It barely seems a year ago, but we’ve just passed the first anniversary of the ill-fated launch of the so-called European Super League. At the time, my abiding memory upon first hearing the announcement was “just how much money do those greedy b**tards want?”
Both the Premier League and the ‘big six’ have always made themselves hard to love most of the time for football fans, with common perceptions of avarice, and seeking to attract maximum revenues purely for themselves.
Let’s be frank, though, and many fans will be reluctant to admit it, whoever they support, or wherever they are within the football pyramid, everyone wants more money.
Whether you’re regularly vying for a Champions League spot, aiming to gain promotion from the Championship, to the so-called Promised Land of the Premier League, or, even, muddling along towards your fourth season in the third tier, it’s all about the money.
Everyone wants more – it’s human nature.
Football is, of course, a meritocracy, performance-based, with promotion and relegation throughout the leagues. But the problem is money, or, more specifically, the lack of it throughout the majority of the pyramid.
The fundamental issue is obvious – the Premier League’s TV rights deals are hugely cash generative. Its domestic TV deals were rolled over during the pandemic and continue to accumulate revenues of £5bn for the three years, starting from 2022-23 season. The next rounds of overseas TV deals, again for a minimum of three years, will generate £5.5bn over the same period.
That’s £10.5bn combined – equivalent to £3.5bn per annum.
These deals dwarf the English Football League’s own deal, with its TV rights, over a five-year period, of £560m. Or, just over £115m per annum.
For context, that’s a whopping multiple of 30 times the difference between the Premier League and EFL’s own deals. Or, to put it in a different context, on an annualised basis, the EFL deal is equivalent to just over three per cent of the Premier League’s contracts.
If you’re unaware, the EFL splits its own media rights between its three divisions, with the Championship retaining 80 per cent of the pot – that’s the equivalent of £2.5m pa for each club in the second tier.
Additionally, for Championship clubs who are not in receipt of parachute payments, they also receive solidarity payments from the Premier League, equivalent to £4.5m pa for each team, giving combined TV revenues of approximately £7.0m each season.
One nuance of solidarity payments from the Premier League to the EFL is that they’re based upon its domestic TV deals only. As the overseas TV deals have increased in value, there’s been no pass-through of that upside to the EFL clubs, making the already huge differentials even greater.
Of course, it would be an easy win for the Premier League to link solidarity payments to all their TV revenues, not just the domestic deals, which would see an instant doubling in the pass-through of revenues to Championship clubs. Circa £15m pa in comparison to just £7.0m pa – who wouldn’t want that?
As an aside, the Premier League could also easily agree to pass on to EFL clubs any ‘unspent’ parachute payments that were due to be received by relegated teams in future seasons, but who were promoted back to the Premier League, rather than ‘hoover them up’ for use by Premier League clubs in future season.
However, given how the EFL thinks that parachute payments are, to use Rick Parry’s own words “evil”, and should be “banned”, it doesn’t currently seem to be a topic for discussion in the ongoing wider debate about redistributions across the leagues.
Just to highlight further the difference between finishing bottom of the Premier League, which currently generates approximately £95m pa in TV revenues, compared to finishing top of the Championship, which provides circa £7.5m. However, finishing twentieth place from next season is projected to increase to circa £110m pa, while the EFL deal will remain unchanged.
The gap is just getting greater and greater.
The EFL’s answer is to negotiate a greater share of the Premier League’s TV pot – they’re after 25 per cent. And, while I don’t think that there’s anyone who actually objects to that idea in principle (unless they happen to own a top-six club) it is counter-intuitive to suggest, as Mr Parry has done, that it would instantly make all of the EFL sustainable.
I’m sorry, but that’s absolute nonsense – of course it wouldn’t because sustainability isn’t just about income. The other side of the debate, which is equally relevant, is cost control, something that the EFL has been unable to comprehend or take satisfactory action to enforce.
Championship clubs, pre-pandemic, had a wage to revenue spend equivalent to £108 on wages for every £100 of revenue received. That’s before you add in the other costs associated with the day-to-day running of the club, meaning even greater losses.
Let’s not for one moment pretend that the Premier League clubs are faultless – they’re not, far from it – but, therein lies the nub of the issue…
As successful as the Premier League is (from purely a cash generative perspective) the gap between the first and second-tier is vast, self-funding, or not.
There are no easy answers, unless, of course, you know different?
This is a terrific article which sets out clearly the financial mountain that all EFL clubs face. Two questions come to mind. 1. How much would a new owner have to invest in order to make NCFC truly competitive? 2. Given how squeamish sections of the fan base were about accepting sponsorship money from BK8, what sort of person/organization would be welcomed?
Hi John+T,
To answer your first question, I don’t think that you can quantify a specific amount, with an assurance of success. To me it has always been about how you spend it, rather than how much you spend. NCFC haven’t been relegated because they only spent £52m, they’ve been relegated because they spent it badly.
As for your second question, sponsorship selection is very much a matter for the Club, not the fans. Internally, they have to decide what’s acceptable and what’s not. However, they can’t always expect a free rein to do whatever they want, without fear of kickback from fans, if they get it wrong.
I’m disappointed you didn’t give me a figure, Gary!
Of course, you are right in saying it’s not how much money but how it is spent. It appears as easy to squander £500 million as £50 million, just ask the owner of Everton.
A lot of postings on this site are from people demanding new, rich, owners and I wonder how rich they need to be?
It seems to me that the Club would need an injection of at least £100 million to radically change the situation. And would the new owner(s) be allowed, under FFP rules, to spend that money?
There’s definitely an FFP consideration for new shares, albeit easily overcome.
