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Arsenal's quest for sustained success

The Emirates Stadium, Home to Arsenal F.C. (USA TODAY Sports Images)

(USA TODAY Sports Images)

The 2014-15 Premier League season is a watershed campaign for Arsenal. The club is now in title contention after four major signings and two trophies following a nine-year drought. For the last decade, Arsenal has not necessarily been focusing on winning trophies, but the future legacy of the club. Many top teams, such as Chelsea and Manchester City, are owned by wealthy investors that can afford to invest billions of dollars. Arsenal management knows they cannot outspend their rivals, so they have focused on a sustainable long-term business model. Their Chief Executive, Ivan Gazidis, said Arsenal’s “model means that it can continue to do what we’re doing forever.”

A new stadium and a sustainable business model

In the 1990’s, the club realized it needed to increase revenue from ticket sales and sponsorships to stay competitive. The club signed a jersey contract with Nike and sold a bond for $478 million to move from Highbury to a newly built stadium with double the capacity. Arsenal retained ownership over the land from their previous stadium and converted it into housing which, in 2011 alone brought the team $259 million in revenue. The club has succeeded in increasing match day revenue from $62 million to $148 million per game. Emirates won the team jersey sponsorship spot and the naming rights to the stadium for $248 million over five years. The Emirates Stadium has received many awards including the Business Venue of the Year in 2007, Best Venue for Meetings and Events in England in 2008, and most recently the London Planning Award’s “Best Built Project 5 Years On.”

The Emirates has lead to an increase in revenue over the long-term, but it has come at significant costs. The Telegraph reported that from 2002 until 2013, Arsenal was receiving only $13 million a year from Nike for their jersey sponsorship. Rivals such as Manchester United and Liverpool were receiving around $41 million a year. This low yearly payout was in place because of Nike’s initial investment for the Emirates’ construction. For the last nine years, the team was always trying to win titles, but it seemed like their main goal was to stay in or above fourth place to remain in the Champions League. Teams who qualify receive millions in revenue from their participation, sponsorships, match day coverage, and increased value of their squad. In the past, Arsenal spent frugally on new players and sold most of their top talent, however this season the team has spent $109.7 million so far. To pay for this new talent, Arsenal spent about $30 million on players which they later sold for a profit totaling $150 million.

Ivan Gazidis had this to say about the franchise’s strategy:

[the franchise's strategy] is based around developing Arsenal’s name and brand around the world… There’s a strong digital strategy, we have 60 million visitors to our website every year, 12 million followers on Facebook, 2 million followers on Twitter, 1 million on Weibo in China alone.

In February 2014, the Chinese telecommunications company Huawei signed a contract with Arsenal, because their brand is internationally known as the “gentlemen of Europe.” After all, Arsenal is one of the few teams to wear suits for every EPL and Champions League game.

The road ahead

Arsenal is close to paying off their debt from the Emirates construction and have recently replaced Nike with their biggest sponsorship deal ever: a $250 million deal with Puma over five years that began this summer. The deal with Puma sees revenue increase $37 million a year until 2019. Arsenal has incredible financial momentum going into this season. This is on top of the arrival of world-class players like Real Madrid’s former No. 10 Mesut Ozil and Barcelona’s former No. 9 Alexis Sanchez. Arsenal has walked a very fine line over the last nine years. It was a very risky path that most teams are unwilling or unable to take. In January, The Economist reported that Arsenal are one of the top ten highest earning teams in the world, however almost 75 percent of its revenue comes from match day attendance and sponsorship deals. Arsenal may have won the FA Cup last season and the Community Shield this season, but they are going to need to keep winning if they want to keep their model alive.

Source: The Economist

Credit: The Economist

Before this season, it seemed like there was a call every week for Coach Wenger’s head and a Saudi billionaire to take control of the club. While some fans may be excited by the prospect of such a move, billions of dollars does not guarantee titles or long-term financial stability. There is something to be said for the impressive way Arsenal have created a quality club based on sustainable growth. The team is now finally building rather than shrinking and the UEFA Financial Fair Play Initiative considers their business model as the definitive method. Even though Arsenal came in fourth last season they are title contenders this season. So far, things are looking bright for the club after opening its 2014-15 campaign with a victory against Crystal Palace, not to mention Wenger hinting at another big signing to add to the summer’s transfer haul. Wenger once said, “If you do not believe you can do it then you have no chance at all.”

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