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Arsenal Football Club: A Successful Business Model That Has Led to a Failed Footballing Model

by Jason Mitchell

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Time for a change of direction at the Emirates Stadium?

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This week Arsenal extended their run of games without a win in the Premier League to four matches. In the same week, Arsenal Chief Executive Ivan Gazidis staunchly defended his club’s business model and transfer policy, highlighting the importance of remaining self-sufficient.

“[Our business model] does mean we can’t afford to compete with oil money, and we can’t afford to compete with super-wealthy individuals from Russia,” he told Fox.

“But I think the more important thing about our model is that it’s sustainable. If we’ve learned anything from the world’s economic crisis, it has to be that football clubs need to have responsibility – not just for today, but for their own futures.”

“Our business model means that we can continue to do what we’re doing forever.”

The importance of a sustainable business model is clear, especially with the prospect of UEFA’s ‘Financial Fair Play’ regulations on the horizon. Arsenal have, all things considered, done an excellent job of remaining financially sound in the aftermath of their expensive move from Highbury to the Emirates Stadium. In 2010 the club recorded a record pre-tax profit of £56 million.

At a time where wealthy owners taking over clubs and spending hundreds of millions of pounds is becoming more and more common, the ambition to remain completely self-sufficient and the success Arsenal have had in remaining one of the world’s most profitable clubs is even admirable.

However, what seems to have gone amiss is the blindingly obvious fact that the sustainability of the business model Gazidis is so proud of hinges on having a successful playing squad.

Football is a business. However, the most important aspect of any football club will always be the football team itself.

Champions League qualification for teams like Arsenal brings with it massive revenue and the ability to negotiate top commercial deals. Success brings with it season ticket sales and international recognition. These things are hugely important for Arsenal’s business model. The ‘football’ and the ‘business’ must operate in tandem. In order to sustain their business model, Arsenal Football Club simply has to deliver results on the pitch.

That aspect of Arsenal’s business model is perhaps under more scrutiny now than at any other time during Arsene Wenger’s reign as manager of the club. A 0-0 draw with Bolton on Wednesday night left the club in 7th place in the Premier League table. Finishing in the same position would surely represent a disaster for Arsenal.

Over the years, Wenger’s ability in the transfer market to buy low and sell high has generated significant money for the club. However, the sale of top quality players like Cesc Fabregas and Samir Nasri at the beginning of the season, and the subsequent failure to replace those players with footballers of similar quality is clearly costing Arsenal.

However, it’s wrong to look at those players in isolation. The policy of selling top players for big money and not spending to adequately replace them has been a theme for Arsenal in recent seasons, arguably dating back as far as the sale of Patrick Vieira in 2005.

The result has been a steady decline in terms of success. The club has gone six seasons without a trophy. Finishing without trophies was seemingly considered acceptable by those in charge while Champions League qualification was assured. However, Arsenal now face the realistic prospect of failure to achieve even that.

Consequences for such an on-the-pitch failure would certainly have a massive impact on Arsenal’s business model. It would also have a futher impact on the ability to attract top footballers to the club and to hold onto players like Robin Van Persie. And so the cycle continues. The club would then have to try to combat the threat of a complete downward spiral.

Despite the quality of their football, Arsenal were already failing to win trophies and achieve footballing success with players like Fabregas and Nasri in the side. The worrying thing is that the overall quality of the playing staff decreased over the summer and the club seemed to anticipate no major consequences.

While operating as one of the most profitable clubs in world football since the move to the Emirates Stadium, each year, the club has regressed further and further on the pitch. Perhaps those in charge will not fully feel the effects of that until they are hit by a lack of Champions League revenue, or a fall in season ticket sales. The danger is that by then it could be too late.

Arsenal do have a successful business model, which they should rightly be proud of. However, it has to operate with a greater emphasis on footballing success. Making the “business” a priority over football will eventually lead to a decline in business success because the two ideas are inextricably linked.

Follow Jason Mitchell on Twitter @JasonOffside

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