This Arsenal team has a problem : It can’t get up for routine games.

It can’t get up for games that are not huge.

It couldn’t get up for Fulham or Hull City, and it couldn’t get up for Everton on the Saturday following at international break. Arsenal were lethargic and Everton ran the game and were 1-0 up at half-time and the team was booed off. It wasn’t mass booing, just frustration. After that the team came out for the second half and won 3-1.

And, as everyone knows, Arsenal haven’t played anybody good yet.

Apart from anything else, people expect value for money. Arsenal fans pay the highest ticket prices in the world. In a recession, fans are feeling the pinch but the players are earning more than ever, so the distance between the fans and the players, which is already huge, gets even bigger. If the canyon between fan and player is growing wider, that’s not helpful. That will apply to all clubs, not just Arsenal, as thousands of people lose their jobs in this recession.

Therefore, more than ever before in this Sky-hyped era, the Premier League millionaires are going to have to work harder to earn their obscene wages. If they don’t, they’ll hear about it immediately. Booing your own team off at half-time will become much more common this winter.

I wanted to miss the AGM, and since Ian Grant always goes, he would cover it.

I told friends I wasn’t going but they didn’t believe me. Then I was called up for two weeks jury service starting on November 3, and then a Cockney girl phoned to ask if I was willing to bring it forward to October 13, and I said OK, although that made it highly unlikely that I would be free on October 23.

On that day, as chairman Peter Hill-Wood stood up on a stage where Arsene Wenger was sitting next to new board member Stan Kroenke, the usher in our court was promising under oath to lock 12 of us in a room and not let anyone speak to us until we agreed a verdict.

Why didn’t I want to go the  AGM? Because I’ve been to loads of AGMs and must have written over 50,000 words about various Arsenal AGMs, more than anybody on this planet. But, crucially, I don’t want to attend the AGM of a company that has a turnover of over £200 million but doesn’t have a chief executive. If they can’t hire somebody to drive the business, you can’t expect respect. If they don’t have a CEO in 2009, I won’t be at the next AGM either.

On October 15, I was in the Jury Assembly Room and happened to pick up a discarded Daily Mail. I glanced through the Charlie Sale column and found the following item :

Arsenal’s botched hunt for a new chief executive has reached the absurd level of American headhunters Spencer Stuart ringing round rival companies for suggestions. This begs the question as to why Arsenal are still employing them in the search to fill the prestigious £1million a year- post. In contrast, the British Olympic Association have five high-calibre candidates for their less paid CEO post and interviews are taking place this week.

This what I’ve heard about the AGM :

Stan Kroenke was happily chatting the shareholders after the formal meeting finished. But the press officers would not let journalists near him. That is par for the course at a paranoid club run by control-freaks.

Wenger answered questions from the floor and admitted he had looked for a centreback in the summer. But centrebacks are scarce, which was proved by the fact that AC Milan had to get Senderos on loan from him !

That is world class sophistry from the greatest spin-doctor that organised sport has ever seen. Gooners are entitled to ask: If there is such a  shortage of centrebacks, why are we lending one to a team we may have to play?

Wenger also asked fans for more support for his young team. That was something new, something very unusual. For the manager to stand up at the AGM and ask more support was something that had never happened before. That was radical, perhaps significant.

One shareholder stood up and said that it is, of course, marvellous to have a youth policy and develop good players and give them a chance to prove themselves at the highest level, all that is very noble. But the problem is that once they are established in a team that is not winning trophies, clubs which do win trophies will cherry-pick and offer them bigger wages, and you are back to square one. Or you may be back to the square BEFORE one. You get good cash for the player who left but his departure is a huge setback in terms of your ability to compete for the title or the Champions League.

I wholly agree with that point. That’s why I wrote about Hleb-Flamini-Fabregas being the hub of the team, the Three Musketeers. And the Premier League and the Champions League are now more similar than they have ever been. To get to the final, Arsenal would probably have to beat Liverpool, Chelsea or Manchester United.

If Arsenal was winning trophies, a dynamic CEO could make them the biggest football club in the world. He could make better commercial deals that Edelman ever did, exploit the popularity of the club abroad, and turn Arsenal TV from an embarrassing, cheapo-cheapo broadcast into a professional channel like the Chelsea or Real Madrid channels. Arsenal TV should not be done in a broom cupboard with bad lightning and no make-up. I was told last season that they don’t even have onsite commentaries for the reserve games. A top executive could make the club less paranoid and more open, which is what’s been happening at Chelsea for the last three months.