£100m probably gets you £30m on transfers with the balance for wages over the next 2/3/4 years !
Depends on what is meant by competitive but the Brighton owner seems to have pumped in £30m p.a. just to stay up. Of course if they were relegated to the EFL, then after parachute payments have stopped they would need that injection just to compete at the top end of the EFL. An alternative could be a lump sum up front to build the business so that it funds itself through income. We did that to some extent with a loan from our owners to build commercial income but that has been dwarved by the amount needed now. I will watch Brentford to see how they funded this season
Would I be right to say the club operates at circa a 30m per annum loss while in the championship? This is based on historic accounting figures and current salary projections. Therefore, you need to put in 30m per year just to stay afloat. Insane really and shows the disparity between the leagues.
Very interesting article Gary.
There is a massive difference in the TV money from EPL to the EFL, and that is exactly what the founding father’s (and mother’s) of the EPL wanted when they formed the Premier League.
The talk of doing away with parachute payments is a difficult one to answer, as we have and will benefit from it a lot in recent years. Though it does sound unfair.
It is likely to be Fulham and Bournemouth going up again and let’s be honest they will both struggle and one of the two will almost certainly come back down again. And they like us will start the following season with a massive advantage.
What I cannot understand is how EFL clubs get away with spending so much of their income on wages. Surely there should be a figure of say no more than 70% of income ?
I am more than a bit thick when it comes to money but I am mystified over our 2018/19 season accounts where our wages cost were 105% of income. Now a lot of this was promotion bonuses which is a excellent way of incentivising players, but it was still a big risk ? or not ?
My question is are we as well run as people say we are regarding wages to income ?
Mr Chase for all his faults had a scheme where the players got a £800 bonus for 1 win then £1,600 for the second win in a row and then £2,400 for the third win in a row. It then went back to £800 so no surprise we hardly ever won four in a row in those days😂
I see big money problems in the future if we do not get back to the EPL as much as we dislike it financially it is the only place to be.
Surely Gary until something is done about clubs spending far too much on wages compared with income in the EFL. So many people feel sorry for Derby, Sheffield Wednesday etc who have been docked points but lets be honest as the way things stand now it is cheating.
But then is it fair that a investor buys into a club and cannot spend what he or she wants ? I really do not know the answer to that.
Hi Tim,
The thing that bugs me on the debate about parachute payments is that it’s focused solely on the perceived revenue advantage, while completely ignoring the wages side of the debate. The reality is that revenue reductions on the TV deals are much greater than the reductions in wages, even taking into account relegation clauses in player contracts.
As for the revenue / wages ratio, that’s what is now being suggested by UEFA under their revised FFP proposals.
Gary has commented on why parachute payments are needed. Why do Championship clubs spend so much more than they earn? I guess that if they did not then the gulf in class between the top 2 divisions would be even wider. It is a bad solution to a bad situation.
2018/19 was an odd season for us as we had no parachute money but had a wage bill that was higher than the average Championship club. I knew some of this was promotion bonus and some legacy wages for unused players like Naismith. At the AGM, I asked for a guide as to how much the loss would have been without these factors. Ben Dack replied that it would have reduced the loss from about £35m to around £15m which was funded by the previous season’s player trading. It does show the gulf between EFL income and expenditure. We can’t afford life in the Championship any more than in the PL.
Salary caps are interesting. The Kings Lynn owner did a good piece in the EDP about the difficulty of accurately estimating income before the start of the season. It is easier for us but it is still difficult.
Ultimately, clubs seem to want to prevent new clubs emerging, they quite like the closed shop in the same way that some people are quite happy not to see social mobility, the wealthy clubs know they lose status if others progress upwards. Things like caps, FFP seem to only protect the status quo
FFP isn’t either fair, or about profitability and sustainability. As you suggest, it’s a rather blunt way to maintain the status quo for the big teams and, if I was being a cynic, a tool to limit the ability of the likes of Newcastle to challenge the existing Big 6.
What is happening in the Football League is happening in leagues all over Europe -France, Spain, Italy -the majority of clubs, if not all, are barely hanging on and we are left with the usual cast of characters/teams competing for the titles and trophies year after year after year. There was an interesting article by Philip Lahm this morning commenting to the slow fall of Bayern Munich and how, like a PSG, dominate their league but are now getting eliminated in the earlier knock-out rounds of the CL.
I understand that the global fan wants to see the Big 6 of the PL and that generates significant amounts of revenue for the PL but the health of the game means the entire pyramid means everyone should be supported. Roman took on 1.5Bn in debt to maintain Chelsea and while the amounts are far smaller, the debt/cash infusions to keep League 1 and 2 sides operating are just a matter of scale.
Clubs and players are now discussing 500K per week as we see the next round of salary inflation (and we thought David DeGea on 365K per week was too much (sarc). Mason Mount is exploring moving because he is ‘only’ making 70K per week. The next cycle of spiraling wages and an uneven playing field has started.
Multiple fixes – Salary cap, let the Big 6 disappear into their own trough, and divide the money more evenly. TV contracts – I’d like to see Championship, L1, L2 matches on a regular basis as I’m tired of the seeing the same teams win -frankly, it’s become rather boring – so a different structure and greater, lower league involvement. (I realize the money may not be as lucrative for some teams but the health of all is of greater importance.) Mitigate overseas investment in clubs be it US, Middle East, or Asian investment as it is exacerbating the problem (Chelsea and Newcastle are exhibit A.)
There is so much hand-wringing and unwillingness to make decisions. The longer this festers, the worse it will become. A little less conversation, a little more action….