Arsenal Holdings PLC

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Arsenal Holdings PLC

Avenell Road
Highbury
London, N5 1 BU
United Kingdom
Telephone: (44) 20-7704-4000
Fax: (44) 20-7704-4001
Web site: http://www.arsenal.com

Private Company
Incorporated: 1893 as Woolwich Arsenal
Employees: 239
Sales: £138.4 million (2005)
NAIC: 711211 Sports Teams and Clubs

Arsenal Holdings PLC owns Arsenal Football Club, a competitor in the English Premiership and the primary source of its revenue. Arsenal Holdings' other interests are in property development, which accounts for slightly less than 25 percent of its revenue. Arsenal Football Club generates 35 percent of its revenue from broadcasting, 27 percent from gate receipts, and the balance from sponsorship deals and merchandise sales.

ORIGINS

To be a successful business enterprise, a sports team must first excel at its game. In the decades before sports teams became brands, a record of success offered virtually the only way for a sports team to survive financially. Championships and trophies attracted fans, giving the team the gate receipts to sustain itself. In the era after sports teams were regarded as brands, winning lost none of its importance, driving the marketing campaigns that helped pay for players' seven-figure salaries: the price of success in modern sports. Among the elite of the football world during both eras was Arsenal Holdings' jewel asset, Arsenal Football Club.

The catalyst for the club's formation was the arrival of Fred Beardsley and Morris Bates to the Woolwich Arsenal Armament Factory in October 1886. The two new employees arrived at the South London firm distinguished by their reputations, having both played football for Nottingham Forest, a club formed 20 years earlier. Their arrival convinced another Woolwich Arsenal employee, David Danskin, that he had the makings of a company football team. Danskin recruited 15 players for the squad, initially named "Dial Square" after one of the company's workshops, and set about the next order of business: buying a football. Each member of the newly formed team contributed toward the purchase of a football, pooling their money to give "The Gunners," as the team later would become informally known, its one indispensable piece of equipment. The modest means of the amateur club was underscored when it attempted to play its first game, a match scheduled for December 11, 1886, against the Eastern Wanderers. The site of venue, located on the Isle of Dogs, left much to be desired. The grounds-keeping debate of the day centered on whether one portion of the pitch was a ditch or an open sewer. Dial Square, evidently, was unaffected by the condition of the pitch, and began what would become a legacy of success by trouncing Eastern Wanderers 6 to 1.

Flush with victory, the team members assembled on Christmas Day to address three issues: a new team name, a team kit (uniform), and finding a suitable pitch. The team members gathered at the Royal Oak next to the Woolwich Arsenal Station and used the site of their discussion as the inspiration for a new team name, settling on "Royal Arsenal." Fred Beardsley, who had played goalkeeper for Nottingham Forest, tackled the second issue facing the committee by writing to Nottingham Forest for help in securing a kit for the team. Nottingham Forest obliged, sending a complete set of red shirts and a football. For the third item on the agenda, a recreation area known as Plumstead Common was chosen as the club's new ground, where Royal Arsenal played its first official match in 1887, beating Erith 6 to 1.

Winning its first two games by an 11-goal margin, the group of armament employees likely was invigorated by the club's start. Victory encouraged meetings to discuss new team names, new kits, and any of a number of topics that added to the legitimacy of a team, fueling the desire to press forward as a viable enterprise. The first two games did much to perpetuate the existence of the club, but beyond the perspective of a small group of factory workers, much more was required to meet the standards of football excellence. The club became a team of distinction after navigating through several turning points in its early history. In later years, as history judged success, a football team was assessed by its achievements in two areas: its league standing and its progress in tournaments, or cups. Arsenal made its reputation by excelling in these two areas, achieving a record of success that elevated a group of 19th-century factory workers to a team of historical significance in the 21st century.

