The EFL is asking the Premier League to pay £750M-a-year to support clubs in the Championship, Leagues One and Two in a new financial settlement.
Sportsmail understands the football league is pushing hard for additional funds – £400M more than lower league clubs currently receive from the top flight – as a government review of the national game is finalised.
Clubs in the Championship, Leagues One and Two believe this is the crucial moment to finally address a huge financial imbalance in the English game.
EFL clubs are warning more teams will go bust if financial distribution is not reformed
They say it is only ‘fair’ the Premier League shares some of its wealth with the football pyramid in order to help clubs survive, and to maintain vibrant competition across all leagues.
‘The time feels right,’ one EFL club chief executive told Sportsmail. ‘It is about fairness. About being fair to the pyramid. Premier League clubs can still be very competitive high performing and have best talent in the world.
‘But it would make a lot of clubs more sustainable. The question is, do the government and Premier League care enough about that to make that change.’
And analysts insist the top flight could afford to pay the money, remove parachute payments, designed to support relegated clubs, and remain the most wealthy and competitive league in Europe.
EFL wants 25 per cent of pooled media revenue to be shared with football league clubs
The Premier League is being asked to contribute 25 per cent of its media revenues.
‘If 75 per cent of the total pot is going to be left for the Premier League clubs, they do not lose out that much,’ said Dr Dan Plumley, an expert in football finance at Sheffield Hallam University.
‘The Premier League would still have access to bigger pots of revenue [than European rivals].
Premier League dwarfs its European rivals in terms of total revenues – La Liga comes closest
The cost of screening Premier League football at home and abroad has rocketed since 1992
‘A scenario like that would not hurt the top clubs at all. But clubs don’t want to give up money that historically has been theirs.’
The top flight currently pays around £350M to EFL clubs in parachute and solidarity payments each year, but that would increase by £400M under plans put forward by the EFL.
MP Tracey Crouch leads the government’s ‘fan-led’ review of football
However, as reported by Sportsmail, the Premier League and EFL have failed to agree on a new financial distribution or the future of parachute payments.
The two organisations remain poles apart, despite being told to sort it out in July by former sports minister, Tracey Crouch MP, who is heading the Government’s review of the national game.
With Crouch’s report, which is based on 100 hours of oral evidence, 70 documents of written evidence and 16,000 responses to an extensive online survey, due to be published in the coming weeks, time is running out.
Premier League is expected to remain a dominant force in Europe since it is the wealthiest
Earlier this year, Crouch issued an interim statement in her fan-led review, in which she asked the Premier League and EFL to come up with their own financial proposals. However, many in the game hold out little hope of agreement.
Crouch is expected to recommend a new regulator for the national game, which will oversee and enforce rules on financial conduct.
But, if approved by government, the regulator’s first task may be to impose a new model of financial distribution.
Sportsmail considers the options – and implications.
What’s the problem?
The fundamental problem is the absolutely enormous money-gap between the Premier League and the Championship and the EFL.
When the Premier League was formed in 1992, no one ever imagined that it would attract such huge sums of money and leave the EFL so far behind that it is no longer visible in the rear-view mirror.
The revenues in the Premier League are driven by incredible growth in the money earned from the sale of media rights. The EFL just hasn’t developed at anywhere near the same rate. But looking back, perhaps the warning signs were there from day one.
Teddy Sheringham of Nottingham Forest fires past David James of Liverpool to score the only goal in a 1-0 win for Forest in the first Premier League game to be televised on Sky
The first Premier League fixture to be screened live on Sky Sports was Nottingham Forest’s 1-0 win over Liverpool on August 16, 1992.
The match pitched Roy Keane, Nigel Clough and Teddy Sheringham against Michael Thomas, Ian Rush and Steve McManaman and the iconic figures of Brian Clough and Graeme Souness were in the dugouts.
And Sky was offering Super Sunday and Monday Night Football week-in and week-out.
In contrast, the Football League had done a deal with ITV, and regional stations were expected to screen matches live. But many did not have enough attractive second tier clubs to warrant a weekly slot, coverage was patchy at best and it never became established.
Division One Millwall’s 2-1 win over West Ham was screened live by LWT on November 15, 1992
On August 16, as the Sky juggernaut rolled into view, only two regional stations screened live games.
Central television showed Birmingham beating Notts County 1-0 and Yorkshire TV treated viewers to Barnsley’s 1-0 home defeat to West Ham.
It just was not as exciting. So, the Premier League’s annual media revenues have grown from £50M in 1992 to £3BN now. While the EFL has seen its TV income go up from £25M to £150M, in the same period.
How big is the gap between the Premier League and the Championship now?
Massive. But exactly how big depends on how you measure it.
Overall, in the 2018-19 season (pre Covid), Premier League clubs generated £5.9 BN, while Championship clubs’ revenue was £785M.
But of course, the money is not spread evenly throughout all of the clubs.
The average revenue of Premier League clubs that competed in the Champions League in 2018-19 was £539M. Even those sides in the top-flight that didn’t play in Europe raked in £161M.
Sky Sports launched its Premier League coverage in 1992 with this picture and video (below)
In contrast, a Championship club with no parachute payment had an average revenue of £23M.
The big difference is TV money. A Premier League club will receive around £90M in payments from the top flight, even if it finishes bottom. The club that wins the Championship will receive around £8M, (assuming it is not receiving parachute payments).
It is these gaps that encourage clubs to gamble on promotion by spending beyond their means.
If they make it and can hold on in the Prem with a sustainable financial strategy, their own wealth and value will rocket. If they don’t, they risk doing a Derby, a Sunderland, a Wigan, a Bolton… And could go out of business.
