The era of bad deals is over as the club decide to go it alone by appointing another senior executive.
Information has been made available to me that in 18 months time, the commercial revenue stream will be massively improved due to the expiry of an awful business deal at the club. It is especially shocking when it is considered that in the past ten years, the club has brokered deals capable of making the club one of the richest (based on income), in world football – if not the richest.
This deal is believed to have been originally brokered by former managing director Keith Edelman, the man who agreed the deal to sell 10.05% of the club to Grenada Media and secured a groundbreaking sponsorship deal with Emirates Airlines to enable the club to move forward with the plans to build the new stadium, hence why its called ‘the Emirates’.
However, for all the brilliance of getting that deal together – which at the time was extraordinarily rare in football business – he also agreed some years later to effectively outsource one of the main commercial revenue streams, retail. Limiting the profit drastically.
Retail basically covers anything with an Arsenal emblem on it, replica shirts, branded clothing, scarfs etc.
The club gave over the rights to each and every one of their stores (including the Armoury), to George Davies, a retail mogul. Due to this they do not earn 100% profit on all the sales in these stores, in fact they earn a very small amount, but they are tied to this deal for another 18 months, after that a new retail director will take over the reigns and if everything goes to plan, significantly increase the revenue from that particular strand of the commercial business at the club.
George Davies founded a sports retail business in 1995, named S’porter Retail, it is currently unclear whether it is under the name of this company he runs the Arsenal retail stores.
Full of Arsenal branded clothing - but the club only get a few pennies profit
The retail director, I can reveal, has already been appointed and will take over as the current deal with George Davies finishes. Plans are already being drawn up to carry everything forward and make the most of this revenue stream. Three more senior directors will follow suit to take over the head of marketing role, the head of global partnership development and a new business development analyst will also be appointed, these roles have been created by Ivan Gazidis and new-ish chief commercial officer, Tom Fox. This was confirmed in a statement released by the club earlier this year when Angus Kinnear was promoted.
The way the arrangement currently works is that the George Davies owned company buys and sources the products and then pays Arsenal a percentage after. The club have been missing out on millions, enough to have brought Mark Schwarzer many times over!
This graphic from the brilliant Swiss Ramble website, shows just how much Arsenal lack on the commercial front:
Given that much of Arsenal’s future income is planned to come through commercial revenue, the expiry of the Edelman deal and appointment of a new retail director is big news. He, along with Tom Tox and Ivan Gazidis will oversee the growth in what is really the clubs future profit, the money that – providing we are not taken over – will fund transfers, wages and overall development of the club and stadia.
Just last week the club announced stunning financial results and despite the record profit, the future of the club is still a work in progress and it just goes to show how much work is going on behind the scenes to secure the club for the future generations of Arsenal fans.
The club still are looking to expand their commercial revenue stateside (nudge nudge, Walmart), and hit the Asian market where Man United have been so successful in recent years – could this also be why Arsenal looked at Keisuke Honda so closely in the past?
For any readers of this that may doubt the importance of this appointment in the grand scheme of things, look at this: Real Madrid managed to effectively pay off the £80 million fee they paid Man United for Cristiano Ronaldo in his first season through shirt and memorabilia sales – that is how powerful that side of football business is and how it can influence player purchases and wages.
With the financial mess many clubs find themselves in right now, Arsenal really are an oasis of hope in a landscape that looks all too gloomy.
Things look very bright indeed for the future, a trophy now would do nicely though.
Update. Nick Peel has been revealed to be the new retail director. This story has made the Guardian’s Digger column.
So the already massive profits will be swelled further. Look forward to that parade of the massive pound sign outside Islington Town Hall.
Martin what about Arsenal tv any news on that?
I agree we need to improve the commercial revenue.
It’s Nick Peel who until recently has the Head of Retail Property at Land Securities.
Interesting stuff.
Really enjoying your work lately Martin. You are covering all aspects of the club that some ‘bloggers’ do not.
I really had no idea we outsourced the retail part of the business. such a poor idea!
As you say though it would be great to add a trophy to all this off field success.
I would seriously take the carling cup – and we have a great opportunity to win it now.
If we could manage a domestic cup double that would be perfect. FA cup and CC please
The majority of Gooners I know will not buy any official Arsenal related products in protest against thier unwillingness to reinvest in the squad.
If this tred continues, this new scheme won’t equal to much more income anyway!
