Arsenal’s Financial State: Insights on Wages, Ticket Prices, FFP, and Debt
Arsenal Football Club has once again reported a loss in their accounts for the fifth consecutive year. The club’s financial results for the year ending on May 31, 2023, revealed a deficit of £52.1 million ($65.8m), which is an increase of £6.6 million from the previous year. However, a closer look at the underlying numbers provides a more optimistic view of the situation. Despite the losses, Arsenal’s overall revenue saw a significant increase of 25 percent, reaching £467 million.
The increase in revenue can be attributed to several factors. Arsenal’s improved performance on the field played a crucial role in generating more income. Their strong challenge for the Premier League title in the 2022-23 season resulted in higher broadcast revenue. Additionally, their return to European football in the form of the Europa League, coupled with an improved Premier League position, further boosted their broadcast income by £45 million, reaching £191.2 million. However, early exits from cup competitions limited their earnings.
Arsenal’s financial report acknowledges that the club is reliant on the continued financial support of its parent company, Kroenke Sports & Entertainment (KSE). Nevertheless, the Arsenal board aims to return to a financially self-sustaining model in the future. The club’s commercial income reached a record high of £169.3 million, thanks to a shift in strategy and emphasis on retail. As a result, Arsenal’s commercial and administrative staff increased from 364 to 426. With the new Emirates deal set to begin in 2024-25, commercial revenue is expected to further rise.
Despite achieving a club record in income, Arsenal still lags behind Manchester City, Manchester United, Liverpool, Chelsea, and Tottenham Hotspur in terms of overall revenue. This discrepancy can be partly explained by the fact that four of these teams were competing in the Champions League. Furthermore, Tottenham Hotspur’s new stadium has enabled them to surpass Arsenal’s matchday revenue.
The financial report also mentions “impairment write-downs” amounting to £18.1 million, which are classified as exceptional items. Impairment losses occur when a business asset’s fair market value depreciates more than its book value. Although specific players are not named, it is speculated that the disastrous signing of Nicolas Pepe for £72 million contributed to these write-downs. Additionally, Arsenal’s inability to sell players has had a negative impact on their profits. The report explains that reduced overall liquidity and market conditions affected the club’s ability to realize profits.
Regarding the wage bill, Arsenal saw an increase due to the arrival of new players in both the men’s and women’s teams. The wage bill currently stands at £234.8 million and is expected to rise further in the next set of accounts with the signings of Declan Rice and new contracts for Martin Odegaard and William Saliba. Despite this increase, Arsenal’s wages account for only 50 percent of their revenue, which is considered a healthy position.
In terms of financial sustainability, Arsenal claims to be compliant with UEFA and Premier League regulations. Although their combined losses exceed the permitted limit of £105 million over a three-season period, the leeway given due to the pandemic puts Arsenal in a relatively comfortable position. The club’s decision not to enter the January transfer market was influenced by financial regulations, suggesting that significant spending is planned for the summer of 2024.
Arsenal recently announced a season ticket price increase of up to six percent in certain areas of the stadium. The club cites rising operating costs and UK inflation as the reasons behind this decision. However, fans feel that other means should be explored to generate additional funds, especially considering the new Champions League format, which will likely result in more home games next season.
In terms of debt, Arsenal owes the majority of their debt to Stan Kroenke, the club’s owner. In the 2022-23 season, Arsenal borrowed an additional £41 million from KSE, bringing their total debt to £259 million. While this is a significant amount, the positive aspect is that the debt is owed to the parent company and not external creditors, resulting in favorable interest rates.
In other news, Arsenal’s subsidiary, Ashburton Trading, has finally received permission to develop a new block of student accommodation near the Emirates Stadium. The original plan for a 25-storey building was rejected in 2011, but after more than a decade, a compromise has been reached for a 12-storey building that can house 284 students.
Lastly, Arsenal has addressed the ongoing controversy surrounding the European Super League. The club states that they are monitoring the situation and if any additional costs arise as a result of the project’s closure, KSE, as the parent entity, will bear the financial burden.
Overall, Arsenal’s financial results for the year ending May 31, 2023, reveal a mixed picture. While the club has recorded losses for the fifth consecutive year, there are signs of improvement. Increased revenue, a shift towards self-sustainability, and plans for future investments indicate that Arsenal is working towards a stronger financial position. However, challenges such as impairment write-downs, difficulties in player sales, and debt obligations still need to be addressed to secure long-term stability for the club.