Two of English football’s biggest entities are clashing heads over money. So what exactly is causing the friction and how likely is a resolution?
Things could get messy between the Premier League, who govern England’s top-flight, and the English Football League, who care for the three remaining professional divisions.
As with most fracturing relationships, the current friction is related to finances.
In essence, the two governing bodies are locking heads about the game’s financial situation, specifically as it pertains to the ‘new deal for football’, as it has been described in some media outlets.
The ‘new deal for football’ is a financial redistribution deal that differs from the current scheme in place. Unsurprisingly, no one seems happy, nor willing to budge too greatly on their position.
So let’s attempt to make sense of it all.
What are the Premier League and EFL at war about?
Following pressure from the British government, both the PL and EFL are looking at ways to redistribute the Premier League’s wealth throughout the rest of England’s professional football divisions. This includes the Championship (second tier), League One (third tier), and League Two (fourth tier).
At the centre of this tussle is the perceived structural cash flow issues within English football.
A Government white paper published earlier this year found ‘the current distribution of revenue is not sufficient, contributing to problems of financial unsustainability and having a destabilising effect on the football pyramid.’
It recommended a ‘clear need to reform financial distributions in English football.’
That’s led us here, to a negotiation stalemate, whereby the EFL want a greater share of the media rights revenue and the Premier League doesn’t want to meet them all the way.
Ongoing for three years, the ordeal looked like drawing to a close in September. According to reports, a deal was submitted to the 72 EFL clubs at Derby County’s stadium.
What’s the deal?
In September, the 72 EFL clubs met at the stadium of Derby County and received a proposal from the Premier League dubbed in some media reports as the ‘new deal for football’.
It proposes the redistribution of the shared media rights revenue of the four professional football divisions in England.
At the moment, the Premier League sends roughly 16 per cent of its £3 billion a year media rights revenue down the pyramid in various payment schemes including solidarity and parachute payments.
But, the EFL wants to get rid of parachute payments altogether, combine the media rights revenue of the four professional English leagues, and share 25 per cent of that sum with the 72 EFL clubs.
This is despite the Premier League making up 85 per cent of English football’s revenue, with the ‘Big six’ – Manchester City, Manchester United, Chelsea, Arsenal, Liverpool, and Tottenham – bringing in nearly half.
The Premier League don’t agree with the proposed 25 per cent figure, with their counter-proposal including combining the rights of the four divisions, with 14.75 per cent of that sum shared, and a further 4.56 per cent dedicated to recently relegated clubs.
This equates to sharing 19.36 per cent of the revenue, an increase on the current 16 per cent share but still short of the 25 per cent demanded by the EFL.
What’s EFL’s position?
The EFL believe increasing the share of the combined media-rights revenue to 25 per cent would do away with parachute payments, or financial sustainability payments as the Premier League’s proposal aims to rename them.
Reportedly, their position is that the higher the share of media rights, the less need there is for parachute payments and the fairer the competition in the Championship, and potentially leagues further down is.
There are some in camp EFL that staunchly oppose the decision. This includes Championship club Rotheram’s owner, Tony Stewart
“What they’ve offered is an insult, quite frankly,” he told The League Paper.
“We’re disappointed. The government is disappointed. The view is that it’s a token offer.”
His view is shared by Niall Couper, chief executive at Fair Game, a lobby group for 34 EFL and non-league clubs, who labelled the deal as having ‘more strings than a puppet show.’
What are parachute payments?
Initially introduced in the 2006-07 season and paid out over the four years following a side’s relegation, parachute payments aim to soften the blow of dropping out of the Premier League. From 2015-16, the parachute payment period was reduced to three years.
The scheme sees each relegated Premier League club receive 55 per cent of the amount a Premier League club would receive in broadcast revenue during the first season out of the top-flight. This then dips to 45 per cent for the second year, and 20 per cent in the third and final year.