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This is a great article-and very valid points about our commercial revenue- which dropped by 4 million last year from the figures you have shown- if anything you have underplayed the potential of the Asian market- it could be huge for Arsenal- unlike English markets these economies are growing substantially. Arsenal are respected everywhere for the way we play and the integrity of our club.
We are reaching the stage of development that winning something is no longer optional- we have to win a major trophy to take advantage of these market opportunities- and the only way we are going to do it is to up our investment in a few more players in the team.
Im in that picture lol….the one closet stuffing my face ha ha
So, we’ll better wait winning something until we can put all the money from the boost in shirt sales into the club’s pockets?
It’s pretty evident that those who think the club doesn’t put money into the club are pretty clueless as to what Arsenal’s finances mean. We have been forced to improve player contracts due to higher taxes introduced this season. We’ve also just paid off the remaining debt of Highbury Square, which was a major concern only 18 months ago and, as this article rightly points out, we are severly handicapped by our lack of income from the commercial side of the business. If we begin to buy expensive players we’ll also pay higher amortisation for said players and there are several things that contribute to our expenses, as well as income.
When we re-negotiate our shirt sponsorship in 2014, we can realistically expect to get between €10-€15m more a year from that alone. The Nike deal is also crippling us compared to our rivals so, while our finances are good, they can potentially improve quite drastically.
I remember Edelman once said in a Q & A with AST that “Arsenal wanted to be a football club run as a business, not a business run as a football club.”
It seems that those old-fashioned values have no place at the club now.
This was a very interesting and informative piece. I have just a couple of comments:
1. The commercial revenue stream includes, apart from retail, our sponsorship deals. The two largest deals are our long-term partnerships with Nike and Emirates. Although these deals were crucial for the construction of our stadium, we had to settle for earning much less per annum than our competition. The first deal to end should be the Nike deal. If I remember correctly, this happens at the end of this season, and I expect us to get a hugely improved deal. We’ll have to be more patient regarding the Emirates shirt sponsorship though.
2. Outsourcing the retail business may have meant that Arsenal is receiving only a percentage of the revenue, but I’m not sure it’s a bad idea. During this time, the club management could concentrate on our stadia and property projects, while the retail department improved the quality of its products and services and enjoyed a minor expansion. When the deal expires, Arsenal get a healthy business with a good platform for a wider expansion.
I completely agree with one thing – it’s time we started winning some trophies (other than the Emirates Cup).
Keep the good work.
Prawn sandwiches anyone? No wonder oour atmosphere’s so library like. O what a yawn.
Sorry for typo sports it’s a sign of my ignorance to understand the concepts of the elite. Bring back the gooners of old who cared about football and supporting the team, who sacrificed to come up with a fiver (less even) to get in. If you think the people behind the business your’re talking about care about you caring about their business you are very naive my friends, very!
PS Dont tell the Mancs I’m a secret gooner or I’ll have your legs off!
Great peace first time on here but after reading this it won’t be the last.
This explains a lot of things for me the two main things being.
1, Why the club have NOT bothered to try to infiltrate the Asian Markets, because after reading this there is no point in making George Davis rich on the back of it, however sure we could do a deal with him to cut his tenure in half with the money now floating around…
2, This also explains why, when I go to buy new tops for my boys they are always 5-10% dearer then other club shirt on the hangers next to them, I’m assuming Arsenal nave NO say in prices being set here?
As for Keith Edelman I can only assume we did not have the money/knowhow @ the time to set-up the operation required, so don’t think we can be too hard on him here.
Seems what we now need is our own little sweatshop in the bowels of the Emirates going forward…..
I can wait
you have missed the big one…. edelman was kicked out for making one of the worst mistakes of all time, i know this for a fact from the inside… he took the decision not to sell highbury square on for one hundred million profit!! instead he decided to squeeze an extra ten million out of it to sell direct… we then had the crunch and we lost one hundred million cos of him!! all that effort and profit gone… there was arsenes transfer money, this is a fact, the retail good to hear but this was the big one and hushed up but thats why he was fired…
makes what the club and arsene done look even more amazing eh?