Would a really dynamic CEO work under Wenger ? I heard  that Celtic chief exec Bill Lawwell was interviewed and offered the job but turned it down because the Arsenal failed to give him a satisfactory job description. Did that mean he didn’t fancy working under Wenger? We don’t know. Lawwell may have used Arsenal to get a pay rise from Celtic. Or he may have had a genuine change of heart because it was too big a wrench to leave the club he supported. Or maybe he bottled it because the Arsenal job was too big for him. We’ll never know the truth about that.

What we do know is that Arsene Wenger runs Arsenal. At Celtic, Martin O’Neill ran the team and Gordon Strachan runs the team now. But Bill Lawwell runs the club. At Arsenal, Wenger runs the team and the club and Acting MD Ken Friar works for him.

To fill the executive vacuum, it’s question of finding someone who can work with Wenger. He’s won seven trophies at Highbury and created a sparkling style of football that’s admired all round the world. He made the Emirates move possible, and that is a colossal achievement, and he secured the medium-term survival of the club.
 
In the early Nineties, George Graham used to tell Ken Friar to prepare an international registration form but not tell Friar the  name of the player, or even what country he was coming from. After the directors sacked Graham in February 1995, they swore that no Arsenal manager would ever be allowed that much power again. 

But Arsene Wenger, a workaholic sports scientist and polymath,  has far more power than George Graham ever had. However, a small but growing minority now believe that Wenger would be better if he had less power. David Dein was big enough to disagree with Wenger occasionally. And that was healthy. Dein was sacked and not replaced, MD Keith Edelman was sacked and not replaced, and Danny Fiszman, who makes the big decisions, lives in Geneva for all but 90 days a year.

So the question today is : Is there an Arsenal season? Or is it merely a series of fixtures? Yes, of course those fixtures will provide some good games and plenty to talk about. But this team of kids and flaky foreigners obviously won’t win the Premier League because they can’t get up for bread and butter league games.

They might get to the last eight of the Champions League. And the manager, who could actually win the FA Cup by winning six games, will probably chuck that trophy, just as he did in 2007 and 2008. The more I think about it, the more I think there is no season. There is only the next game.

Arsenal is a club with a yesterday and a tomorrow – and this season they’ll finish somewhere between third and sixth.

But of course something could happen  to make me believe there IS an Arsenal season. Hill-Wood told shareholders that a new chief executive would be appointed soon.

Parts of yesterday’s piece were misleading.

Expert Arsenal-watchers have explained the finances to me in round numbers.

So that’s what I’m sharing with you today.

Accountants may baulk at this summary, but here goes :

Arsenal’s annual revenue is roughly £200 million.

Of that £200m, about £90 million comes from gate receipts and most of that is cash, apart from the upfront payments for four years of season-tickets in Club Level.About £3m per year.

Another £50m comes from TV games in the EPL and the Uefa Champions League.
Retail from replica shirts and assorted merchandise is about £10m.
The gate receipts, TV money and shop money are, effectively, cash.

The other £50 million is commercial money, but that is not all cash because much of it has been received in advance. That is where the shortfall arises. The club doesn’t get that money because they front-loaded their commercial deals ands have received a lot of that cash already. The Emirates deal was £100m gross and £90m net to Arsenal.

Of that £90m, £72m is being paid in the early years of the deal, with very little in the later years.
The Emirates shirt deal is £48m over eight years. Which is £6m a year.The naming rights is a 15-year deal for £42.5 m. Which is only £2.5 million a season. That is : less than the gate receipts from one game !

As everyone knows, Arsenal borrowed £260m to build a stadium that cost £400m. So they had to find another £140m from their own resources. That is a helluva lot of money for any football club to find, in any country.

Some of that £140m was cash from the shares sold to Granada for £77m. Most of Nike’s £55m was paid up front, and the Delaware North catering contract for £15 million was paid up front. That was cash that went into building the stadium. It’s not rocket science: MD Keith Edelman needed money to pay the builders and some of his deals would never have been done if Arsenal did not need the money to build the stadium.

Those deals now look poor and cleverclogs columnists tend to say : Arsenal always know their price, but don’t know their value. But others argue that you have to take the best deal on the table and get on with it.

Recapitulating, Arsenal has £150m  in annual cash receipts. What do they spend that £150m on during the year?

Obviously, it’s a big operation and costs are high.
Wages are £80m.
Running costs for the stadium are £15m
Other costs total a remarkable £35m.
Debt servicing on the stadium is £25m.

So £145m of cash is spent in the year.

And you’ve only earned cash of £150m before any commercial income. They may accrue £15m in commercial income in a year.

This is where the size of the squad, and the composition of the squad, becomes critical. Because there is no way that Arsene can allow his wage costs to creep up from £80m to £90m to £100m. That cannot happen. It’s impossible. The money isn’t there to pay it, even though there is a small amount of commercial money coming in.