It was a half-century before Arsenal asserted itself as a dominant club, but the intervening years marked its progress toward dominance. The club won its first trophies in 1890, a year before it turned professional, capturing the Kent Senior Cup, the Kent Junior Cup, and, most significant, the London Charity Cup, a match it played in front of 10,000 people. Despite being the first "silverware" won by the club, the trophies paled in importance to the titles that would matter most as the 20th century progressed. Excellence was achieved by winning the First Division or winning the F.A. Cup, the most prestigious of English tournaments. On rare occasions, a club won both the division title and the F.A. Cup, which ran concurrent with the regular season in a single elimination format. The mediocre, "mid-table," teams usually won nothing. Those teams suffering from something more profound than mediocrity endured the ignobility and financial consequences of relegation, a process by which teams at the bottom of season-end standings were dropped to the league below. Every club in England, despite the rallying cry of its fans to "stay up!," experienced the desperation of relegation, but no club felt the sting of demotion less than Arsenal. The club, as the 20th century progressed, established the record for the longest uninterrupted tenure in the "top flight," but initially Arsenal struggled to keep its place in the First Division.

KEY DATES

1886:: Arsenal is formed by a group of factory workers at the Woolwich Arsenal Armament Factory.
1891:: The club turns professional and joins the English Football League two years later.
1913:: Arsenal relocates to Highbury.
1919:: Arsenal is promoted to the First Division, beginning the longest uninterrupted stay in England's highest division.
1925:: Herbert Chapman is hired as the club's manager, ushering in Arsenal's first era of dominance.
1930:: Arsenal wins its first F.A. Cup, beginning a decade that would bring five First Division Championships and two F.A. Cups to the club.
1971:: Arsenal wins the F.A. Cup and the First Division, a feat known as the "Double."
1986:: George Graham is hired as manager and leads the team to a First Division Championship three years later, ending an 18-year drought.
1996:: Arsene Wenger, Arsenal's first foreign manager, is hired.
1998:: Arsenal completes its second Double, repeating the achievement four years later.
2004:: Arsenal wins its 13th division title.
2006:: Arsenal unveils Emirates Stadium.

Before the club could subject itself to the process of promotion and relegation it had to join the English Football League in the first place, something it did in 1893. Competing as Woolwich Arsenal, the club joined the Second Division that year, the same year it formed a limited liability company in which 862 people purchased 1,552 shares at £1.00 per share. The club won promotion to the First Division in 1904, but never finished higher than sixth place before being relegated in 1913. Although the year marked the club's return to the Second Division, it also ushered in a new era, marking one of the crucial turning points in the history of the club. Woolwich Arsenal was having difficulty attracting spectators, a problem the club's chairman, Sir Henry Norris, attributed to its location in South London. After trying to merge the club with another London club, Fulham, and failing, a new home was found near a theological college in Highbury, North London. Tottenham Hotspur, located four miles away from the Highbury site, objected to the move, but Sir Henry Norris prevailed and moved his club into the residential area, sowing the first seeds of enmity between the two clubs. Arsenal dropped "Woolwich" from its name in 1914, settling on a permanent name as it settled into its permanent home, and made the leap into the First Division five years later, where it would stay for the remainder of the 20th century and into the next.

Rivalry between clubs was a natural occurrence in sports, but in the world of football the animosity took on an especially fierce quality. The severity of the antipathy drew its intensity, in part, from the identification of a specific target. The supporters of one football club regarded every other football club as an enemy, but to varying degrees. Nearly every club in the world had one enemy in particular, a rivalry that elicited the greatest passion between two teams and their supporters and became a mutual disdain handed down from one generation to the next. Arsenal, already viewed with disregard by Tottenham Hotspur supporters because it had encroached upon their home turf, made sure the ill feelings turned into deep-seated wrath by the way it gained promotion in 1919. After suspending play during World War I, the English Football Association (the F.A.) expanded the First Division from 20 to 22 clubs, which under normal circumstances would have resulted in the First Division's bottom clubs retaining their topflight status and the top two Second Division clubs earning promotion. Instead, Tottenham Hotspur, which had placed 20th in the First Division in 1915, was dropped to the Second Division to make room for the top two Second Division teams and the Second Division's fifth-place team, Arsenal, a highly controversial selection made amid rumors of significant amounts of money changing hands. From that point forward, the feud between Arsenal and its North London neighbor, Tottenham Hotspur, became apoplectic.

