What is Stan Kroenke’s Long Game?

As you will full well know by now, in the 2013/14 accounting year, Arsenal Football Club PLC paid KSE LLC – Kroenke Sports Enterprises – £3 million relating to “strategic and advisory services which relate to Arsenal’s broadband”.

As highlighted by The Guardian, this was a similar value as to the extra money raised by the club through ticket price rises.

Now what these “strategic and advisory services” were is anyone guess – maybe a shareholder could pose this question at the next AGM?

Yes, in 2013/14, Arsenal launched a new website, a YouTube channel, and raised further funds through “selling a three-hour block of weekly content to the lucrative international market”, but how this justifies the £3 million payment is up for debate.

What would be interesting is to see how much the Arsenal Broadband side of the business has generated for the club, and how much these new ventures have increased revenue.

Ever since Stan Kroenke bought into the club back in April 2007, his long game has been clear, but it seems only now other’s are realising what this is.

When he bought his first shares from ITV on 5th April 2007, acquiring 9.9% of the club, part of the deal also included a 50% share of Arsenal Broadband Ltd, the company set up by the club in partnership with Granada to ensure Arsenal were able to exploit the lucrative media market which is not associated with match day.

With the partnership, the club revamped the website, bringing more daily content, and launched a TV channel, Arsenal TV, to compete with Manchester united’s MUTV, and Liverpool’s, Liverpool TV – interestingly Granada also held shares in both companies and had a similar deal to that of Arsenal.

Upon Kroenke’s take over, it was painfully obvious what he was planning. By buying ITV’s shares and with it the 50% share in Arsenal Broadband Ltd, Kroenke had his eyes on the lucrative TV deal.

Arsenal Broadband run all of Arsenal’s media content, whether it be online through the website, or any potential ‘pay for’ TV programme that we (re)Launch. It also benefits from any advertising revenue that the website generates.

So what does this all have to do with Kroenke’s long game?

Well, his investment in Arsenal is to make money. The same with the Yanks at Liverpool, Manchester United, Villa dn Sunderland. The largest revenue stream is that of TV money.

There will become a point in the future where the joint TV deal breaks up, and each individual club well sell their own TV rights. What will happen is simple.

Arsenal match’s will be packaged up by Arsenal Broadband Ltd, and then sold on to TV companies, within both the UK and abroad. The money from selling the rights to all Arsenal games could be worth well over €300 million a year. This money will then be split, 50/50, between the two parties who own Arsenal Broadband Ltd. KSE and Arsenal.

Add in highlights packages and other content, this will become a huge revenue stream. And the Kroenke long game then comes into plan. He pockets half the cash, with Arsenal getting the other half. It will make the American even richer.

In the short term, Kroenke has had to explore other avenue’s to make money from the club. People would riot too much if the club paid out dividends. A dividend would also line the pockets of Kroenke’s rival, Alisher Usmanov. Something which Kroenke would not want to do.

By charging the club for “strategic and advisory services”, Kroenke was clearly hoping to dupe the fans into thinking he was providing the club a justified service. Unfortunately for him he underestimated the intelligence of the fans who saw straight through it.

He has enabled himself to line his own pockets, without paying out to other share holders.

The worry for Arsenal fans is that this will set a precedent. Do not be surprised for Kroenke to be taking out a sum from the club as part of a service each year. And if and when individual TV deals, then he will be laughing all the way to the bank. Money that could reduce ticket prices or go towards improving the playing squad, will just be lining his pockets.

Is it greed? No. It is business. It is modern football. It is killing the game.

Keenos

 

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11 thoughts on “What is Stan Kroenke’s Long Game?

  1. Gunner6

    As you put it, we don’t know the income side to consider whether the £3m is money well spent. But then you went into “lining his pockets” statement. It is not his pockets, but his company’s. You might think it is one and the same but a business has expenses too.

    What we do know is he has not taken any dividends out which directly lines his pocket. So please, before jumping on tne bandwagon of the British media that SK lining his pocket, stop and think for a moment on this matter.

    But I do agree with your analysis about the TV deals. He is setting his company up for a huge windfall should Arsenal be able to market their own TV deals. If that is the case, then what’s the issue with £3m?

    The British press will roll this out like it is the end of the world, yet fail to properly scrutinize other owners. I don’t need to expand as I am sure you are well aware of.

    Reply
    1. Mysticweb.

