Whilst the club will not weaken their bargaining position by openly stating the amount we have to spend on transfers, the £50,000,000 is not rank speculation on the part of journalists. Club accounts “which have shown a consistent £40-£50m profit before player sales for the last few year". Arsenal will not spend money they do not have, so wages, agent fees and amortisation of transfer fees have to come out of that money.
The significant point to take from that for those unduly concerned about the amount we have to spend is the ‘amortisation of transfer fees’. Football clubs are allowed to amortise the cost of a transfer fee over the length of players contracts.
So say after wages and fees we have £35,000,000 to spend, this is still a significant amount to bring in the players we need to improve the squad. Also, this doesn’t take into account player sales which means we will have more.
An example here would be signing Sokratis, for a reported £18,000,000, which over a five year deal would cost us £3.6 million a year. If we then went and bought, say Seri for £40,000,000, on a four year deal, costing us ten million a year, we would have purchased close to sixty million pounds worth of players “yet the impact on the budget is just £15m."
Essentially a 50,000,000 pre-sales budget means we could buy:
1x £50m player on a 5 year deal
1x £40m player on a 4 year deal
1x £25m player on a 5 year deal
1x £25m player on a 5 year deal
1x £20m player on a 4 year deal
"£160m outlay on players, yet it will only increase our yearly outgoings by £50m. It is within the budget"
For a better analysis, here is the article: https://www.google.co.uk/amp/s/shewore.com/2018/05/19/arsenals-50m-budget-explained/amp/
That ‘£50 million’ budget
posted on 22/5/18
Thanks for the explanations everyone.
posted on 22/5/18
comment by 8bit (U2653)
posted 1 hour, 29 minutes ago
comment by Jenius99 (U4918)
posted 13 minutes ago
comment by Giröulski Alt-153 and Alt-160 forever (U14971)
posted 1 minute ago
Won't this eventually snowball to the point where our budget for this year will be hamstrung from the transfers of last year?
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No. This is an additional amount.
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hmm not sure, unless we're increasing our revenue by 50m every year then it's not sustainable. Doubt we'll see anywhere near a 160m net spend this summer.
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Older deals are coming off the books while the revenue is increasing because of the new TV deal which the club is only allowed to spend a small percentage off. Thats boosting the reserves whilst the stadium debt is also decreasing. Essentially Arsenal are cash cow.
You assume that we are just collecting players, we do not because the squad is limited. There are in fact very few cases like Mertesacker and santi that are write offs.
posted on 22/5/18
Comment Deleted by Site Moderator
posted on 22/5/18
Thought we paid for Ozil and Alexis in one go
We can offer cash opposed to installments due to our signifcant cash reserves
posted on 23/5/18
Don't think we paid for Ozil in one go:
"The €50 million fee is broken down into an initial €24 million payment that was completed on Sept 2, 2013 when Ozil joined Arsenal. A further €15 million was then payable on Sept 30, 2014 and then another €5 million on 30 Sept, 2015. The remaining €6 million was then split evenly over six years from July 1, 2014 subject to Champions League qualification. It means that the total deal cannot exceed €50 million, plus VAT."
https://www.google.co.uk/amp/s/www.telegraph.co.uk/football/2016/01/29/mesut-ozil-leaked-contract-reveals-real-madrid-have-buy-back-opt/amp/
posted on 23/5/18
comment by Gunners-Maq (U6667)
posted 10 hours, 24 minutes ago
As someone working in audit this can be true but not always.
Amortization isn't a cost you have to spend. It's an accounting principle whereby you spread the cost of investment in an intangible asset (ie player) over the lifetime of the investment or useful economic life (ie contract).
Now if a club demands payment up front for a £50m player, then that's exactly what's going out of our accounts irregardless of the fact we'd recognize the cost £10m yearly if the contract length was 5 years (with the rest recognized probably as a prepayment that's unwound every year).
However, as far as I'm aware, most clubs do agree upon staggered financing where transfer fees are concerned. The fine details of those we won't know but I would certainly suspect a lot of clubs will want an up front payment of at least some kind.
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A player is most definitely a tangible asset
posted on 23/5/18
comment by Scribe is back (U18092)
posted 0 seconds ago
comment by Gunners-Maq (U6667)
posted 10 hours, 24 minutes ago
As someone working in audit this can be true but not always.
Amortization isn't a cost you have to spend. It's an accounting principle whereby you spread the cost of investment in an intangible asset (ie player) over the lifetime of the investment or useful economic life (ie contract).
Now if a club demands payment up front for a £50m player, then that's exactly what's going out of our accounts irregardless of the fact we'd recognize the cost £10m yearly if the contract length was 5 years (with the rest recognized probably as a prepayment that's unwound every year).
However, as far as I'm aware, most clubs do agree upon staggered financing where transfer fees are concerned. The fine details of those we won't know but I would certainly suspect a lot of clubs will want an up front payment of at least some kind.
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A player is most definitely a tangible asset
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I stand corrected after researching however I would say that Danny Wellbeck is the exception to the rule as you wouldn't want to use him for any commercial rights of making money
posted on 23/5/18
The majority of transfers are paid for in instalments as opposed to the sun in full though, so whichever way you look at it, £50m still isn’t that much.
posted on 23/5/18
Still don't understand how £50m is not enough? Quite obviously the £50m figure can amount to £150m in spending depending on how you structure the deals. That is before player sales. I bet Arsenal's spending power this window will be greater than all but the Manchester clubs this summer. And with ffp looming Man City may not be over spending this summer either.
posted on 23/5/18
comment by Gillespie Road (U18361)
posted 13 hours, 21 minutes ago
comment by Giröulski Alt-153 and Alt-160 forever (U14971)
posted 3 minutes ago
Won't this eventually snowball to the point where our budget for this year will be hamstrung from the transfers of last year?
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We've always drawn our installment payments out by pegging them on player performance. We're probably still sending out cheques for Özil and Sanchez.
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Conversely, we're probably still receiving cheques for Anelka's move to Madrid.