Peeling back the onion on franchise value and the economics behind a Premier League Team
Club Finances - How Arsenal Makes Money
Revenues (also called Group Turnover in the UK):
Arsenal earns revenue through three primary segments - Matchday revenues (concessions, ticket sales, etc.; ~21.4% of total revenues in 2024), broadcasting (~42.5%), and commercial (which includes kit/retail sales that capitalizes on Arsenal's brand value; ~35.40%). Other revenue verticals include property development and player trading, but these avenues are marginal at best, producing a combined <1% in total revenues over the past few years.
Broadcasting revenues are now the largest driver of revenue growth, growing ~55%, ~31%, and ~37% year-over-year in 2021, 2022, and 2023, respectively. Broadcasting used to be a smaller piece of the puzzle for Premier League teams, but now, largely thanks to increasingly lucrative Premier League and Champions League broadcasting contracts, it is the overwhelming decider between a good year financially or a poor year for many European teams. To put it in perspective, of the £262.252 million Arsenal earned in revenue for broadcasting in 2024, £80.4 million (~31%) was exclusively from Champions League broadcasting rights sharing. Across European soccer, this dynamic has had the effect of creating even more intense pressure to invest in player registrations and overall club performance than ever before, because without this extra purse many top-teams cannot sustain themselves financially.
Arsenal is no exception -- Since 2015, Arsenal was consistently 2nd or 3rd in the League with positive profits (net income) and Champions League participation most years, but in an effort to keep up with the rapid splurge on talent to acquisitions, operating expenses started to outpace revenues, and Arsenal began running at a loss in 2018. This was not helped by the direction of the 100% owner Stan Kroenke, who became the independent owner of the team and re-registered it as a private corporation in 2018 (it was publicly traded on a thinly-traded NEX exchange before) -- A shake-up of the ownership structure and loss of stability, heavy investment in new players, and increased debt issuance all created a vulnerable Arsenal for when performance did slip (and then Covid). The 2017, 2018, and 2019 finishes in 6th, 5th, and 8th started to weaken broadcasting and match-day revenues, yet against a cost structure that had only grown.
Below, you can see Arsenal's revenue, operating expenses, and Profit/Loss (P/L) broken down over time (courtesy of a financial model built by one of the staff authors here, with original data provided by official fiscal year audited financial reports available on Arsenal's website):
Breakdown in costs & P/L:
And here we can see what our future internal estimates suggest when projecting Arsenal's revenues through FY2029.
Notice how the the ownership structure has changed over time as a function of these growing revenues but also growing earnings volatility and overall spiking cost structures (A Hint - More foreign billionaires are buying large individual stakes -- Some, like with Todd Boehly and Clear Lake Capitals' buy-out of Chelsea, see Premier League teams as true investments. Others just want to have the pride of owning the brand of a historic sports organization. For Kroenke, it appears to be some of both -- He has continued to inject personal capital into Arsenal in the form of new equity contribution and inter-company loans through his parent company Kroenke Sports & Entertainment (KSE), but he also owns stakes in several NFL, MLB, and other sports teams):
The ultimate goal of our project in modeling out the financials was also to try and estimate the valuation of Arsenal. Forbes estimates Arsenal is worth £2.1 billion ($2.6B USD), while arguing that Chelsea is worth £400 million more at at £2.5 billion valuation ($3.125B USD). They assume Chelsea has $100 million greater brand value than Arsenal. While these figures are likely not too far off, their method of estimation is fairly arbitrary and likely not exact, simply attaching values to their match-day revenues, broadcasting rights, "commercial" value, and "brand value":
Original Forbes Source: https://www.forbes.com/teams/arsenal/
So how did I value Arsenal? Like a true firm with free cash flows, because their financial statements are publicly available. I used a discounted cash flow model, with a discount rate of ~13% (Arsenal cashflows are risky, they have added a lot of debt on to the balance sheet since 2020, etc.), an exit multiple of 8.0x NTM (next-twelve-months) EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization), and projected out cashflows over a 4.58 year stub period (through 2029, assuming I could purchase 100% of Arsenal today). The 8.0x multiple reflects the fact that Kroenke completed his take-over bid for a valuation of £1.8 billion in 2018 (a 9.6x EV/EBITDA in 2018)--The team immediately began to struggle, cashflows have been more volatile, net income has been overwhelmingly negative since Kroenke took control, and Covid created a lot of financial issues, hence my slight discount:
Ultimately, my model produces an estimated value of £2.403 billion as a fair firm-wide valuation (total enterprise value), which seems to be roughly in the ballpark (about £300 million more than what Forbes thinks Arsenal is worth). This reflects how much asset values of sports teams have gone up since 2018-20, as private equity and larger investment groups have been driving the valuations of teams way up in recent years. It also reflects a go-forward projection of an Arsenal team that is playing better than it has in years, has already been through the worst during Covid, has invested a lot into young talent, and is one of the most valuable sports franchises in the world (in a league with rapidly growing broadcasting rights). At a 11.5x EV/ FY2026 EBITDA, Arsenal seems like a fairly priced team. In general, the correct valuation appears to be between £2.0 billion and £2.6 billion.
Source:
Financial Model built by W. Miller (2025), utilizing audited financial statements filed by Arsenal from 2005 to 2018:
https://www.arsenal.com/the-club/corporate-info/arsenal-holdings-financial-results