For example, the three clubs relegated from the Premier League in the 2022-23 season – Leeds United, Leicester City, and Southampton – will receive £47.8 million in the 2023-24 season as a parachute payment.
In the 2024-25 season, this payment could dip to £39.1 million, and then the season after that they could receive £17.4 million.
There are a few crucial caveats to know about parachute payments. Firstly, clubs who only spent one season in the division before suffering the drop receive payments over a two year period.
Secondly, any recently relegated club promoted within the three year window will have their payments stopped.
Over the last decade, 12 of the 20 automatic promotion spots have been filled by parachute clubs, while further six have come up via the playoffs. That’s 60 per cent of promotion places filled by these clubs.
This unfair divide is precisely what the EFL is looking to eliminate. While not fully closing the door, the parachute payment scheme primarily provides the key to recently promoted clubs, with only a small margin of these non-parachute clubs able to kick the door down and jump up the division.
What’s the Premier League’s position?
England’s top flight doesn’t want to get rid of parachute payments. In fact, they’re insistent on keeping them around.
In the eyes of the Premier League, they’re already far more generous to the divisions below it than any other in European football. According to reports, they fear how increased financial generosity may impact their standing in European football, potentially threatening its status as the world’s number one league.
From a government perspective, and with the appointment of an independent regulator for English football looking likely, it’s unlikely the UK government will want to enact any serious change that may impact the Premier League, one of its main economic drivers.
The independent regulator for football will have the power to step in and address cash flow, financial regulation compliance, corporate government, and fan engagement, amongst other things.
Of the 92 clubs in the EFL and Premier League, the report found 63 reported annual losses. It found the Championship to be running with the highest amount of financial risks as clubs locked in a battle of spending, at sometimes irrational and unsustainable rates, to try and get a slice of the Premier League’s financial pie.
Any other points of contention?
Yes, related to the squad-cost ratio rule which UEFA, European football’s governing body, currently uses.
Implementing this scheme would mean clubs across England would only be allowed to spend a set percentage of their revenues on their team.
However, the Premier League are hunting the squad-cost ratio to be set at 85 per cent, as opposed to the 70 per cent used by UEFA, with the Championship set to be held to the 70 per cent figure, and the bottom two figures ratios capped at 50 per cent.
More glaringly, the English top flight wants clubs in receipt of parachute payments to also be held to the 85 per cent ratio, despite plying their trade in the Championship.
As a counter, the EFL essentially suggests that clubs in receipt of a year-two parachute payment are held to a ratio of 75 per cent, with that figure dipping to the same 70 per cent as the other Championship clubs in year three.
Messy, we know.
What happens if an agreement is reached?
Should this eventuate, a two-year transitional period would be allowed as part of the implementation.
In the immediate term, an £88 million payment would be made to the solidarity pot, with these funds split into £3.52 million for each Championship club, £528,000 to each League One club, and £352,000 to each League Two club.
The implementation plan targets the 2025-26 season as the first ‘steady-state’ season.
From 25-26, the deal would result in non parachute clubs in the EFL sharing roughly £466 million, £169 million more than they currently do. On top of this, there would be £267 million in parachute payments paid out.
According to The Athletic’s Matt Slater, by 2025-26 “the solidarity payments rise to 14.75 per cent of net media rights, with the parachute pot moving to a new formula of 1.442 per cent for year-one payments, 1.124 per cent of year-two payments, and 0.557 per cent in year three.”
However, unlike currently, those parachute payments will come on top of said clubs receiving their share of the EFL solidarity payments.
Is a deal likely?
Speaking to The Athletic, Tony Bloom, chairman of Premier League club Brighton, said “compromise is needed across the board, which is happening.”
That’s not to suggest progression to a conclusion is likely. Tony Stewart who suggested the EFL are “gagging for the government to step in and appraise the situation as we have.”
“We’re gagging for the government to step in and appraise the situation as we have.”
Nothing is clear in this situation, except for the fact that negotiations will be long, complex, and have wide-reaching impacts on English football.
