Cracks in the Arsenal Brand

Arsenal's early season struggles have brought out the well worn and often angry portrayals of manager Arsène Wenger's tactical cluelessness, his transfer ineptitude, his awkward man-management, and his geriatric stubbornness.

The suspect evidence supporting these characterizations and the logical fallacy of the Arsenal=Arsène equation only seem to intensify the appeal of these arguments. It's gotten to the point that unthinking perceptions are reshaping the Arsenal brand; as a result, the club is facing a deeper issue than the manager's performance or the team's lackluster form.

What makes a football brand

In a largely problematic account of Arsenal's 2013-14 season ("Arsène and Arsenal: The Quest to Rediscover Past Glories"), Alex Fynn presents a strong foundation in brand theory. Brands aren't just logos or taglines, explains Fynn, but are collections and expressions of the rational and emotional attributes associated with an organization.

These attributes give brands distinctive personalities, such as Volvo's "Crisp and Safe" and Apple's "Cool and Innovative," which shape the main characters in those organizations' stories. The dramatic or comedic pull of these stories, along with the personalities and values they express, attract like-minded individuals.

Even more than other sports, football engenders strong brands, Fynn points out, because the dramatic impact is so great. One late moment of brilliance or bad fortune can overturn a result that seemed a foregone conclusion for 89 minutes. That's unmatched dramatic potential.

The geographic, historical, and cultural identifications of football clubs also make them sturdy vessels for brands, and clubs and their supporters can easily identify themselves in opposition to the "other" created by rivalries.

Elements of the Arsenal brand

Although Arsenal's brand benefits from clear differentiation with Tottenham, Chelsea, and Manchester United, the club has reaped its biggest reputational reward by honing its own personality. I would define this as "Refined, Successful, and Sensible." (See "The Brand's the Thing" and "Whiffing on Risk" for additional thoughts.)

At the foundation of these personality traits lie the club's historical values:

• A distinctive balance between English football tradition and innovation
• Adherence to standards of conduct that denote "class"
• Consistent success at the highest level of the sport

Arsenal promises those who have identified with it that it will live out these values and behave in accordance with its underlying personality. Breaking that promise could make supporters and sponsors question their loyalty, with major cultural and financial consequences.

Fissures

Just three months ago, Arsenal appeared to be reaffirming its core personality and values, with world-class acquisitions joining the club soon after an FA Cup triumph. The speed and irrationality of the shift in perceptions should trouble CEO Ivan Gazidis and other club executives, because they suggest that a different, much less positive, brand story is replacing the advantageous one.

Here's how it's happening: First, the promise of potential success appears to be an empty one. It's extremely unlikely that the club will win the Premier League or the Champions League this season. That's the standard of success the club has established for itself, and it will once again fall short.

Instead, as Andrew Mangan pointed out on the November 7 Arsecast, we are witnessing a routine of top-four league finishes and exits after the round of 16 of the Champions League.

This pattern of performance lessens the excitement because it's so predictable. Add that to the team's inability to win matches against the top domestic competition, and you'll struggle to find compelling drama.

Second, the club's image as an innovator is getting weaker. With the same manager for 18 years, no matter how sincerely he might profess new ideas or his focus on the future, Arsenal is always going to appear hidebound. (One reason I think so many supporters were excited about the appointment of Shad Forsythe as head of athletic performance enhancement is that it hinted at the club's innovative best.)

The third brand problem is that the personality trait "Sensible" is being undermined by a perception that identical weaknesses cause the same results year in, year out. Facts and reasonable analysis to the contrary, "defensive frailty" is Arsenal's downfall. It doesn't matter that the major problem in 2013-14 might well have been a lack of speed and in 2012-13 a lack of creativity. The story is already written.

The persistence and immediacy of this narrative are strong evidence that Arsenal's brand has shifted.

Impact

If this analysis is right, a succession of good results won't move the brand back onto favorable ground. Only a major achievement, a Premier League title or a Champions League trophy, will be sufficient for that.

Major sponsors seem comfortable with this scenario. The lucrative deals with Emirates Airlines for shirt and stadium sponsorship and Puma for playing gear indicate that those companies continue to see considerable advantage in aligning with Arsenal. How secondary and regional sponsors weigh the Arsenal brand will be crucial to higher commercial revenue.

