million to £56 million, even though they dropped a place to fourth, which was almost entirely due to the substantial increase in overseas rights.

Each club gets an equal share of 50% of the domestic rights (£13.8 million) and 100% of the overseas rights (£17.9 million). However, facility fees (25% of domestic rights) depend on how many times each club is broadcast live with £11.6 million for Arsenal, based on 22 games. Finally, merit payments (25% of domestic rights) are worth £0.8 million per place in the league table, giving £12.9 million to Arsenal.

In other words, if Arsenal were to fall out of the top four, they would receive a smaller merit payment and probably lower facility fees, as they might be deemed less attractive and not be televised so often. However, this would not damage them too much financially, e.g. Tottenham received only £3 million less than Arsenal when they finished fifth in 2010/11. Similarly, the additional prize money earned for winning the Premier League would not be that great – though it would be a trophy…

Match day income should increase by around £4 million following the 6.5% increase in ticket prices for the 2011/12 season, but this revenue stream is reaching saturation point, as Arsenal continue to register capacity crowds of 60,000 (the seventh largest in Europe) and their ticket prices are among the highest in the world, though comparisons are difficult, as they include the first seven cup games from European competition and the FA Cup.

In 2010/11 this generated £3.3 million a game, lower than the previous season due to a less favourable mix of matches (2 fewer in the Champions League). Nevertheless, total match day income of £93 million was the fourth highest in the Money League, only behind Real Madrid, Manchester United and Barcelona. In fact, Arsenal is the only club in the Money League where match day provides the largest proportion of total revenue.

Therefore, it was perhaps no great shock that the club announced a price freeze on General Admission season ticket renewals for next season, though the 7,000 Club Level members were not so fortunate, as they have been asked to pay an additional 2%, which is a strange move, as it will only bring in an additional £1 million. Although the club is at pains to emphasise that they have held season ticket prices flat in four of the last six seasons, that is not that powerful a justification, given the high starting point.

One issue that may yet adversely affect revenue is if the club issues credits should the team not qualify for Europe or even if the fare on offer is the inferior Europa League. Indeed, some might argue that the revenue risks here are on the downside. A combination of a less successful team, allied with a more functional brand of football and the effects of the economic crisis mean that some fans may opt out, a fact acknowledged by Wenger, “The stadiums will be less quickly full and we have noticed that already.”

Given the limited growth potential of match day income and TV revenue from the Premier League (in the short term), it is imperative that Arsenal significantly increase their commercial income, which is extremely low for a club of Arsenal’s stature. In 2010/11, their revenue of £46 million in this category was dwarfed by the likes of Bayern Munich £161 million, Real Madrid £156 million, Barcelona £141 million and Manchester United £103 million.

Arsenal’s weakness in this area arises from the fact they had to tie themselves into long-term deals to provide security for the stadium financing, which arguably made sense at the time, but recent deals by other clubs have highlighted how much money Arsenal leave on the table every season.

The Emirates deal was worth £90 million, covering 15 years of stadium naming rights (£42 million) running until 2020/21 and 8 years of shirt sponsorship (£48 million) until 2014. Following step-ups the shirt sponsorship deal is worth £5.5 million a season, which compares very unfavourably to the £20 million earned by Liverpool from Standard Chartered, Manchester United from Aon and (reportedly) Manchester City from Etihad. Even Tottenham (one whole season in the Champions League) now earn £12.5 million a season from shirt sponsorship (Auresma £10 million plus Investec £2.5 million).

The news is no better with Arsenal’s kit supplier, where the club signed a 7-year deal with Nike until 2011, which was then extended by three years until 2014. This now delivers £8 million a season, compared to the £25 million deal recently announced by Liverpool with Warrior Sports and the £25.4 million paid to Manchester United by Nike.

Arsenal have restructured their executive team at great expense, recruiting Tom Fox from the NBA in August 2009 as Commercial Director to “drive long-term commercial success”, though there has been little tangible revenue growth to date. In fairness, it is probably difficult to re-negotiate the principal agreements (though Chelsea did just that with their kit supplier in 2005), but we might have hoped for more secondary sponsors, which has been the main engine behind Manchester United’s commercial growth.

