Arsenal Football Club was founded in 1886 in Woolwich and in 1893 became the first club from the south of England to join the Football League. Arsenal is one of the most successful clubs in the Football League winning 13 First Division and Premier League Titles and a further 10 FA Cups. In 1913, the club moved north to the Arsenal Stadium in Highbury where they stayed until 2006 before moving to the Emirates Stadium. Arsenal FC has a reputation for being a club with class, some players believe that this is a great influence over the way the side plays and the way it operates in general. Furthermore, Arsenal FC is renowned for having a very tight community. Despite the club’s size and success, it is important that a family mentality is maintained, meaning that the players are treated with respect and equally. As well as this Arsenal values innovation. This passion for innovation has resulted in a lot of “firsts” for the club, for example Arsenal FC was the first club to wear hooped socks, to have players names on the back of their shirts, furthermore Arsenal was involved in the first live radio and TV broadcast of a football match, in 1927 and 1937 respectively. This innovation has continued to the present day, demonstrated by the fact that Arsenal was the involved in the first live broadcast of a 3D TV match (Information taken from visit to Arsenal Stadium). These values have become a part of all of Arsenal’s operations and has made the club what it is today. All information used in this pamphlet has been gathered from Arsenal Holdings Plc – Statement of Accounts and Annual Reports 2006-2011 and the visit to Arsenal Stadium (most notably information provided by Nick Peel – Retail Director).
Unlike most other football clubs, Arsenal is owned by a parent company: Arsenal Holdings PLC who owns a small number of shares which are infrequently traded. Arsenal Holdings PLC is a non -quoted public limited company, and owns 12 subsidiary companies, which collectively cover all of Arsenal Football Clubs activities. To date Arsenal Football Club has issued just over 62,000 shares, however these are not traded on a public stock market, but instead are traded on a less frequent basis in a specialised market (PLUS). Major Shareholders as of 2007 Stan Kroenke
KSE UK Inc.
RED and WHITE Securities LTD.
Arsenal Holdings PLC was previously owned by the descendants of two families, the BracewellSmiths and the Hill-Woods. However Kroenke and Usmanov’s interest in the club in 2007 changed this. As of end 2011, operating profits before tax, for the Football side of the business was £45.8m, a decrease of £11m from the previous year. As well as this, Arsenal Football Club made a further £6.8m profit on player sales. Despite these promising figures however, Arsenal Holdings PLC made a loss of £97.8m in 2011 as a whole. In April 2009 Forbes ranked Arsenal FC as the 3rd most valuable club in the world, excluding debt, behind Manchester Utd and Real Madrid ($1.2bn). Deloitte also valued the club, however Arsenal FC ranked 5th in Deloitte’s Football Money League in 2011. This is based on clubs revenue and Arsenal made £274.1m in the 2009-10 season. According to the club’s 2011 financial report, the objectives were as follows: “Our primary objective will always be success on the field” (Gazidis, 2011). The chief executive went on to state that the club would fight for increased revenue and investment in the team and a large engaged fan base (Arsenal Holdings PLC Annual Report, 2011). In 2007, some Arsenal followers were worried that Kroenke would not appreciate Arsenal’s core values such as “class and distinction” (Wenger, 2007). However Kroenke’s ownership has not changed these, in fact he respects them.
Arsenal is Britain’s second-largest and the world’s fifth-largest football club in revenue-generating terms (Mintel, 2011). Arsenal FC Key Financials for 2005-2011 Year Turnover (£000's) Operating Profit/ Loss (£000's) Cost of Player Net Book Value (£000's) Number of Employees Wages (£000's) Player Trading (£000’s)
Arsenal Holdings PLC recorded total operating profits of £14.8m in 2011, a massive decrease from the £56m they posted in the previous year. Despite decreased operating profits in 2011, the group net debt as a whole has decreased from £135.6m in 2010 to £97.8m in 2011. The move to the Emirates Stadium has been largely successful. The club was able to earn 93.1m from match day revenues in 2011 against the 44.1m in the last year at Highbury: an increase of two-fold in 5 years. (Scott M, 2011) With regard to the football segment, profit before tax for 2011 was £2.2m in contrast to £44.8m generated in 2010. Despite the club’s turnover being £3m more in 2011 than in 2010, the club lost £14.6m in player trading in 2011 whereas in 2010 the club gained £13.6m in this sector. Other factors that may have affected this decrease in profit is the match day revenue and costs. In 2011, Arsenal Football Club produced just under £1m less in ticket sales. Furthermore with staff numbers increasing, staff wages nearly doubled in 6 years. In 2011 wage costs were £124.4m representing 55.2% of the revenue, an increase from 47.6% in 2005.
