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Football's Finance Fail: At Arsenal, Real Estate Is More Lucrative Than Sponsors

Arsenal -- or "Arsenal Holdings PLC," as the soccer club is known to the world of finance -- released its second half results for 2010 two days ago and the numbers offer a dismal picture of the economics of football, and the surprising lack of impact that sponsorship revenues can have.

Unlike most clubs, Arsenal is a public company so it discloses its finances regularly and in a level of detail not offered by other clubs. (Italy's Juventus, for instance, is part-owned by soon-to-be ousted Libyan dictator Moammer Ghaddafi.)

Here are the top and bottom lines for Arsenal:


Total sales sank 39 percent largely because the team is nearly done selling off apartments at the site of its old Highbury stadium (the London club now plays at the Emirates stadium, a few blocks away). Nonetheless, £120 million is a decent amount of revenue for six months -- yet the club still lost £2.5 million after tax.

Now look at the details of Arsenal's business segments, including its sponsorship, advertising and retail marketing efforts:


It's instantly obvious that the disappearance of its real estate business, once the Highbury development is sold off, will hurt the club dramatically. Sponsorship ("commercial") and retail merchandise sales are essentially flat and cannot be expected to grow to fill the gap.

The numbers illustrate the central truth of the insanity of soccer economics: There is a ceiling on the number of fans a club can attract. A handful, like Manchester United and F.C. Barcelona can attract large international followings but even they cannot grow new fans indefinitely. The difference between a regular business and the business of football is that an ordinary company can add new products any time it likes, and therefore new customers. For Arsenal, there is only Arsenal.

The numbers are a grim reminder of Arsenal boss Arsene Wenger's anxiety at the prospect that a major club, perhaps his own, might one day go into bankruptcy the way several smaller clubs such as Portsmouth F.C. have already done. When asked about this in 2009, the Frenchman said:

It means if you are not successful on the pitch you are dead.

I believe that every club in the world should only live with the income he makes ... It is not acceptable that any industry in the world has income not generated by his activity.

Wenger's words came after former Birmingham City owner David Sullivan expressed the same worries. Ironically, Birmingham beat Arsenal in Sunday's Carling Cup final.

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