      Altitude Sports and Entertainment
      Cable channel
      Altitude Sports and Entertainment is an American regional sports cable and satellite television channel that is owned by Stan Kroenke. Wikipedia
      CEO: Kimberly A. Carver
      Founder: Stan Kroenke……….. If the future is for clubs to sell their own TV deals Kroenke is already well placed having his own TV platform.

      Reply
      1. We're Coming For Your Club, Xenphobes

        Sounds like a smart business man to me, I’m glad we have him on our side.

  2. Andy Kelly

    “Unfortunately for him he underestimated the intelligence of the fans who saw straight through it.”

    But not intelligent enough not to give him a load more cash next summer.

    Reply
  3. GunnerAnt

    I agree,-he owns the team and purchased the shares to call the shots. When we purchase tickets,we only lease the product for a certain amount of time.At the end of theday,he put the millions up to purchase the team.

    Reply
  4. We're Coming For Your Club, Xenphobes

    This is going to be so unpopular, I am going to get abused like *TM for being just as snarky. But one of the things I love about SheWore is the variety of opinions and views. I could expand these thoughts with some real research and a blog post, you know with like with my real initials (*CS) instead of some dumb user name and a lifted email address if there is any interest in a unpopular but present opinion (especially, among global fans). Yes, the yanks are coming for your club (side note: where I grew up, we would fight anyone that called us a yankee). But believe it or not, I love The Arsenal too.

    Arsenal Football Club is a global brand, not a local football club. There, I said it. I know, I know, it’s killing the old time feel of going to Highbury and dusting off a few (dozen) pints and breaking a few noses everyone grew up with, but it is growing the game on a global level. Key word: global. That means money from the dudes with cable on 5 continents, not just the blokes on Holloway Road. Guess what Islington, people all over the world are buying apparel, watching games on satellite feeds (it’s like TV, but in space), and going to the stadium when they visit London. This is a good thing for the club, the sport, and the owner who invested his money in the club, but not so much for you. Sorry, hate the game, not the player, and all that. Further, ownership is positioning itself well in the modern era of football. Ownership invested its money in the club in the form of Broadband, which is most likely the future of sports distribution, especially once the live sports on TV bubble bursts.

    Leading me to ticket prices, why would the club lower or keep ticket prices the same if they are still selling out? Ideally, they want different fans in the seats at every game. I am friends with the top ticket executive for a small market NHL (hockey, it’s a real sport played on ice) club. He told me the club (and most clubs) tries to limit the number of season tickets sold, so fresh faces can see games, thereby growing the club’s marketshare. The club doesn’t want you to have cheap season tickets because those seats can be filled by fans that haven’t already bought apparel at The Armory and haven’t already bought a pie at every game of the season. If you want to go to every game, you need to be worth it, and I don’t mean because you stand up and sing loud.

    On to TV revenues and this is where I need research. Is there a precedent for an individual club being able to globally or nationally market its own TV deal in all of global sports? I know NHL, NBA and MLB clubs in the US can market their games locally, but the national and international deals are locked up with the league. I don’t know what the Premier League or any of the other big continental leagues allow.

    I know Kroenke isn’t popular as an owner and that’s fine, but I can tell you he’s better than a lot of the alternatives. My MLB (baseball, it’s a real sport that is about 100 times better than cricket widely played on 3 continents) team is owned by a faceless corporation, meaning I don’t even know who to get mad at when the team collapses down the stretch for the second time in 4 years. You could also have a madman like Tan, or an owner who does pay himself insane amounts of dividends. You could have the sugar daddy owners some clubs do, and break and bend every FFP rule in the book, but sooner or later that owner is gone and it goes back the the structure of the club and that is where AFC is positioning itself. You could have the fan owned clubs like Real Madrid and the Green Bay Packers (NFL, it’s a real sport a whole continent of people calls football), and that seems to work very well if you’re lucky enough to have gotten in at the ground floor. How were ticket prices affected by Bale’s signing, anyway? Kroenke has every right to make his money, and he has proven he is investing in the club on the field (Özil, Alexis, Chambers) and in the marketplace (stadium, broadband).

    In closing, I will quote a fan I really have tons of respect for:

    “Is it greed? No. It is business. It is modern football.”

    I left the last phrase out because the game is the game and business is business. Separate the two and things are a hell of a lot more fun. In the end, it’s still 2 teams, 2 goals, 1 ball and a beautiful pitch of grass, the rest is just fucking noise.

    Flame on.

    Reply

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