The problem with parachute payments, and what it means for clubs like West Brom and Fulham
Both West Brom and Fulham were relegated from the Premier League last time round, but both are on course to challenge for an immediate return to the promise land.
Making it into the Premier League is obviously the dream for any team competing in the English Football League. The wealth generated when a team can say they compete in the English top flight is undeniable, but dropping out of the Premier League has its wealth too – in the form of parachute payments.
Parachute payments, as defined by The Times earlier this year, are:
“Parachute payments, in their latest guise, are distributed to relegated clubs over a three-year period, with values equating to 55 per cent of Premier League media rights revenue for each club in year one, 45 per cent in year two, and 20 per cent in year three.”
The problem with parachute payments
Parachute payments have come under some heavy scrutiny in recent years. The main argument is that they make for a disjointed Championship, in which teams like West Brom and Fulham for example, become better financially equip to break out of the Championship owing to parachute payments.
EFL chairman Rick Parry is also a keen advocate of the abandonment of parachute payments. He told Sports Pro Media just last week:
“Really the clue is in the name – nobody ever needed a parachute for falling off a step. You need a parachute because clubs are falling off a cliff.
“Well, let’s address the cliff – and then parachutes won’t be necessary.
“We need to think of one pyramid and a seamless transition, where relegation isn’t a catastrophe and where promotion doesn’t present enormous challenges.
“There’s no doubt, we’ve got to be realistic, the economics of the Championship are broken.”
Elsewhere, football finance expert Kieran Maguire has spoken to Football Insider about parachute payments and has highlighted a new problematic area, with relegated clubs like West Brom, Fulham and of course Sheffield United being unable to compete alongside the Premier League clubs in terms of wages should they make it back into the Premier League.
“Parachute payments are a very clumsy solution to the fact that there is such a gap and clubs like West Brom have benefited,” he said.
T”he EFL is brilliant. I support a club that has spent 95 per cent of its existence in the EFL. The three divisions are amazing but its level of success has been very modest compared to the Premier League.
“The problem is the Premier League’s been too successful, financially, when you compare it to the rest of the football period.
“To compete in the Premier League you have to pay a decent level of wage. There are relegation clauses in contracts and the average decrease in wages when a club is relegated is around 40 per cent. If we were to get rid of parachute payments you would see that increase to about 70 per cent.
“Under those circumstances you would really struggle to recruit players. Therefore, it would increase the likelihood of clubs like West Brom being a yo-yo clubs. These clubs would not be able to offer players decent contracts when they get promoted.”
The EFL and the Premier League seem to be distancing themselves with every season. This year in particular – the year in which we saw the idea of a Super League officially tabled – we’re seeing the gaps between the top and lower ends of the British game broaden and whilst those at the top benefit, those lower down suffer.
Fans of the Championship know how entertaining a league it is but slowly, the money-hungry ways of the Premier League are distorting the English second-tier and it’s quickly damaging the charm of the Championship.
Teams like West Brom and Fulham who have been yo-yo clubs in recent seasons may find themselves stuck in this rut for seasons to come – at an unfair advantage to the rest of the Championship. Sooner or later though, it’ll blow up and West Brom or Fulham could find themselves falling down the face of the Football League like Portsmouth, Bolton and Wigan before them.
Something needs to change, and change soon.