When you look at it, the only variable cost is your squad. And the cost of the squad has been trimmed and trimmed again. That’s why Arsene cannot put Adebayor’s wages up from £35,000 a week to £70,000 a week. He can’t double Ade’s wages, let alone treble his wages, even if he wanted to. And he doesn’t want to. ANR readers do not need me to tell them why Ade’s wages should not be trebled.

Today the test of whether a club is being sensibly run is the wages/turnover ratio.

Michel Platini and his buddies think your wages/turnover ratio should be 50-55%. Remarkably, during the latest accounting period, Arsenal’s wages/turnover ratio will be less than 50%.

So I was wrong yesterday to repeat The News of the World’s suggestion that AW has to generate £24m profits on player sales. But that £24m has to come from somewhere and has to be paid. That is money which the team is generating by playing in their big new stadium, but which the manager doesn’t get to spend on his team. Because servicing the debt is more crucial than buying Fernando Torres, even if Torres wanted to join Arsenal.

The six banks originally loaned Arsenal £260m. Later on, the refinancing deal included a raft of covenants which are there to protect the lenders. One of the covenants explicitly forbids a fire-sale of players, as happened at Leeds United when they got into big financial trouble soon after their Champions League semi-final in 2001, when they lost 3-0 in Valencia after beating AC Milan, Besiktas, Lazio and Deportivo La Coruna. Then the performance declines, and the club gets relegated, and that hurts the banks as well as the football club. There is a clause in the financing agreement which says that 75% of player sale proceeds have to be re-invested in the team, in new players and/or wages.

Where Edelman scored was his re-financing at a fixed interest rate. That means that Arsenal now enjoy very cheap money, which would be impossible these days. No banks would lend £260 million to a football club now, on any terms.

What about the property portfolio ?

In February 2008 we had the half-year figures up to November 30, 2007. Peter Hill Wood wrote that the proceeds of Highbury Square and Queensland Road would about £350 gross.

He did not break down that ball-park figure.It is thought that would come from £300m gross at Highbury Square, and £50 gross from Queensland Road, a site that the club acquired Arsenal as part of a land package. It is now is surplus land at the time of a credit crunch when banks will not even lend money to each other. The club always planned to get planning permission and then sell the site to a developer. In the current climate they might have to choose between holding onto the site for five years or flogging it for £20m.

At Highbury Square they have taken over £30m in deposits on the apartments and penthouses.
There is a loan of £150m and if they achieve £250m in sales, they net £100m of cash. If they make £200m in sales, they still clear the development loan of £150m.

But here is where the arithmetic gets interesting : If you need £200m to complete the development of Highbury Square, and your loan is £150m and your deposits are £30m, you are still £20m short.

So where did that £20m come from ?

Its highly likely that it came from money that the manager hoped to spend on new players and wages. Why? Because Keith Edelman could not find that £20m from anywhere else. That seems to be where the finances have gone wrong, and seems to be why Edelman was fired.

How should this situation be improved?

Well, Arsenal should renegotiate their commercial deals with Emirates.

When Abramovich bought Chelsea, they blew out the Emirates deal that Ken Bates had made.They paid the Emirates £30m to go away and made deal for much more money with Samsung. And they also blew out Umbro to make a better deal with adidas. And Manchester United walked away from their shirt deal on a break-clause two years before the end of their Vodaphone contract. But that was not their call. Vodaphone made that decision. Then the Glazers got United a £14m-a-year deal with AIG.

That’s how big clubs operate. Arsenal get £6m a year from the Emirates, which is less than Ajax gets from AGEON, a Dutch insurance company. So Ajax have a bigger shirt sponsorship deal than Arsenal.

Unfortunately, Hill-Wood’s attitude is : We are Arsenal, we have more integrity than other clubs, we’ve never renegotiated a contract with anybody in our history. That policy is old-fashioned, snobbish, and self-defeating. It’s complete bollocks. Arsenal is a modern business like any other. And that’s why they need a worldly CEO with some balls, rather than an administrator like Ken Friar.

Yes, it looks as if Stan Kroenke will join the board but when he does, if he does, it will be on his terms. Stan always negotiates from a position of strength and does not mind how long the negotiations take. But it’s clear that Stan will not buy the whole club. And even if he did, he would have to borrow the money to do it. That is not what Arsenal want, or can afford, or what their supporters want to see happen.

What’s interesting is that Arsenal have not yet hired a CEO.

Why is it taking so long? Is it because Stan wants to choose Arsenal’s next chief executive? Or wants, at least, to approve the appointment.?

The question Arsenal fans should ask themselves is : If I’d invested £75m in a football club, would I want a say in the appointment of the new chief executive?