As we have seen, there were some encouraging signs in the interims, but there is still a long way to go, as annualised revenue is still only £53 million. Some new sponsors have been signed up recently, including Carlsberg at around £3 million a year and Indesit in a “multi-million” deal. In addition, Citroen extended their deal for a higher sum, while there were new agreements with Thomas Cook, replacing Thompson Sport, and on-line gambling firm Betsson. However, Arsenal still have less than half the number of sponsors that partner with Manchester United.

"When will I see you again?"

Arsenal made their first long-distance pre-season tour in 12 years to Malaysia and China, which helped fill their coffers, but may have adversely impacted the players’ fitness, contributing to the poorest start of the season in living memory. Nevertheless, there are plans to take on even more this summer with a tour of three Asian capitals (Seoul, Beijing and Hong Kong) as well as a trip to Nigeria.

On the bright side, when the main sponsorship deals are up for renewal in 2014, Arsenal will have a fantastic opportunity to significantly increase their revenue by up to £30 million per annum. However, here’s the thing: there is a danger that if the team continues to be unsuccessful and maybe even drops out of the Champions League, the club’s bargaining position will be correspondingly weaker. That said, Liverpool have managed to sign superb deals, even though they are in the same boat (though some might argue that they have a stronger brand).

2. What happens if Arsenal fail to qualify for the Champions League?

There is no doubt that competing in the Champions League can make a big difference, as can be seen by looking at the TV money received by the leading English clubs last season, where the advantage enjoyed by those teams participating in Europe’s flagship tournament is clearly evident.

In the past, Gazidis has claimed that Arsenal “have got a really stable model that could not just cope, but do well and compete” if Arsenal do not qualify, while Wenger has said that a season without the Champions League would be a “catastrophe” and a “disaster”, so who’s right?

The AST pressed the panic button when they suggested that this would cost the club around £45 million in lost revenue, which might conceivably make them “the first club to fail to meet Financial Fair Play rules.” This would be the height of irony for a club often held up as paragons of virtue by UEFA president Michel Platini.

Although the AST said they would provide a detailed assessment of this figure, in fact they only listed £27 million (€30 million) for money paid out by UEFA for participation and prize money (based on the 2010/11 distribution) with the remaining £18 million presumably coming from the “impact on premium seat sales and season tickets”, which would represent virtually a 20% reduction in match day income. That might be unduly pessimistic, especially if Arsenal were to compete in the Europa League, though it would be interesting to see what the club would do to season ticket prices in this eventuality.

Admittedly, the prize money for Europe’s junior competition is a lot less, e.g. last season the two English representatives, Manchester City and Liverpool, each earned just €6 million for reaching the last 16, while the highest pay-out was only €9 million.

Sharp-eyed observers will have noted that the allocation for the TV pool varies significantly among English clubs (Chelsea €27 million, Manchester United €25.9 million, Arsenal €16.6 million and Tottenham €14.4 million). This is because of the methodology used to allocate this element, whereby: (a) Half depends on the position that the club finished in the previous season’s Premier League with the team coming first receiving 40%, second 30%, third 20% and fourth 10%. As Arsenal finished third in the 2009/10 Premier League, they received half as much as Chelsea. (b) Half depends on the progress in the current season’s Champions League, which is based on the number of games played. So Arsenal received the least, as they only reached the last 16.

In other words, success has a direct impact on the amount of money received. If Arsenal were to qualify for the Champions League by finishing fourth, that would obviously be beneficial, but they would not receive as much as the teams finishing above them. Of course, fourth place has other unhappy implications. Not only is there potential for an awkward qualifying match at an inconvenient stage of the club’s preparation (like Udinese this season), but also there is a suspicion that this will impinge on transfer activity, as the budget might depend on the outcome of that tie.

Naturally, the other downside of failure to qualify is that it makes it more difficult to retain players of the calibre of Robin Van Persie and to attract the big names that would make Arsenal genuine challengers for honours.