Its key to note that the capital flows associated with football clubs, and especially Arsenal, are very sporadic. Matchday revenue depends on number of home games, broadcasting, sale of merchandise and catering revenue all are functions of the team’s league performance. According to Deloitte, Arsenal Holding’s auditor, the club has fallen behind other elite European clubs in commercial revenues. Because of long term contracts with sponsors it is unlikely that sponsorship revenue will change in the short term. Arsenal FC Revenue Sources 2011 Gate and other match day revenue
TV and broadcasting
Source: Arsenal Holdings plc - Statement of Accounts and Annual Report 2010/2011
The major costs associated with the club are real estate and salaries. While the cost of the stadium has been restructured, the associated costs with interest, administrative, maintenance and depreciation are fairly static, the volatile costs are in wages. Wage costs and revenue can be volatile, but the general trend is positive for Arsenal giving the club a strong platform to invest and develop the brand.
UEFAâ€™s financial fair play regulations, which aim to encourage clubs to balance revenues and costs, are likely to sharpen Arsenal focus on extracting more value from their inventory of commercial rights. Club will seek to sell more rights for money. (Mintel, 2011). Sponsors will be able to get involved with the Arsenal club on a wider range of levels than at present as a result the club become more open to brand approach which have been identified as a particular assets which best suited to their strategic commercial goals. These will include revision of the current Emirate stadium name contract with Fly emirates organisation. (Mintel, 2011). Arsenal brand need to follow club increasingly segmented pricing, merchandising and facility strategies in tailoring their activation programmes to speak to different crowd elements in different voices. Stadium development should create more opportunities for varied and technology-led touch points with fans through which brands can achieve this, primarily by enabling new services and amenities that enhance the event experience. New media technologies is enabling supporters to connect with the game on a 24/7 basis, and for Arsenal brand to benefit by enabling new kinds of interaction between fans, players and the club. Due to increasing investment in technology (a 10% increase worldwide by 2014) more people are going to be able to access digital technology, which could result in an increase in Arsenalâ€™s fan base (Jaruzelski and Dehoff, 2008). Additionally the prevalence and growth in online streaming technology means that more fans are likely to watch matches over the internet. A portion of Arsenalâ€™s future success is dependant on how well they are able to capitalise their online marketplace.
Arsenal‟s marketing strategy is not purely focused on the UK market and Match Days, but on a global scale targeting growth areas in Africa and Asia as well as building revenue streams outside of the football season. For example hosting X factor tours and concerts at the stadium, which generates revenue and publicity for the Arsenal brand (Utalkmarketing, 2008). Football and commercial operations work hand in hand at Arsenal, both in current and new domestic markets and in the potential markets represented by the club‟s global fan base, especially Eastern African countries such as Nigeria (Boddy, 2011). They have also developed relationships with TV and Multi-Media partners in China, India, US. Examples of Arsenal‟s global appeal include 104 retail outlets in China stocking official merchandise. (BBC, 2010) The strategy is aiming to develop domestic success by leveraging global brand awareness through new products (Boddy, 2011), such as women‟s clothing (Arsenal, 2012) and by partnering with non-football organisations. Arsenal FC have used a differentiated approach to targeting and are aware that markets are heterogeneous. They use specific marketing strategies when positioning to those different segments. A primary segment would be Socio Economic ABC1 whom they target by using customer based pricing. (Blythe, 2008) Arsenal predicts its international fan base is over 100 million, (Marketing Week, 2011) in order to access the segments in this market, from those who do not attend a single match to those devoted fans with season tickets, you need to utilise multinational channels of communication. This includes social media sites, their own website as well as plain oldfashioned direct mail. Examples of ways in which relationships are built between Arsenal and their fans include Facebook pages, iPhone Apps, (Utalkmarketing, 2009) Twitter accounts, Newsletters and more.
Arsenal used differentiation strategy in order to sustain its competitive advantage and promote its brand (Johnson et. 2008). For example they penetrate existing customers by offering them different membership levels which depend on price and services offered. These include: Club level membership including diamond club, third level and first level club memberships. Another element of differentiation seemed in Arsenal management. They create new branding and commercial strategy to increase its fan base (Grant, 2010). Arsenal follows a self-sustaining business model and believes in buying and developing young players rather than purchasing well-known stars at high prices (Mintel 2011). Arsenal announced new partnership in August 2011 with a Malta-based gaming company Betsson which includes the creation of a new gambling brand, GunnersGaming by Betsson, and an online gaming service dedicated to Arsenal fans.
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