Stadium, Arsenal-style survival logic

Written by Han Bing When Milan's new stadium plan was finally settled, Arsenal's Emirates Stadium expansion concept also appeared in the newspapers, which attracted strong attention in the football world. Arsenal is the first European giant in the 21st century to build a new modern stadium with a capacity of 60,000 people. This has doubled the match day revenue and thus achieved the strategic goal of being on par with Manchester United and leaving behind the other top four in the Premier League. However, the heavy debt pressure of building the Emirates Stadium has also made Arsenal's survival situation restricted by this magnificent stadium for a long time.

It was not until 2014 that Arsenal's stadium debt burden was greatly reduced due to the dividends brought by the surge in Premier League broadcast revenue. When Arsenal was finally able to invest heavily in signings in recent years to improve its championship competitiveness, the Emirates Stadium was gradually at a disadvantage in the face of competition from new large-capacity and multi-functional stadiums. The Kroenke family had to keep up with the trend and launch plans to expand the Emirates Stadium.

For Arsenal, this means that the underlying logic of "living off the stadium" in the past 20 years seems to be continuing to extend...

The Emirates Stadium has been a treasury and a cage for 20 years.

The reason why Ferguson's Manchester United dominated the Premier League in the 1990s was due to the game-day revenue generated by the continuous expansion of Old Trafford, which was the incremental capital that allowed the Red Devils to lead other opponents. As early as 1997, shortly after arriving in England, Wenger began to explore the possibility of owning a large-capacity stadium. When Arsenal's new stadium was finally approved in 2001, Wenger called it "the greatest decision in Arsenal's history" since the board appointed Chapman as coach in the 1920s. But it is this "greatest decision" that deeply binds Arsenal's survival status in the 21st century to the new stadium. The new stadium brought with it a doubling of matchday revenue and a long downturn of massive debt and tight money.

When the 60,000-capacity Emirates Stadium opened in 2006, the new construction cost was only 450 million euros, which was only 40% of the cost of Tottenham’s new stadium 13 years later. However, two-thirds of it came from loans, leaving Arsenal with a heavy debt burden. Arsenal's matchday revenue during the season is stable at more than 100 million euros, but at the same time, its huge debt of more than 300 million euros has forced Arsenal to issue bonds to relieve the pressure. Before the Premier League broadcast revenue grew by leaps and bounds in 2014, Arsenal's survival logic had always been to prioritize loan repayments rather than investing in the lineup. For 10 years at the beginning of the 21st century, Arsenal's investment in a single season only reached 50 million euros three times. It was not until the summer of 2014 that it exceeded 100 million euros for the first time.

The epidemic has resulted in empty-field games, which has had a particularly severe impact on Arsenal's matchday income. Arsenal can only refinance and low-interest short-term loans to fill the cash flow gap. The Emirates Stadium brings both positive and negative survival effects to Arsenal in the 21st century. Behind the revenue of 100 million euros per season is a heavy debt burden that directly affects the competitiveness of the stadium. Before moving to the Emirates Stadium in 2006, Arsenal ranked among the top two in the Premier League for eight consecutive seasons. However, in the following 16 seasons, they only entered the top two once, and retaining qualification for the Champions League became the priority competitive goal.

In the 2015/16 season, Arsenal once again entered the top two in the Premier League after 11 seasons. Thanks to the exponential growth in Premier League television broadcast revenue, Arsenal's season market investment has also begun to jump to more than 100 million euros. But at this time, the continued investment in the football market by other Premier League giants has brought returns, and Arsenal has fallen into a low period of missing the Champions League for 6 consecutive seasons. Arsenal's total investment in the football market in the past five seasons has reached 990 million euros. The price of ranking second in the Premier League for three consecutive seasons was five consecutive seasons of losses, with a total investment of more than 360 million euros.

As the French newspaper L’Equipe pointed out: In recent years, other Premier League giants’ investment in stadium expansion has caused Arsenal’s match-day revenue advantage to no longer exist, and its proportion of the club’s revenue has continued to decline. In less than 20 years, the dividends brought to Arsenal by the expansion of the Emirates Stadium have basically disappeared. In the context that TV broadcast revenue cannot widen the gap, expanding the stadium to significantly increase match day revenue is a shortcut for Arsenal to regain its capital advantage.

In the past and future, will the Gunners’ key goal be the stadium?

By the time Manchester City’s home expansion is completed early next year, Arsenal’s home capacity will drop from second place in the Premier League 19 years ago to sixth place, falling behind rivals Tottenham and West Ham United in London. On the one hand, Arsenal has as many as 100,000 fans waiting to buy season tickets; on the other hand, stadium bonds and epidemic financing debts have still not been paid off. Expanding the Emirates Stadium to a capacity of at least 70,000 people will require an investment of at least 580 million euros. This is almost double the long-term expenditure for Arsenal, which still has to repay at least 15 million euros of debt every season.

Arsenal fans hope that the stadium expansion will be completed in the summer of 2028, and that due to the comprehensive multi-functional transformation, the season's box office revenue will at least increase by more than 50%. But things are not as simple as imagined: the expansion requires raising the roof of the stadium and additional permission from the local district council. The expansion also means that the capacity of public transportation hubs near the stadium must be simultaneously increased, which will be a difficulty in getting the plan approved. The Daily Telegraph claimed that it may take up to five years for the expansion to obtain planning permission from Islington City Council. During the expansion period, Arsenal will have to move to Wembley Stadium for at least two seasons. This is also an unwilling choice for Arsenal fans.

Even so, expanding the Emirates Stadium is the only way for Arsenal to revive in the future. The current competitive situation is even more severe than it was 25 years ago. Archrival Tottenham has already led Arsenal in terms of stadium revenue development. Liverpool and Manchester City are also catching up. Manchester United, which already has an advantage, has launched a new stadium plan for 100,000 people. Arsenal's renaissance in the stadium is on the rise, but stadium capacity remains the same as it was 25 years ago, becoming the club's biggest obstacle to its competitive advantage.

Of course, this also means that the expansion cost of nearly 600 million euros will inevitably make Arsenal continue to bear the financial burden brought by the stadium. In the next 5 to 10 years, the club's financial situation will be significantly affected. But for Arsenal, this has been the way of survival that the club has been accustomed to since the 21st century.. But unlike before, the ever-increasing Premier League television broadcast revenue will reduce the pressure brought about by expansion costs to a great extent. In addition, Arsenal's rapidly growing commercial income will also help the club reduce its burden, and the Kroenke family, which fully controls Arsenal, will naturally use other financial methods to relieve the club's pressure. If Arteta's team can continue to compete in the Champions League steadily during this period, and even win major trophies, with the Emirates Stadium as the center's arsenal, the real revival will come faster.