First Liverpool, now Manchester United.
Two big, American owned, English clubs are up for sale. Why is this? And will the Kroenke’s follow a similar route with Arsenal.
Value at their peak?
The feeling is, football may well be “at its peak”.
Many of the American owners of top clubs have made their money through the financial markets. They (and the people around them) are experts at reading the markets. Finding companies that are undervalued, and selling them when they think they have reached peak value.
Have these financial experts looked at football clubs and thought “they have reached their peak, time to sell”. But why have they reached their peak?
European Super League
You can only wring a cloth so many times.
Two thirds of a top clubs revenue comes from TV money and gate receipts.
Since the Premier League came into existence, TV money has jumped dramatically every deal.
Sky numbers have stagnated for many years, and due to the cost of living crisis in the UK, their subscribers are declining – a 255,000 decrease in the second quarter of 2022.
In the last decade, the increasing in TV money has mainly been driven by overseas deals.
With “the world now conquered” and Sky’s decline viewership, clubs had to look elsewhere for to increase revenue. That was the European Super League.
Fans swiftly shut the door on that idea, leaving clubs very few alternative routes to increase revenue.
Stagnating gate receipts
You feel gate receipts in England have potentially reached their peak.
Since the Emirates has opened, Arsenal have only had 3 (from memory) “real” price rises (excluding rises due to VAT or reversals from European football discounts).
The aforementioned cost of living crisis means many people do not have the money for luxury entertainment – football, concert and other sporting tickets, holidays, etc.
Arsenal are currently suffering from a huge supply & demand issue, but dramatically increase ticket prices will be a huge PR own goal just as fans are on side.
And even an increase in tickets will not do much – if Arsenal increased tickets by 10% it would only add another 3% in revenue. Not enough to increase club value.
The only way clubs are dramatically increasing gate receipts these days is to expand their current stadium or build a bigger one. But that in itself comes at a huge cost and adding up to £1BU in debt to your club will only reduce its value in the short term (Spurs owners are struggling to sell due to the levels of debt).
So with no huge increases in gate receipts or TV revenue, and the Super League off the table, you can understand why investors might think footballing revenue has peaked.
The recent sale of Chelsea would have made owners of other clubs sit up and take note.
The club sold for £4.25bn, with revenue of £428m.
Manchester United’s revenue is £583m, Liverpool £487m. So how much would they be worth?
It would be too easy to say “£5.8pm & £4.8bn” based on the x10 multiplier Chelsea were sold for. There are other factors to take into account.
Chelsea were sold as debt free, whilst Man U have over £500m in debt.
The buyer of Chelsea would know they are in desperate need of a new stadium (Stamford Bridge capacity: 40,000), whilst Liverpool are in the process of expanding to 61,000.
Manchester United have the biggest ground in the country, but it is outdated and in desperate need of investment. Some experts believe they might be best off pulling it down and starting again.
FSG paid £300m for Liverpool back in 2010. The Glaziers spent close to £800m on Manchester United.
Both would be looking at at least a £4bn profit on their investment if they sold. Huge.
Incoming global recession
As the world continues to financially recover from Covid, and with the war in Ukraine, we are facing a global recession (it is not just the UK suffering right now).
Prior to a global recession is a good time to sell as the value of the assets will likely drop. Likewise, the cash a sale generates will be king.
The final impacting factor is the rise in state investment.
With the likes of Newcastle, Manchester City and PSG now owned by oil states, it is becoming increasingly harder for “self sustained” clubs to compete.
Success and fan bases go hand in hand.
We already see more Manchester City fans across the UK than ever before (you never used to see a City shirt in London). And the same is happening abroad.
Foreign fans are often quick to jump onto the next “successful club”. With the swing of success from Man U to Man City, the red shirts are being replaced by Sky Blue.
It will take time, but if City’s dominance (alongside potentially Newcastle’s), we will begin to see the fan base of “traditional” clubs decline as new, younger fans begin supporting the latest successful clubs.
As the fanbase declines, so will potential revenue from sponsors.
The likes of Manchester United and Liverpool might currently be at their peak in terms of marketability. And they simple can not keep up with state owned clubs.
So what does this mean for Arsenal?
Reports are that Manchester United are looking to sell having spoken to FSG and found out the offers on the table for Liverpool. You would be surprised if the Kroenke’s have not had the same conversations.
But will that be enough for the Kroenke’s to sell? Possibly not.
Whilst Liverpool and Manchester United are at their peak, value wise, Arsenal still have room to grow.
We are on an upwards curve on the pitch (Liverpool and Man U are on a downward curve).
Our most recent revenue was £327m.
That is £100m less than Chelsea, £160m less than Liverpool and £260m less than Manchester United.
You want to sell an asset at its peak, not whilst it is on the up. And we are on the up.
If we continue on our current trajectory, and keep hold of our talented young players, success will follow. And with success will come an increase in revenue.
Champions League football, more from kit manufacturers, more from kit sponsors, new global partners.
If we go on the x10 multiplier of Chelsea, then we will sell for around £1bn less than them, and potentially £2bn less than Man U.
The Kroenke’s would be walking away just as we are on the right path back to the top, and would potentially be sacrificing bigger profits down the line.
The Kroenke’s will look at what others are getting, and Arsenal’s current revenue. They will know that if we get back to where we should be, our value will dramatically rise. They won’t want to “sell early” and miss out on further profits.
Manchester United and Liverpool might be sold over the next few months. I do not see the Kroenke’s walking away for at least another 5 years.
I also think the Kroenke’s would note how their investment in their USA teams have brought success and increased valuations as to the value of the clubs and will follow the same model in respect to Arsenal.