AK: How solid is this? I have heard things like this before but the consequences of writing something like that, for me, without proof would be pretty big.
i was told by somebody who knows the board well, its 100%.. im sure if you dig it you will find it, i acutally heard it from a few sources inside the club, the club had the chance to sell the whole scheme on at a profit, this is very normal to ‘flip’ it to a developer, the club did it on much of the project, but KE decided to go direct… what a huge huge mistake… cant change the past eh?..
here is another one but a positve for you this time, the club bought the whole training ground & the all the first wave of building it PLUS thierry henry for selling anelka!
AK – Yeah the Anelka sale paid for a hell of a lot. I know Edelman wasn’t very popular and many doubted his suitability to the role he held but it is very difficult getting that sort of stuff so I will have a word or two.
Interesting stuff, but you should not swallow the Real guff about Ronaldo’s £80m fee being paid back by shirts and memorabilia already. They claimed the same for Beckham. Remember Ronaldo fee was paid up front, no instalments, and Real only get 50 per cent of (net?) income from shirts sold, so it may get paid back (but I doubt it) but not in one year.
Edelman was a shmock. Fucked alot up apperently not just the emirates shirt deal.
18 months is a long time to wait, April 2012, then we have to wait whilst it all kicks in, so add another 6 months.
Keep up the good work Martin. Will Rvp be back after the int. break?
a bit of a naive question here. but what happens if we arnt sponsored by fly emirates anymore? do we lose the stadium? change the name? is it even possible for us to lose their sponsorship at this point? like i said its a bit of a stupid question but id really like to know the answer
The idea that Ronaldo’s purchase has been paid for is not supported by that link. Excluding the numerous errors in their math (1,200 million jerseys and memorabilia in the capital alone?) the analysis is flawed. The nearest somewhat simple way to look at how much Ronaldo made for them is increase, year on year, in Real Madrid Jerseys/merchandise sold. Most of those who bought CR9 jerseys would have bought Kaka jerseys, or Higuain, or whoever else instead, and Real would still have gotten their money. Unfortunately it’s harder to pull out the effect of Ronaldo versus the other players’ bought in the same summer. The article linked, however, doesn’t even bother. They just take a somewhat cavalier estimation of Jerseys sold, make wild assumptions about effects over time, and voila, Ronaldo was a bargain. Look at the debt of teams like Real and Barcelona, and Chelsea, among others (even though Chelsea cook the books to make it appear otherwise) who spend like this. The only viable conclusion is that rampant spending leads to rampant debt, which doesn’t happen if big purchases “pay for themselves”.
The effect of the termination of this deal will be higher turnover and maybe profits. The shirt deals potentially will be very much better. I seem to remember that in 2014 or so, when the shirt deal is up there will be a negotiation for the stadium naming rights. This being the case, we are onward to being the bigest club in terms of turnover. We are already the most profitable club in the planet. That counts a lot in any business. No mean feat in this tough football business, and economic environment.
I feel the club’s phylosophy of operating it like a business is an excellent strategy. Normally in footballing world, exceesive spending is the key. Both by players individually as well as clubs. No financial sense at all. If the finance companies were to stop funding the clubs tomorrow, at least half the clubs will go under within six months. That should be the test for any organisation.
I’m with ob1 on the Ronaldo shirt sales – 200 million??? That’s one for every 30 people on the planet!!! Not a hope in hell of that happening!
[...] The Goon Blog wrote a good piece on the future of commercial revenue at the club and is well worth checking out if you haven’t already. Likewise, The Swiss Ramble also wrote a very good article discussing Arsenal’s finances. Read it. Before reading the latter, bear in mind that Man Shitty have just announced lossed of £121m and that their wages now exceed their turnover. Their wages exceed their turnover! That’s the clearest example that you will find of financial doping. Scandalous. Man Shitty’s income was £125m and their wage bill was £133m. That’s just mental. [...]
It’s great idea to do internet page like this one! Really untypical point of view and fine graphic.
That might explain why I recently bought an item of clothing from the Armoury and later found the label inside to have a picture of a Liverbird with letters LFC underneath. TRUE!
Yep! He does Liverpool’s too!
Good points re the merchandising. Needs must when debt is so high. Hindsight is a wonderful thing, but it does appear Edelman did a good deal.
I read that he got the boot as the directors found out he was taking backhanders from the property developers at Highbury. Palms were greased. Contracts signed.
Muu
[...] Information has been made available to me that in 18 months time, the commercial revenue stream will be massively improved due to the expiry of an awful business deal at the club. It is especially shocking when it [...] The Goon Blog [...]