AST Board member Simon Hill looks at Arsenal finances and ask whether the Club really needed to increase prices by 3% last season and suggests how a more custodianship approach can be brought to ticket pricing:

In the recently released 2013/14 accounts, Arsenal reported revenues above  £300m and cash reserves of over £170m. In light of this, was the club justified in increasing ticket prices by 3%?

In December 2013 Arsenal broke with tradition and announced far earlier than usual that ticket prices for all Platinum, Gold, Silver and Red members were to increase by 3% for Season 2014-15.

Subsequent to this, a successful FA Cup run saw the team play a total of nine home cup games (excluding League Cup) last season, so season ticket holders were surcharged for two extra games, with one of the games (Bayern Munich) being surcharged at Category A prices.

The club sought to justify the pricing increase on the grounds of keeping pace with inflationary pressures. At a Fans Forum, Ivan Gazidis emphasised that the increase was needed to ‘remain competitive’ and defended the increase by saying it was only the third rise in eight years.

I found this increase extraordinary and would highlight:

a)    It is the second rise in three years fans have suffered, making 9% in all (including VAT) or an average 3% pa (Gazidis’ use of a nine year period is an invidious manipulation of statistics for the benefit of his own argument and spans six years when Danny was in charge and minimal increases were put through)

b)    Inflation (itself only 1.9%) only pertains to £60m of Arsenal’s cost base (operating costs) or 20% of its revenues. The vast bulk of costs relate to wages and transfer fees something set European wide according to supply and demand, the relative strength of TV and sponsorship revenues and not, repeat not, influenced by the general RPI in the UK.

c)    In 2014/5 £26m of Arsenal’s £34m of extra EPL TV revenue has to be retained by the club and put toward non-wage costs (these can include player transfer fees or management fees such as the £3m paid to KSE last season) or profit under the new Premier League financial rules agreed in spring 2013 – this provides plenty of capacity to mop up the higher gas bills and Stan’s fees.

d)   Overall football related income is up 20% in 2013/14 – a trend that looks set to continue as sponsorship revenues will rise by around £20m this season, Champions League TV revenues by some £7m in 2015/16 and then Premier League revenues again the year after that by anything up to another 50% (£45mpa).

I also perceive a complete disconnect between the people making decisions on how much income is raised from fans, and the man deciding how much he wants to spend on his team. To any outsider this is baffling and I would like to hear the manager’s genuine views on whether the recent ticket pricing decisions meet with his approval and his advice on the financial resources he needed for this season.

In 2010 Arsenal rebuffed calls for a rights issue by stating that the manager did not see the extra resources as being required. Fair enough. Was he also consulted on whether this sub-£3m ticketing increase was needed on top of the £170m in cash reserves that would be held come last season’s end?

Let’s be clear: ticket prices were increased because the Board believe they could be raised without jeopardising ticket sales and that it is good business practice to get fans used to small regular increases in much the same way as the Tube network operates. The club knows it has a monopoly on our emotional attachment to attending games and can exploit that a bit further at the moment so best do it whilst they can.

Custodianship: Giving Something Back

With matchday revenues from non premium seats (Gold, Silver and Red sales) accounting for no more than £60m pa or 20% of the Club’s total revenues, there must be a case for the club to offer a Custodianship approach and give something back, such as:

a)    removing the additional surcharge costs for games played beyond the 26 covered by the season ticket in the same way that Club Level already encompasses all home matches.

b)    allowing ticket holders to opt out of the earlier cup games to avoid then having to pay extra later for the bigger and potentially better and more rewarding games in the latter stages of cups

c)    a Premier League only season ticket consisting of 19 games

d)    extending the excellent Young Guns scheme to also cover Category A games

For the club, the extra revenue earned from the 27th and 28th home games of a season is a bonus, a windfall. They also receive additional TV and prize monies for these achievements. For the supporter it is an extra 6% on their season ticket for an A game and 4% for a B game, and so for last season was over 10% or an average extra £130 for fans who attend them all. For FA Cup games however, 55% of any extra gross revenue is passed out of the club to the other team and the FA, and the benefit to the club becomes even more marginal (under 1% of their total income last season).

The upshot is actions that earn Arsenal about a 1% increase in revenues cost the main body of fans 10% more last season.

The negativity generated by the increases and aggressive pricing methods is surely disproportionate to the financial benefit it brings. I believe the club is looking at supporters in completely the wrong way and needs to change their mindset and recognise that:

a)    supporters are direct contributors to the team’s performance in home games – the players and manager are always making this clear, and the club should strive to make sure their most passionate and vocal fans attend games

b)    supporters are secured for life when attending games at a young age for the first time and cup games provide the ideal chance to get them at games, especially if they are held at weekends

c)    charging a net few million here or there in the good years when the team has a good home cup run is not vital in a £300m business where key assets cost upward of £30m to secure, where sponsorship revenue is increasingly the basis for competition between clubs and atmosphere is an important ingredient in success

d)    European competitors, especially the Germans, recognise that supporters have a contribution to make to the cost of the team but that they aren’t the primary source of securing financial competitive advantage – that comes from sponsorship, developing the brand and fan base and on field performance (winning). The President of Bayern said recently said, “We could triple our prices… but we do not think fans are cows that should be milked”.

Of course you can ask why should season ticket holders get the benefit of extra games at no or little cost whilst other Red or Silver members pay more game by game, but we would emphasise the season ticket holder has no choice over how his 26 games are allocated and has to pay upfront. This gives the club precious funds early in the summer to buy new players and plan with certainty, and we believe one or two extra games is modest reward for that early outlay and unquestioning commitment to pay for all games.

The aim of all fans and Supporter Groups should be to aim for changes in how the season ticket is charged for, as well as more affordable pricing across all ticketing categories.