As for Arsenal struggling to meet FFP, that seems very dubious to me. Even if the revenue were to fall by £45 million, this would be accompanied by cost reductions, e.g. hosting games, travel and performance bonuses. There is also plenty of room to manoeuvre in the wage bill, but that may not even be necessary because of the “healthy” costs that UEFA exclude in their break-even calculation.

In the 2010/11 annual accounts, this amounted to £38 million, consisting of expenditure on youth development and community (estimated at £10 million and £1 million respectively), interest on the stadium loan (£14 million) and depreciation of tangible assets (£12 million).

Once those expenses are added back to the football profit of £2 million (the £13 million profit from property development is also excluded), we have an FFP profit of £40 million, which should be ample to cope with a Champions League shortfall. That said, the annual cost base is likely to increase by around £20 million following the rise in wages and player amortisation, though much of this will be covered by revenue growth (excluding Champions League). On the other hand, 2010/11 had relatively low profit on player sales of £6 million.

If this is insufficient, then it should be noted that clubs will be allowed to absorb aggregate losses (“acceptable deviations”) of €45 million (around £38 million), initially over two years for the first monitoring period in 2013/14 and then over three years, as long as they are willing to cover the deficit by making equity contributions. The maximum permitted loss then falls to €30 million from 2015/16 and will be further reduced from 2018/19 (to an unspecified amount).

If that is not enough, there is a clause in the small print of the FFP regulations (Annex XI) that allows for the wages of players signed before June 2010 to be excluded from the calculation, assuming their contracts have not been extended after that date, so long as the club is reporting a positive trend in the annual break-even results.

3. How much is Arsenal’s transfer budget?

This question is partially driven by Arsenal’s parsimony in the transfer market, where they are the only leading club that has been a net seller over the last five years to the tune of £33 million. As Gazidis stated recently, “We’re about creating star players, not about buying them.” Manchester City’s net spend of £431 million is more than the other five clubs combined, but Chelsea have also splashed out £160 million. In comparison, Manchester United, Tottenham and Liverpool have been relatively frugal, though their spend is at least £80 million more than Arsenal.

However, Arsenal did spend a fair bit in the summer: £53 million according to Transfer League, including £12 million on Oxlade-Chamberlain, £11 million on Gervinho, £10 million for Arteta, £10 million for Mertesacker and £6 million for Santos. The interims state that the club actually invested £75 million in the acquisition of new players, including “to a lesser extent” improved contracts for some existing players, suggesting either that the fees were higher than reported and/or additional payments were made to agents or to players as loyalty/re-signing fees.

"Like a Song"

In terms of how much money is now available, the noises coming out of the club are a little contradictory. After last summer, Gazidis said, “We deliberately kept some powder dry… There are funds available to invest in a significant way in January and next summer.” He was backed up by the owner, Stan Kroenke, who defended Arsenal’s lack of spending thus, “It wasn’t because the money wasn’t there. We have the money.” However, Wenger said last week that it was not true that he had £50 million available, as estimated by many analysts including the AST and yours truly.

That is the amount available in cash, though to an extent that is not really meaningful, as most transfers are funded via stage payments, e.g. Arsenal are currently owed £19 million by other clubs, but in turn owe others £23 million, so all the transfer money is not needed upfront.

Furthermore, Arsenal’s strong balance sheet would allow them to take on some additional debt, especially as this could be supported by the cash still to come from property development.

Some may be concerned that Arsenal’s cash balances have fallen £45 million from £160 million to £115 million in the last six months, but that is partly because of the seasonal nature of cash flows during the year, e.g. the balance is invariably higher in May than November, due to the influx of season ticket money. A more pertinent comparison would be November 2010, when the cash balance was £110 million. In other words, the underlying trend remains upwards.

The other point that people often raise when discussing the transfer fund is that it would also have to fund a new signing’s wages, so if the club bought a player for £25 million on a five-year contract at £100,000 a week, that would represent a commitment of £50 million. That is undoubtedly true, but it is a little disingenuous, as it ignores the fact that this would be at least partially offset by the departure of an existing player, not least because of the limitations imposed by the rules on squad size and non-homegrown players.

4. How can the wage bill be so large?

When we talk about the transfer policy, that effectively also covers the wages policy, for these are two sides of the same coin at Arsenal with Wenger controlling an overall budget for transfers and wages. In particular, Wenger has admitted that Arsenal cannot afford to follow a policy that involves both high transfers and high wages.

