An Opinion on Arsenal, Wage Structures and the Future

How I View Arsenal

Arsenal, by definition and formality, is a club which it started out as such before became a lucrative business, much like how the sport of football evolved from amateurs to professionals, whose sole interest is to its fans, players and shareholders. It is my opinion that the club aims to achieve success on the pitch while maintaining financial stability and profitability in order to achieve long-term goals and ambitions, and Arsenal has a long history of doing everything possible to achieve financial excellence, starting with club’s move from their ancestral home of Woolwich to Highbury. As caretakers to the future of the club, the club should run by the Board as efficiently as possible and with an eye towards profit and self-sustainability, much like any responsible and successful business. Arsenal is unique both in England, Europe and the rest of the world in that they have managed to succeed on the pitch while turning profits almost every year, which has enabled the club to extend their reach worldwide without over-leveraging themselves with individual debts and benefactor loans that carry limited options for repayment (see: Liverpool under Tom Hicks and George Gillett; Manchester United under the Glazer family; Chelsea under Roman Abramovich; Manchester City under Sheikh Mansour). It is because of this why the Board, along with many who see the club in this light, has rebuked and publicly stated its opposition to the money of Alisher Usmanov, that the Russian’s view on how Arsenal should be operated stand in complete contrast to the club’s ethos and principals.

Arsenal and Arsene Wenger

Arsene Wenger has a history of unearthing talented youth players and giving them an opportunity to start in league, domestic cup and European matches, something other clubs of Arsenal’s stature both domestically and throughout the continent can’t provide or boast. As a result, Arsenal is often mentioned as a possible destination for the world’s best youth players. Arsenal’s youth academy, started in 1954 and currently overseen by Liam Brady, one of the finest players to ever wear an Arsenal shirt, (who also graduated from Arsenal’s youth academy), is regarded alongside Barcelona’s La Masia as the world’s best. It is due to this standing and success with its academy that will help Arsenal as UEFA ushers in Financial Fair Play (Note: While there are many loopholes that have arisen in FFP – one such being UEFA’s truth strength in preventing player transfers to clubs not in compliance with FFP - it is generally assumed that clubs across Europe have to change the way they conduct business). Under FFP, a club does not have to count investments made to their youth players and academy infrastructure, in order to encourage clubs to develop more youth from within their ranks as opposed to spending on transfers, but can count net transfer fees from the youth players as income generated. This is vital to Arsenal, since under Arsene Wenger the club has bought such youth players as Nicolas Anelka (for 500,000 pounds), Cesc Fabregas (2.25 million), and promoted schoolboy players into the first team ranks like Ashley Cole, only to later sell them for exponentially larger transfer fees. As clubs depend more on homegrown youth players, it is my opinion that Arsenal, due to their history of integrating the club’s youth players into the first time at a younger age, will still stand above the rest. This will only strengthen Arsenal’s standing within FFP, while becoming a destination for talented young players.

Arsenal, Transfers and the Wage Structure

Arsenal have done remarkably well since Arsene Wenger arrived in identifying successful players from leagues whose member clubs generate far less revenue (any league outside the top divisions in England, Spain, Italy, Germany, and France), talented players from clubs within the top divisions of those five countries but come from clubs that don’t generate as much revenue as the richer clubs within their respective countries, and players who are on the fringes of their clubs in those five countries’ top divisions. These players have a lower transfer fee attached to them, in general (since Arsenal technically have a slight advantage in that the fee to be agreed constitutes a large chunk of revenue for the selling club, in part due to Arsenal's outstanding scouting network finding the player in the first place - see: Joel Campbell), and the new players are given a wage that generally constitutes a raise from their previous clubs, but is generally less than what they’d get had they come through a situation not highlighted above (e.g., a star player from one of the big five leagues), and it falls within a strict structure that is congruent with their time of service and performance. Given that Arsenal is a club that has a significant amount of money and assets, there is room to increase transfer fees for a player of exceptional talent in order to win the player’s signature, but their wages still must fall within the club’s structure relative to their own standing. Arsenal, for the most part, don’t disclose the length of the contracts the players sign, but if the player(s) impresses enough, the club is quick to offer an extension of the contract along with a significant raise (see: Emmanuel Adebayor’s 100% raise in 2008) that still falls within the wage structure.

Faults with the Wage Structure as It is

Too many role-players on the squad have gotten raises too early in their careers based on promise versus actual output, which has increased the total wage bill to near the top of the league despite having zero players earning above 80,000 pounds per week (which is what Robin van Persie currently earns, the highest in the club). In addition, the wage structure hasn't increased enough to keep star players from leaving, but can be increased in the future as the club looks to renegotiate their shirt sponsorship and naming rights deals, which are widely looked at from an Arsenal standpoint as weak, as well as other commercial avenues and club assets not previously exploited.

The Wage Structure, its Harsh Realities, and why It Works

In theory, a wage structure works because it differentiates earnings between employees, or in this case, earnings between players. If wages go unchecked, there’s no ceiling and the club can’t enforce past precedence. Spending will spiral out of control as each new player arriving will demand more than the previous arrival in their hypothetical “category of talent.” The fact is that Arsenal can’t compete in regards to transfer fees and wages with old money clubs like Manchester United, Bayern Munich, Real Madrid and Barcelona, and nouveau riche clubs Manchester City and Chelsea at the moment (and the sadder reality is that it won’t be for another 5-6 years before clubs are required to be down to nearly zero losses for the accounting year, and again this is assuming no loopholes within FFP are found and exploited, such as City’s world record-breaking stadium naming rights deal, or that the FFP becomes toothless due to the upper echelon of clubs openly refusing to comply with the rules in place for FFP). Specifically, English clubs as a whole can’t compete with Real Madrid and Barcelona on the television front as those two clubs earn nearly five times more than EPL teams just in TV rights due to their ability to negotiate their own deals both domestically and internationally. Therefore, Arsenal must rely on finding talent that fits within Wenger’s tactics that comes comparatively affordable and who can be rewarded with extended contracts and raises based on performance, however the club and Wenger must do a better job at evaluating the talent they have on hand when it comes to extensions and wage increases. The club must develop youth, already a strong asset within the organization, in order to fill in for departures when spending decreases for a particular transfer window, whether by design or by need. The club is working within the same context in today’s world that it was when there was a time when there wasn't wealthy benefactors and club takeovers by the world’s richest families and men dotting the football landscape. Although Arsenal itself has seen a change in ownership, mainly going from a plural to a singular, the business model remains the same and it remains the steadiest in terms of long-term success and vitality. Build the core from within through the world’s best youth academy and young players; spend within means for talented players on the transfer market and reward outstanding individual performances with wage increases fit within the club’s financial structure and extended contracts, continue to profit and avoid over-leveraging of debts. The club has seen a drought in trophies over the past few years and a lot of that can be contributed to the exponential rise in spending from clubs armed with new cash that wasn’t generated by the club itself. However, the club has still finished in the top four of the league in those years without a trophy. The hope is that Arsenal has set themselves up better than anyone else when FFP starts to show through changes in behavior from the clubs most guilty of spending beyond what they organically generate. The reality is that the club is already there, that the club is being guided by players grown from within. How the players perform on the pitch…well that’s another story.

[Ed. note: Twin Cites Hawk originally posted this on Saturday evening. I've modified the date and time. -Ted].