Meanwhile, supporters have communicated mixed messages about their loyalty to the brand. The increase in season ticket prices, coming as it did as the brand was shifting, sparked vocal criticism. What appeared an attempt to capitalize on the FA Cup success and hope for the future has instead made longtime match goers question their commitment to an organization whose brand promises are shaky.

Despite the reaction, the waiting list for Arsenal season tickets remains long. What proportion of season ticket holders in years to come will be new? How many ticket holders will leave their seats empty? And how will those developments affect the stadium atmosphere, which is part of what any sports organization sells to sponsors, broadcasters, and fans?

These are potentially much more troubling questions for the club than are any about the manager's transfer, team setup, or personnel decisions. They aren't as dramatic or obvious, but structural questions rarely are.

Forward, Upward, or on Some Generally Positive Trajectory

There's something newly bold about the Arsenal.

My recent piece "Suddenly, This Summer" assessed the club's current position and paid particular attention to manager Arsène Wenger's public stance and the strategic importance of signing the young defender Calum Chambers from Southampton. Another way to analyze the club's direction is to reexamine the factors I identified in August 2013's "Platform or Plateau."

Supports of the platform

What has reinforced or undermined the sources of Arsenal's progress over the past year?

1. The club's own financial strength. The advantages continue to accrue. Although updated figures won't be available until late September's annual report, the Puma kit sponsorship and the blockbuster Premier League television deal have expanded the club's coffers, while costs of Arsenal PLC overall have declined. The Arsenal Supporters Trust has estimated that the result is a £140 million cash balance, the bulk of which might be deployed to fund transfers.
2. The different level of transfer target. Success. The term now should be acquisition, because the club isn't just targeting world-class performers; it's landing them. Mesut Özil and Alexis Sánchez are top talents in their positions brought in from Real Madrid and Barcelona, respectively. The persistent links to Real Madrid's Sami Khedira are further evidence that Arsenal is a serious contender for the world's best players.
3. Unrest elsewhere. A missed opportunity. Manchester United was decidedly weaker in 2013-14, and neither moneybags Manchester City or Chelsea proved a juggernaut in the league. In that context, Arsenal's fourth-place league finish represented a failure to capitalize on the situation.
4. Continuity in Arsenal's management and playing squad. Reinforced. Wenger has agreed to extend his stay for three years, while the changes in the player development staff have been methodical and promising. In raw numbers, there's been considerable turnover among players, but only the Bosman transfer of right back Bacary Sagna has had a meaningful effect on the first team. There's a strong case to be made -- and 7amkickoff makes it on Arseblog -- that quality improves with the arrival of Sagna's replacement Mathieu Debuchy from Newcastle. The integration of Debuchy and Sánchez will be a major factor in the team's performance in 2014-15.
5. The winning mentality of this squad. We won the FA Cup.
6. The exits of unwanted players. More additions by subtractions. Although most of this summer's departures have been from the youth ranks, cutting ties with Niklas Bendtner and Park Chu-Young has had a material impact on the reserve squad and the financials. Their salaries might well offset part of what the club will be paying Sánchez.
7. The impact of Financial Fair Play (FFP). Mixed results. UEFA, European football's governing body, did punish Paris Saint-Germain and Manchester City, among others, for failing to meet financial requirements. The sanctions reduced their squad sizes for the upcoming Champions League competition and levied multimillion-euro fines. The squad restrictions may not matter much, though, especially because specific instructions on home-grown players appear not to be harsh. (See sports law expert Daniel Geey's explanation here.) Meanwhile, the fines aren't material amounts for these clubs or even definitive. Indeed, PSG continues to spend like mad, breaking the record transfer fee for a defender to acquire David Luiz from Chelsea. That same transaction shows Chelsea's different reaction to FFP; it has stopped, at least for now, indiscriminate spending.

Conditions on the plateau 

How have the five forces suggesting stasis played out over the past year?