This is important, as Arsenal’s wage bill is one of the highest in the country at £124 million, though it is a fair way below Manchester City £174 million, Chelsea £168 million and Manchester United £153 million. Note: given the performance-related bonus payments included in United’s figure, the fundamental difference is much smaller. On this basis, Arsenal’s performance in regularly finishing third or fourth in the Premier League could be considered slightly better than par for the course. Some might point out at this stage that Tottenham are ahead of Arsenal in the league, even though their wage bill is £30 million smaller, but this is only one season – and it hasn’t finished yet.

The pressure to compete is obvious by the deterioration in Arsenal’s wage to turnover ratio from 46% in 2009 to 55% in 2011. Although this is still one of the best in the Premier League, it is the logical result of flat revenue and 20% growth in wages. There is also little sign of this trend ending any time soon with the £8 million increase in wages reported in the interims. On an annualised basis, that implies a wage bill of around £140 million for 2011/12.

There are clearly issues with Arsenal’s equitable wage structure, which means that the best players like Robin Van Persie are not particularly well remunerated (by modern standards), while fringe players like Abou Diaby, Marouane Chamakh and Manuel Almunia are handsomely rewarded for their efforts. This was epitomised recently by Johan Djourou’s new £50,000 a week contract, which seemed more in recognition of his frequent interviews with Arsenal.com than his defensive ability.

Not only does this policy reduce the money available to attract world-class players, but it also makes it difficult to move on under-performers, hence loans for Bendtner and Denilson. While there is some logic in giving youngsters good contracts, as it prevents other clubs from snapping them up for free, it is questionable whether this has worked out for Arsenal, given the relatively small number of success stories. My hope would be that one of Arsenal’s smart executives is conducting a review of whether this approach is the most appropriate in 2012.

5. Where has all the money gone?

Given that Arsenal have been so profitable for so long, it begs the question what the club has done with all that lovely cash - £389 million from operating activities in the last six years. Looking at the cash flow statement, it is clear that very little has been spent on bringing in new players with net player registrations of just £14 million.

Unsurprisingly, it’s all about the new stadium, property and other infrastructure (e.g. the new medical centre at London Colney) with £180 million going on capital expenditure and £111 million on loan interest. Since these loans peaked in 2008, another £156 million (net) has been used to repay debt. And of course the cash balances continue to rise…

Following the elimination of the property debt, the only outstanding debt is effectively the “mortgage” on the Emirates Stadium. At the 2011 year-end, this was represented by gross debt of £258 million comprising long-term bonds and debentures. In the last six months, this has been reduced by another £6 million, while net debt has risen by £39 million from £98 million to £137 million, almost entirely due to the £45 million reduction in cash discussed above.

Many ask whether it would be possible for Arsenal to pay off the outstanding debt early in order to reduce the interest charges, but Gazidis has previously implied that this is unlikely, arguing that not all debt is bad, “The debt that we’re left with is what I would call ‘healthy debt’ – it’s long term, low rates and very affordable for the club.”

So what’s the conclusion on Arsenal’s finances?

I guess this partly depends on whether you’re a “glass half full” or “glass half empty” type of person. There’s no doubt that Arsenal’s sustainable model has much to be admired, though it is not without some challenges, especially around growing (commercial) revenue and controlling wages growth. In particular, it is vital that more secondary sponsorships deals are signed before the main agreements are re-negotiated in 2014, when Arsenal’s financials could soar.

"Lightspeed Champion"

In spite of these issues, many fans still wish that the board would push the boat out a little more. After all, there is a middle ground between spending like it’s going out of fashion and hoarding cash for a rainy day.

Looked at another way, it is worth asking whether Arsenal can afford not to spend. As Gazidis admitted, the club is “not where we want to be.” If they end up failing to qualify for the Champions League, then their prudent approach might be fairly described as a false economy. This is by no stretch of imagination a club in crisis, but it is clear that a club as wealthy as Arsenal should be doing better. Then, to paraphrase Morrissey, every day might be like Sunday.