A DOMINANT TEAM EMERGES

Arsenal's record-setting stay in England's highest division began with mediocrity, but soon after a new manager joined the club, it began to shine for the first time. Herbert Chapman, hired as the club's manager in 1925, brought a commitment to excellence to Arsenal, establishing the infrastructure to support an elite English club. Perhaps most important, he knew how to win, having turned Huddersfield Town into the dominant team of the late 1920s. Chapman led the effort to build a new stadium, a facility made with marble halls, undersoil heating, and outfitted with the best medical facilities in the country. He developed a youth program to train promising athletes and, although the F.A. rejected both proposals, he suggested putting numbers on players' shirts and using floodlights. His greatest achievement, aside from leading a winning side, was lobbying to change the name of the nearby underground train station from "Gillespie Road," to "Arsenal," a massive undertaking that required tickets, maps, and signage to be changed, providing his new club with a promotional coup. On the pitch, Arsenal excelled, becoming the dominant team of the 1930s. The club won its first major trophy, the F.A. Cup, in 1930 by beating Chapman's former team Huddersfield Town and added a second F.A. Cup in 1936. In the First Division, the club won its first title in 1931, establishing a point record (points are awarded for wins and draws) that would not be eclipsed for 30 years. Arsenal went on to claim four more division championships during the decade, including three in a row between 1933 and 1935, securing its fifth title in 1938.

The 1930s gave Arsenal its first taste of dominance, setting high expectations for the future. Following World War II, as football moved into the modern era, replicating the 1930s proved difficult. After winning the First Division title in 1948 and again in 1953, the club suffered an 18-year drought, failing to add another division title or win a major trophy until the beginning of the 1970s. To make matters worse, Tottenham Hotspur enjoyed its glory years while Arsenal struggled, becoming the first team in the country to win the F.A. Cup and the First Division in the same year, a feat known as the "Double." After years without fanfare, Arsenal stormed into the limelight, winning its first European trophy in 1970, the Inter Cities Fairs Cup, the predecessor to the UEFA Cup, and completing the Double in 1971. Arsenal supporters basked in the victory, with an estimated 250,000 fans lining the streets from Highbury to Islington Town Hall to watch the club display the two trophies from an open-top bus.

After the most successful season in the club's history, another long gap between division titles awaited Arsenal supporters. An F.A. Cup victory in 1979, the club's fifth, offered the only celebratory occasion until a member of the famed 1971 squad was named manager. George Graham, "Man-of-the-Match" in the 1971 F.A. Cup final, was hired in 1986, beginning an eight-year tenure in which Arsenal won six major trophies, including the club's ninth First Division Championship in 1989, ending another 18-year drought. During Graham's stewardship, the First Division was re-branded as the Premiership, a change in nomenclature that signaled the dawn of high-stakes football. The financial rewards to be won both on the pitch and on the business front grew enormously during the 1990s, becoming a new benchmark of success for the world's elite football organizations. Transfer fees, the amount paid for one club to purchase another club's player, salaries, and television revenues increased exponentially during the decade, driving the development of the sport into the realm of big business. Arsenal, after Graham's departure midway through the 1995 season and brief stints by two other managers, turned to Arsene Wenger to lead the club during the new era.

BEGINNING OF THE ARSENE WENGER ERA

Under Wenger's guidance, Arsenal established itself as an elite member of the Premiership. The club asserted itself as a domestic powerhouse during the late 1990s and the first years of the 21st century, completing the Double twice, in 1998 and in 2002. Its one glaring failure was a lack of distinction on the European stage, particularly the club's inability to win the most prized club trophy, the UEFA Champions League (formerly the European Cup). At home, however, Arsenal was a force to be reckoned with, establishing an unbeaten league record of 49 matches in 2005, a year that saw the club win its 10th F.A. Cup one year after capturing its 13th division title. As the club prepared to add to its impressive legacy of success, it also was preparing to move into a new home. Emirates Stadium, scheduled to be completed by August 2006, promised to provide a substantial boost to the club's revenue-generating capabilities. The £390 million, 60,000-seat stadium was one-third larger than Highbury, the site of the club's home games since 1913. Once the club moved into Emirates Stadium, its gate receipts, accounting for slightly more than 25 percent of Arsenal Holdings' total revenue, was set to increase significantly, giving The Gunners an ideal venue to showcase its winning pedigree.