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.