From Rhys Jaggar: stadium repayment truth
I read fan after fan saying that ‘the stadium is now paid for’ ‘almost paid for’ etc etc.
The stadium debt of £260m remortgaged upon completion of the building works was remortgaged as fixed-interest bonds of either 20 years or 25 years.
What that meant was that there were fixed annual payments from 2007 to 2026 until the first tranche matures, and a reduced annual payment up to 2031, when the second tranche is complete.
What is true is that the annual mortgage payment is now effectively an ‘operating cost matched by revenues’, namely season ticket revenue and, more crucially, corporate revenues from Club/Box levels.
However, if Arsenal were to implode sporting-wise and the prices had to drop radically, if the Champions League revenues disappeared, then the mortgage payments would become much, much more significant.
The changes in Arsenal’s financial position have come, not from a reduction in the stadium mortgage, but a radical change in foreign TV revenues from the EPL collective bargaining agreement; new sponsorship deals with Emirates, PUMA etc.
Stadium revenues have been relatively constant since the stadium opened at £95 – £100m and retail/merchandising has been growing organically without significantly affecting overall performance.
The material risks which still exist in Arsenal’s financial model include:
1. Failure to qualify for the Champions League Group stages two years in a row: this would put a £25 – 30m hole in their revenue streams, possibly more since ticket prices might have to drop if that happened and sponsorship deals might reduce in value if sporting performance were to decline.
2. Premium ticket holders become increasingly unwilling to continue to pay premium prices for the offering on offer in the absence of genuinely competitive performance in the pursuit of trophies. Some can be offset by football tourism, but by no means all.
The material risks, however, to UK-based fans who go to matches include the following:
1. The ownership cartel of EPL clubs seeing greater revenue opportunities in running the league outside of the UK and, hence, reducing matches in this country to a rump 10 – 12 matches.
2. A worsening economic climate seeing fewer UK-based fans capable of paying market rates for tickets, with associated increases in football tourism and/or casual attendees.
Right now, it is legitimate to balance the new sponsorship revenues from PUMA and Emirates against new signings, whilst managing current squad content according to revenue from other streams (including paring the squad should circumstances dictate).
Right now, what we are seeing is the big targets not arriving (Cesar going to Napoli, Higuain stalling, Rooney stalled, Fellaini dormant) and young Frenchmen being touted.
I”m all for an ambitious, focussed signing of star quality, but it has to be done within the framework of financial reality, which includes, for the next 13 years, an annual mortgage bond payment in the region of £20m.