OK, but it’s at their own risk, right…?
Yes, it is at the owner’s risk, but that also risks the future of the club. Look at Derby. The club is almost certainly heading to League One after its financial meltdown.
Hopefully a buyer will complete a takeover, but it is a close call.
Imagine if Derby County disappeared. The economic consequences would be severe for the city, but the cultural impact would be far greater.
Sky Sports commentator, Martin Tyler (R), brought viewers live matches in 1992, alongside Andy Gray. Gray left the channel in 2011 after off air comments were picked up by a mic, while Tyler is still Sky’s lead commentator 29 years after the first live games were covered
Should owners be allowed to risk all that? This is where a new regulator, if approved by government, will have a role to play in forcing clubs to follow financial rules.
However, there is also a knock-on effect of the financial gap to the whole of the EFL.
The need to spend big to gain promotion to the Premier League forces up the price of players and wages. And that affects all clubs in the EFL, who all pay more.
Don’t parachute payments bridge the gap between the Premier Division and Championship?
That is the aim, and they work for relegated clubs, but they have a perverse effect.
The idea is that clubs need to pay more in players’ wages to compete in the top flight, but that leaves them vulnerable if they go down.
They could be saddled with contracts they can’t afford.
Clubs that receive parachute payments are twice as likely to be promoted to the top flight
So, clubs relegated from the Premier League receive up to £45M in the first year after they go down and as much as £90M over three years.
In contrast, a club that does not benefit from parachute payments receive just £4.5M from the Premier League in a solidarity payment.
Not surprisingly, a relegation bonus of tens of millions of pounds increases a club’s chances of promotion.
Research from Sheffield Hallam University has revealed that clubs receiving parachute payments are twice as likely to go up and twice as likely to avoid relegation as those that don’t. It is a huge advantage.
Inevitably, other clubs start spending more to compete, which is why second tier teams are stuck with eye-watering debt.
But without parachutes, Championship clubs would go bust when they come down and wouldn’t be able to compete when they go up…?
Not necessarily. Promoted clubs could consider writing relegation clauses into contracts so a player’s pay falls if the club goes down.
This season, Watford have introduced 50 per cent salary reduction clauses into new contracts, in case of relegation, to help keep the club sustainable in the future.
Norwich City’s players reportedly saw their wages cut by 50 per cent when they were relegated from the Premier league in 2019-20.
Watford have introduced relegation clauses into new contracts in case they go down
Making similar clauses a requirement in the Premier League would provide a relegation cushion.
The EFL wants the money currently spent on parachutes to be included within a £750M annual payment to the EFL clubs, which would be distributed among all 72 teams.
In addition, the merit system, which sees Prem clubs rewarded for each place they climb in the final top-flight table could be extended to the Championship, so clubs finishing near the top of the division are better placed to step up.
EFL chairman Rick Parry believes the financial gap between the second and top tiers could be halved from around £80M to about £40M. Not ideal, but more manageable.
OK, scrap parachute payments and throw £750M at the EFL. Does that sort it?
According to the EFL, financial analysts and club executives it would go a long way to solving some of the problems.
For example, League One and Two clubs could benefit from an additional £1M to £2M, which would be a huge boost for some of them and remove many budget deficits, pushing them into the black.
However, it can only work if some form of spending limit is imposed and enforced. For example, allowing only 60 per cent of revenue to be spent on wages as is currently the case in League One and Two.
Bury went out of business due to poor financial management and overspending on players
Any rules will have to be rigorously enforced through a new, properly funded and expert football regulator. Otherwise, the chances are clubs would just pile the cash into higher wages.
Could the Premier League afford it?
In theory, yes. However, there could be greater impact on smaller clubs depending how the funding works.
The EFL is proposing that 25 per cent of the pooled media income for itself and the Premier League is distributed to its clubs, which works out at around £750M.
Currently, the Premier League pays £350M to EFL clubs annually.
Fans support for reform of football has increased after the European Super League fiasco
| League | Revenue per club (£m) | % Total club revenue |
|---|---|---|
| Premier League | £143.2m | 53% |
| La Liga | £66.6m | 42% |
| Bundesliga | £60.3m | 34% |
| Serie A | £54.0m | 47% |
| Ligue 1 | £31.1m | 37% |
| Source: UEFA Benchmarking Report 2019 |
The top flight also pays £150M to other causes such as community schemes and for football infrastructure through the Football Foundation.
But the EFL is only focused on the money that goes to the 72 clubs in the Championship, Leagues One and Two, so it is asking for a £400M increase on that.
If the Premier League paid the additional money, it would still be the richest league in Europe by a long way.
Premier League revenues in 2018/19 were £5.9 BN, compared to its nearest rivals, La Liga, with revenues of £3.4BN
However, if the cash was simply top-sliced from the pooled media revenues of the Premier League and EFL, the impact would be far greater on a Burnley, Norwich or Watford, which have lower revenues compared to Liverpool, Manchester United or Chelsea.
But this could be mitigated by offering financial incentives for sustainability or linking contributions to income.
What happens if nothing changes?
Everyone agrees something needs to change. The Premier League accept a need for a review of current arrangements and continue to engage with Tracey Crouch and the EFL.
The top flight want to be sure their contribution to the EFL has maximum impact and they are watching with interest whatever financial controls are suggested by Crouch’s review.
The EFL and its clubs believe that if nothing changes, more clubs will go bust and the top half of the Championship will become a mini-league to simply refresh the clubs in the top flight.
This post first appeared on Dailymail.co.uk
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