1. The existing distance between Arsenal and the top of the table. Narrowed but persisted. The team amassed 79 points in the 2013-14 league campaign, its highest total since 2007-08, and finished just six points behind champions Manchester City. Not since that 2007-08 season has the team finished closer to the top in points. And yet. Against leading competition, the team's performances were again found lacking. Arsenal secured only 13 of 36 possible points (W3, D4, L5) against other clubs in last season's top seven and only three of those points came away from home, the 1-0 victory at White Hart Lane.
2. The risk-averse transfer approach. Loosened. This has been one of my biggest concerns, partially because skittishness about transfers has affected the quality of play but even more because it's risked damage to the Arsenal brand. I'm less concerned now. The purchases of Özil and Sánchez indicate looser purse strings; the clearest sign, though, is the risk the club took to pay as much as £16 million for Chambers. As a result, mitigating transfer risk no longer appears to be a guiding policy in building the team or in running the business.
3. Lack of experience in transfers at the high level. Dealt with. Acquiring Özil and Sánchez from the two Spanish giants shows that CEO Ivan Gazidis, Wenger, and chief negotiator Dick Law can close deals on world-class talent with top clubs.
4. Uncertain enforcement of FFP. Continues. UEFA did not expel any clubs from European competition. Still, Manchester City agreed to sanctions without contest because they must have concluded that the potential of a ban was real. Neither City nor Chelsea has continued its transfer profligacy, suggesting that at least the English clubs are now taking compliance seriously. Wenger has observed that this development tightens the Premier League title chase and enhances Arsenal's chances.
5. The composition of the Arsenal board. Barely changed. The retirement of longtime director and former chairman Peter Hill-Wood and the arrival of Josh Kroenke, son of majority owner Stan Kroenke, have reduced the board's average age and introduced some youth. Still, the board is small, white, and male, so it continues to represent the Arsenal fan base poorly, while it's just as unlikely to benefit from differences of opinion. 

What progress looks like

A review of these 12 factors points to the conclusion that the club has made progress and is on a promising trajectory. That's not to say conditions are perfect, that success is inevitable, or that every result and bit of news will be positive. Life doesn't work that way, especially in professional sport, which could be the most publicly competitive environment there is.

What can reasonably be said is that the Arsenal's fundamental position is as strong as it has been in a decade and that the prospect of highly entertaining football is real and immediate. I'm not sure a reasonable person can ask for more.

Suddenly, This Summer

A year ago, my post entitled "Platform or Plateau" considered whether the Arsenal Football Club had reached a static position or had established the foundations for greater success. Although its 2013-14 campaign brought silverware in the form of the FA Cup, featured a long stay at the top of the Premier League, and finished with the most league points since 2008, the question of progress persisted because of the way the title challenge faltered and because manager Arsène Wenger had not yet agreed to renew his contract.

Wenger's signature on a three-year contract extension may not have quieted those who complain because they enjoy complaining or who criticize him due to francophobia or an exaggerated sense of their own importance. Any reasonable analysis suggests, though, that the Arsenal is back to a level of competitiveness not seen since the move to the Emirates Stadium in 2006.

Top-level talent arrives and signals a renewed intent 

The most obvious indication of the upward trajectory is this summer's transfer activity: Four headline players have arrived since the current transaction period began, while none has been sold. That's a significant change even from this point in 2013, when the inexperienced Auxerre striker Yaya Sanogo had been the only acquisition.

The cost of these 2014 acquisitions stands at £56 million according to the Arsenal Report's Transfer Centre; the club has never entered an August with a transfer bill even remotely near that figure. That points to a confident, proactive approach to the playing staff and validates CEO Ivan Gazidis's contention that this summer would see enhanced revenues deployed to strengthen the team.

The level of investment and the obvious quality of the players recruited, forward Alexis Sanchez, fullback Mathieu Debuchy, goalkeeper David Ospina, and defender Calum Chambers, have rightly received the attention. What's struck me, though, is the change in Wenger's image and emphasis.

The manager recrafts his image

I try not to make assumptions about people's thoughts, feelings, or intentions, particularly those of individuals whom I've never met or interviewed. Doing so leads to facile analyses and conclusions that are both flimsy and irrefutable.

It's not presumptuous, though, to remark on the image public figures present. In the past three months, Wenger has stopped giving the appearance of a drawn, tense man and has (re)established the look of a relaxed, assured one.

Whether he felt any differently about himself or considered his future in a new light after beating Hull City in the FA Cup final, we can never know. What most observers will say is that he has appeared revitalized. It didn't hurt that he displayed the skills and physique of a much younger man in a much publicized video of his beach football exploits during the World Cup.

Emphasis and strategy emerge as different

Wenger's recent comments also reveal a return to confident competitiveness. He is no longer bemoaning the irrationality of the transfer market or downplaying Arsenal's prospects of landing recognized, world-class talent. He is instead stating the assumption that the players he wants want to join the club.

When asked about the Ospina deal before it had closed, Wenger did not redirect the inquiry or wait for the official announcement. He said: "There were four candidates, and I decided on one." When? "It was during the World Cup."

