Today I want to have a look at how Arsenal might continue to grow off the field.
- Our income comes from three principal sources:
- Broadcasting (radio, television, internet, smart-phones, etc)
- Match day revenue (ticket sales, programmes, catering, hospitality, etc)
- Commercial (sponsorship, merchandising, etc)
First broadcasting. Most of the money we receive for broadcasting comes from our share of collective deals negotiated by the Premier League, UEFA (Champions League), the Football Association (FA Cup) and Football League (Carling Cup). The only rights we negotiate ourselves are for home friendly matches (essentially the Emirates Cup which has become an annual event).
The current Premier League contracts finish at the end of this season. The new deals are currently being finalised but we know that the new deals with BSkyB and ESPN for domestic live TV rights are up a little on the current deal. Domestic radio rights have just been finalised. They’re up too, to around £36 million over three seasons, with Absolute Radio (formerly Virgin Radio) joining BBC Radio 5 Live and TalkSport as live radio commentary rights holders. The international television rights are currently being finalised. As things stand the total media deals look set to comfortably exceed the current £2.7 billion over three seasons.
This doesn’t help us relative to the other clubs of course as these are collective deals. All Premier League clubs will be better off, assuming the current predictions are correct. The rights we receive for the UEFA Champions League are also collectively negotiated. The only way to significantly increase broadcasting revenue relative to other clubs here and elsewhere in Europe would be to break away from collective bargaining. Spanish clubs negotiate their own rights which means massive deals for Real Madrid and Barcelona and the scrapings for everybody else. Italy has become so unequal under individual selling that they’re moving back to collective rights. The Premier League is enough of procession already without us going the same way.
Match day income is about maxed out at the moment. I certainly can’t afford anymore for my season ticket. Actually if I could I wouldn’t choose to. They’re astronomical enough already. The constant advertising the club is doing for Club season tickets would tend to suggest that we’re having to work very hard to keep these seats sold. There’s a lot that are empty even for the biggest games.
So that really leaves commercial income. We all know that the sponsorship deals with Nike and Emirates are sub-par. The need to get cash in quickly meant we’ve had most of the money from the current agreements. They’re also considerably below market rates at the moment. Welching on these deals would do a lot of harm to our reputation as a reliable business partner. By all means try and re-negotiate them onto more favourable terms but we’re holding a weak hand.
The current Nike kit deal expires at the end of next season in 2011 and the shirt title sponsorship element of the Emirates deal ends in 2014 (the naming rights deal for the ground runs until 2021). Both chief executive Ivan Gazidis and top commercial banana at Arsenal Angus Kinnear have spoken of increasing our commercial and sponsorship income. Arsčne Wenger has made it clear he doesn’t want us playing pre-season games outside Europe. That makes the commercial team’s work more difficult. I respect his reasoning on this, but think there is a compromise where we play pre-season games outside of Europe in odd numbered years where there isn’t a World Cup or European Championship. In the end though we can’t have the commercial tail wagging the football dog.
We all know our retail merchandising operation could improve. The level of service, quality and income all need to rise. That won’t provide a quantum leap in income however, welcome as any additional revenue would be (likewise improved quality, range and service). There is some scope for adding to our roster of commercial partners and sponsors. This is the area that the club is correctly concentrating on.
And to return finally to an old chestnut of mine, I’d like to see the club economically model the consequences of not having sponsor’s advertising on our playing jerseys. I think there may be an economic as well as an aesthetic reason for looking at this.
Here’s to three points on Humberside tomorrow evening against Hull City. Let’s keep up the momentum on and off the field.
Keep the faith!