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By Nick Harris
30 April 2010
The value of winning the world’s most lucrative single football match – the Championship play-off final on 22 May – rises to £90m this year, up 50 per cent on last year. But analysts from accountants Deloitte Touche say that statistics don’t support the view there is an “unbridgeable gap” between the Premier League and the Championship.
The Premier League is the world’s richest football league. The bottom club next season will earn around £40m at least from central funds, or comfortably more than 10 times as much as the average club in the Championship – England’s second tier – earns from central funds.
The £90m play-off prize pot figure is calculated by adding extra income in the winner’s first season in the Premier League to the £48m in “parachute” payments if the play-off victors were immediately relegated back to the Championship. If the play-off winners stayed in the Premier League beyond one season, the £90m increases by at least £40m per extra season.
Paul Rawnsley, director of the sports business group at Deloitte, says: “In financial terms, this match offers the winning club the most substantial prize in world football and the value is now even greater as a result of the Premier League’s increased revenues from international broadcast rights and the proposals to extend parachute payments over four seasons. It is a prize which provides the opportunity for sound investment and strengthening the foundations of a club for years to come.”
Of the four clubs that will enter the play-offs, three are already known: Nottingham Forest, Cardiff City and Leicester City. The fourth place will go to either Blackpool (at home to Bristol City on Sunday) or Swansea City (at home to Doncaster). Blackpool have 69 points at the moment and Swansea have 68.
There has long been a debate whether the wealth gap between the Premier League and the rest of English football is healthy. But Alex Byars, senior consultant in the sports business group, says: “Whilst some commentators talk of an unbridgeable gulf between the Championship and the Premier League for promoted clubs, the statistics do not bear this out.
“Over the past decade, over half (17) of the 30 newly promoted clubs [three per season] have successfully retained their Premier League status in that crucial first season. The main priority for all of the promoted clubs will be survival which will require investment on and off the pitch.
“The investment in the playing squad needs to be rational and the contracts need to have in-built protection against the risk of relegation, through variable pay clauses.
“Whilst parachute payments will increase from the 2010-11 season they have risen before, most recently in 2007-08, and yet around two out of every three of those same thirty clubs promoted into the Premier League over the past decade (19 out of 30) achieved this without having the benefit of a parachute payment in their promotion season.
“The Championship is a very competitive division and on-pitch success is based on more than just a club’s financial muscle.”
For the purpose of Deloitte’s analysis, the firm included those clubs gaining promotion to the Premier League for the 10 seasons of the Championship up to and including 2008-09. The analysis of newly promoted clubs retaining (or otherwise) their Premier League status in the first season following promotion was based on the same population of 30 clubs, for the 10 seasons of the Premier League up to and including 2009-10.
The Deloitte analysis is striking and does strongly suggest that a club moving from the Championship is not necessarily doomed to fail in the Premier League, and that those clubs that get up to the Premier League don’t necessarily achieve that on the back of parachute cash.
But the Deloitte analysis totally ignores another impact of the wealth gap: what happens to relegated clubs. Sportingintelligence analysis shows that 40 per cent of clubs relegated from the Premier League since it started (1992-93) have made it back up within the two seasons that the parachute payments are made. And two-thirds of those who haven’t made it back within two years haven’t made it back at all, and a majority of those who haven’t made it back have subsequently entered financial administration or experienced other severe financial difficulties.
In other words, being in the Premier League is great; falling out of it is seriously damaging.
As the financial gap between the Premier League and the Championship has widened, so clubs have fallen out of the top flight harder and further. Five clubs in the last five years alone have dropped from Premier League to League One, a drop of two divisions in a short period.
Eight former-Premier League clubs are currently residing in the third and fourth tiers of the English game: Norwich, Leeds, Swindon, Charlton, Southampton, MK Dons (formerly Wimbledon), Oldham and Bradford.
So while Deloitte demonstrate correctly that there is not an unbridgeable gap to prevent clubs going up to the Premier League, or staying there beyond one season, there are solid statistical grounds for believing the League can seriously damage the financial health of clubs after leaving. (See what happened, by scrolling to the bottom of the linked page, to Oldham, Swindon, QPR, Barnsley, Forest, Wimbledon, Sheff Wed, Coventry, Bradford, Ipswich, Leicester, Leeds, Palace, Norwich, Southampton, Sheff Utd, Charlton, Watford, Reading and Derby County).
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