With the current season drawing to a close, there’s important information regarding parachute payments for clubs that are on their way down to the Championship.
What are parachute payments?
When the season is done and dusted and the table is finalised, the three relegated teams get parachute payments. Clubs get these payments to ensure that they can cope with the reduced income of the Championship.
Many players will still be contracted under Premier League wages which is difficult for relegated sides. Leicester City decided to sell their most prized possession – James Maddison – to help cut costs.
£100 million is paid across the football league over the course of three years. Based on the recent figures, that is said to be worth around £40m in the first year, £35m in the second and £15m in the third.
However, clubs that return to the Premier League within three years of being relegated do not receive parachute payments.
How much do relegated clubs make off TV rights?
Each Premier League club receives 55 percent of the amount that each team would collect under an equal share of broadcast revenue, reduced to 45 percent in the second year and 20 percent the year after that.
For instance, recently relegated sides Leicester, Leeds, and Southampton are each set to receive more than £120 million as a parting gift. However, their earnings have significantly decreased now that they are in the Championship.
It’s estimated that clubs receive £950k from very broadcasted game. A team staring down the barrel of relegation like Burnley, have been shown seven times on UK channels so far this season.
How much does relegation impact a clubs revenue?
The financial impact of relegation is substantial. There’s an estimation that it could cost a club approximately £50 million in Premier League distributions alone. Premier League clubs typically receive around £90 million from the league each season, generated from TV revenues in both domestic and foreign markets.
Relegated teams lose around £25m on average when they get demoted to the Championship. Most of the revenue cuts is due to a lack of broadcasted games in England’s second-tier division.
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