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The impact on Arsenal of playing in the Europa league

Posted Monday 22nd May 2017

THURSDAY NIGHT FOOTY - WHAT WILL IT MEAN FOR ARSENAL'S FINANCES?

How much will not qualifying for the Champions League cost Arsenal?

In total we expect Arsenal playing in the Europa League instead of the Champions League will directly cost the club around £30m / €36m net in the 2017-18 season. This is due to a number of factors, largely the loss of broadcast revenue from Uefa. There is also likely to be some loss in gate receipts and an impact on the ability to secure increased sponsorship revenues, offset by a wages saving as some player bonuses won't be paid. Another 'cost' is the increased difficulty of attracting and retaining the very best players.

Loss of TV revenue explained:

This year we expect Arsenal to earn about €60m from the Champions League (c£50m; as Uefa pay in euros and exchange rates are volatile we can't be sure of future sterling figures). The Europa League offers much less; as a benchmark, Spurs made €20m for reaching the last 16 two years ago. In the last two seasons Arsenal have earned €53m and €60m from the Champions League (the difference is due to how UEFA allocate money based on performance in the domestic league as well as the CL). So we anticipate a reduction in TV revenue in the region of €30m-€40m (perhaps £25m-£33m), depending on Europa League progress. A small side note is that Arsenal will probably earn more as a result of Manchesyer United qualifying for the Champions league leaving Europa league income to be divided amongst just two clubs.

How much will Arsenal lose in gate receipts?

In recent seasons Arsenal have made approximately £100m in gate receipts from home matches in all competitions. This includes four Champions League games at a mix of category A and B. Arsenal have introduced pricing for the early rounds of the Europa League which are set slightly lower than the standard category C.

At a headline level we would expect Arsenal will lose about £9m in gate receipts over the three group games and first knockout game, although a run to the semi-final of the Europa League and the additional matches involved would see this reduced.

What is the effect on player bonuses?

Two seasons ago Arsenal paid two lots of Champions League bonuses in the same financial year, due to participation only being confirmed in August via a qualifier. Based on the differences seen in the accounts, we think that Champions League bonuses cost around £10m each season and this saving will be reflected in this year's results. We suspect some level of bonuses will be paid for Europa League qualification, but anticipate only a few million pounds. So we estimate there will be a saving here of about £7m.

Will Arsenal make a profit this season?

We expect Arsenal to record a pre-tax profit of close to £40m for 2016-17. This stems from the increased revenues from the bumper new Premier League TV deal and the saving on Champions League bonuses.

What can Arsenal afford to spend on players this summer having missed out on the Champions League places?

Our latest report in February estimated circa £120m of free cash (ie not set aside for debt repayment) would exist at 31 May 2017.  The projected reduced European income in 2017-18 would probably cut the amount available to safely spend this summer to £90m, but proceeds generated from selling players would add to this sum.

What can Arsenal afford to pay in wages next season and how does it compare to this season?

We expect a wage bill of around £200m for this season (fourth highest in England after the Manchester clubs and Chelsea) and believe limited growth will be possible - perhaps just the extra £7m allowed by Premier League rules from the TV revenues. At this level of wages Arsenal should still be profitable even with the reduced income, and will still generate close on £70m for transfers every year.

It should be noted that Spurs and Liverpool are fast catching up on income, with revenues likely to be close to £300m and £350m respectively next season, while Arsenal's will drop to around £400m. This may increase the challenge of returning to the top four, and with the club's main sponsorship deals due for renewal by 2019 lack of Champions League football could prove a real drawback in negotiations.

On the playing side, Arsenal relied in the past on the 'cult of Wenger' to attract young players, allied to an ability to pay more than all but two or three clubs in wages. Arguably these advantages have now gone, and although Arsenal will still be bigger payers than Spurs, the club could be seen as the sixth most attractive in England to join.