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Ix Techau Evil Mastermind 14,278 pts

Arsenal Finances for Dummies, part two: Can we buy Hazard for £30m?

Posted by Ix Techau over 8 years ago · 0 replies
This article was originally posted on Arsenal Report on March 10th, 2012.

For some reason, Eden Hazard has become the symbol of all things that are wrong with Arsenal’s frugal transfer policy over the last 10 years, with some supporters claiming he – or a player of similar perceived quality – is the answer to all issues on and off the pitch. But ignoring for a second whether or not he’d improve the team from a footballing perspective, would Arsenal even be able to afford a player in that transfer segment?

The short-term answer is yes; we have enough cash at the club to finance such a deal at the moment. However, the long-term answer is no; with the current financial structure and self-sustaining approach, such a transfer would represent huge risk over time in a number of areas. It would also result in putting enormous pressure on the player from a performance perspective, and it would set a measure of expectation from the fans that Arsenal simply can not afford in the long run.

The true cost of a transfer

Some may not realise this, but the actual cost of a transfer is much more than just the initial transfer fee. Wages can easily rise to several million pounds when you calculate them from a yearly perspective – for example; Djourou’s new £50k/week contract translates into £2.6m per year. On top of that you have agent fees, bonuses, possible future instalments, etc, all adding up to the true transfer cost.

It’s also worth remembering that transfer fees usually (but not always) influence player wage, in that a high transfer fee indicates higher player quality, and that will be reflected in the player’s wages. Buying a £30m player will most certainly mean we’re looking at wages above £100k/week, which translates into at least an extra £20.8m added to the budget for a four-year contract.

With performance bonuses and agent fees added, the true cost of a £30m transfer could easily be anything between £50-60m, potentially making the initial fee only half of the actual expense for the investment in getting a player’s signature.

What is our transfer budget?

At Arsenal, the transfer budget (or ‘war chest’ as it’s commonly referred to) is a combined segment in the overall yearly budget that includes not only initial fees, but also contracts – new ones and renewed ones (for current players). So if we want to give Van Persie an improved contract from £90k/week to £110k/week, that extra £20k/week converts into an added £1m per year that would come out of our war chest.

Naturally, the club wouldn’t want to announce their exact transfer budget, as that would influence the prices for players we want, but judging by reports it’s safe to assume that Arsenal have set aside a healthy amount of cash each year for transfers and contract renewals. This is then adjusted by outgoing players, so every year the club can operate around £50m in terms of transfers and contracts.

There is more cash available, but the club is sensibly saving cash for rainy (well…rainier) days. It’s also worth noting that the Arsenal Supporters’ Trust believe that £45m (90%) of our yearly war chest budget is solely from Champions League participation, and that failure to qualify for the competition means a drastically reduced transfer budget for Wenger. But again, that’s where the rainy day fund comes in.

So…we’re stuck with next best?

Not necessarily. Arsenal currently have notoriously poor commercial deals with shirt sponsor Emirates and kit supplier Nike, but both deals expire in 2014. In order to maximise new deals, the best negotiating point would be that the team is winning trophies and increasing its reputation. One way of doing both those things would be to invest in a few profile signings between now and 2014, to raise the profile and quality of the team.

I personally think that the transfer of Gervinho felt very much like settling for the next best thing we could buy from Lille. Wenger clearly wanted cover for Nasri on the left flank, and Gervinho was playing right wing at Lille, with Hazard on his opposite flank. Yes, Hazard would have been more expensive – vastly so – but he offers more in terms of creativity, and he wouldn’t have left us for a month in the middle of the season to go to the African Cup of Nations. Gervinho’s absence could’ve been one of the reasons we lost every single Premier League game in January.

Would Hazard add quality to the team? Without a doubt. Can we afford him? Yes, but he would probably eat our entire transfer budget, and we need to strengthen other positions as well. Will we attempt to buy him? It’s doubtful. There might be personality issues, and Wenger might not be convinced Hazard fits into his tactical system. It’s also highly improbable that Wenger would break his £15m transfer record out of the blue. For that to happen, something drastic needs to occur.

This article was originally posted on Arsenal Report on March 10th, 2012.
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