Monday Musings – The Road to Insolvency?

The English Football League

Much has been made of the widening gap between Premier League clubs and even the EFL Championship, although it widens exponentially through the lower leagues. With the “Football Leaks” discussion about a European Super League, it brings into question — Can the rest of the EFL survive?

Most Championship clubs take on substantial debt in an attempt to compete for (and ideally win) promotion to the Premier League. In fact, Tony Bloom (owner of Brighton and Hove Albion) said in 2016 that “[a]ny Championship club without parachute payments wishing to compete for promotion will inevitably make significant losses”. A prominent opponent of parachute and solidarity payments insinuated that eventually private clubs would grow tired of subsidizing the league.

Have we reached this point? In the era where every time Premier League television rights are awarded is a new, can “everyone else” truly thrive? 9 clubs (including one Premier League side) have entered administration for insolvency since 2010. Financial Fair Play (FFP) rules have helped some, but the growing chasm in revenues have some clubs willing to take the risk.

Leveling the playing field

Parachute payments are seen as a “necessary evil” to keep “challenger” clubs competitive because without them clubs would either have to use relegation wage decrease clauses which are not ideal for players or risk losing out. Opponents argue that players on a relegation wage cut would be more apt to help the club avoid relegation.

The Premier League television rights deal reached £5.136B upon last award. That means that the equal share alone for each premier league club comes in at roughly £34.8M per club, while the average total media payment is closer to £121M for each premier league club. They pay £72.6M to the Championship in solidarity (about 1.4%), EFL League One receives £16.3M (about 0.3%) and EFL League Two receives £10.9 (about 0.2%).

Part of the problem with maintaining fiscal responsibility is the runaway growth of wages and transfer fees. The separation between rich and poor clubs grows every year — and the Champions League only increases the divide.

I’m not convinced there’s an easy fix, but I am doubting the serious ability of lower division clubs to be competitive. Unless, like BHA, they have someone with a deep bank account that really wants them to succeed and they are willing to get right up to FFP limits for a gamble. Though, I do think that the portion shared needs to be higher if the EFL wants to maintain serious competition.

What’s next… ?

The path we’re on is getting closer and closer to American Professional Sports because of the massive wage differential. The lowest wage bill in the 2016-2017 Premier League season was Burnley with £61M and the highest was Manchester City with £264M.

Join me next week for even more musings.

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