"I decided on one," and I was confident he would join us. Not "we had to negotiate with his club, convince his agent and entourage, court him, and get him to accept our financial terms." This is not a tenuous stance or a nervous message. 

What the manager said as the signing of Chambers drew close was similarly telling. The Telegraph reported these remarks from Wenger: "He hasn’t played many games, no, but the English players on the market in England are very expensive and at the end of the day I was ready to take a gamble because he is a player for the future."

"I was ready to take a gamble" -- those are not words common in Wenger's public statements about players in recent years. It's a fair and revealing characterization, though, of the potential £16 million outlay for a 19-year-old defender.

It's one thing to break the club's transfer record to secure Mesut Özil. Wenger and Gazidis knew then that they were getting a mainstay of the German national team and a star at Real Madrid. I think it's even more consequential to acquire an unproven Chambers with potentially one of the club's five highest transfer fees to date. This move reverses nearly a decade of aversion to transfer risk and emphasizes the desire to be a serious contender.

Future titles aren't guaranteed, primarily because the difference between victory and defeat at Arsenal's level of competition is so fine, but the intent to engage the contest on advantageous terms has certainly reemerged. Supporters should watch with less trepidation, while opponents approach more warily.

Numbers and the Game

Last week, Arsenal Holdings released its financial results for the year that ended May 31, 2012. Immediately, a corner of Twitter exploded with commentary about how this or that number confirmed an existing opinion--that the Board's parsimony is the biggest threat to the club's identity, that there's a conspiracy to foist a mediocre product on credulous fans, that in an attempt to prove his own genius Arsène Wenger is purposefully steering the club away from the highest quality talent.

Perhaps I exaggerate, but only a little.

Leave it to The Swiss Ramble to bring some rationality to the conversation. Tuesday's entry analyzed and illuminated the numbers, giving credit to the club for its sensible approach in an increasingly irrational environment but calling the leadership to task for some serious failings.

High on that list is the "miserable" growth of commercial revenue, which at £52.5 million is not even half what Manchester United earns from that stream. Because existing ticket prices and stadium capacity are taking the Arsenal close to its upper limit on match-day revenue, commercial partnerships have to be the foundation of any substantive increase in payroll.

Strategies at Odds

The analysis also makes it obvious that the annual profitability of football operations increasingly relies on player sales. Last year, without the £65.5 million from the sales of Cesc Fabregas, Samir Nasri, and Gael Clichy, the club would have posted an £18.5 million operating loss from football operations. Many others have observed that after the exhaustion of the major property sales at Highbury Square, the business's "self-sustaining model" now requires player sales and wages out to exceed player acquisitions and wages in, at least until presumably more lucrative commercial arrangements come good in 2014.

A fundamental problem with this approach is that it brings the business strategy into increasing conflict with the football strategy. Wenger's system is not focused on detailed tactical instruction, positioning, and feedback; instead, the manager gives players considerable freedom to exercise judgment and succeed as a unit. As a result, the group has to train and play together for an extended period to develop the necessary collective understanding and trust. This puts a premium on continuity of personnel.

When the team is in synch, the result is a joy to watch. The extended run of unbeaten league games that the team achieved between late January and mid-April 2012 shows what happens when the group gels. Unfortunately, this streak only came when there was no margin for error after a frustrating and disjointed start to the season, while three starters were gone or leaving and eventually vital elements were arriving.

Where We Are Now

The results seem slightly better this time around, though nine points from the first six league matches may have made another long run imperative if the club is to contend for the title or perhaps even to qualify for the Champions League. That scenario is the clear consequence of the misalignment of business and football strategy. Supporters may have to endure it again next season if the priority continues to be annual profitability.

There seem to be two conceivable alternatives:

• Keep the current squad in tact with changes only at the margins. Even that tack could increase the payroll because it will generate a new contract for Bacary Sagna at the very least
• Call on part of the £150 million cash reserve during the final year before the expected increase in commercial revenue to fund meaningful acquisitions, while taking what the club can get for players deemed superfluous

The second course of action seems to be the preferred one among supporters who focus on the financials. Yet it does not serve squad continuity. And if the current lineup falls short in its performances, the first option could be a disaster for the brand while new commercial deals are being negotiated.

No easy answers, unfortunately. I guess that's why Ivan Gazidis pulls in more than £2 million each year.