Swiss Ramble Profile picture
Aug 21, 2018 14 tweets 10 min read Twitter logo Read on Twitter
Parachute payments are made to clubs relegated from the Premier League in order to soften the blow of the significant reduction in revenue in the Championship, especially as many players’ wages remain at a high level. The following thread looks at how these payments work.
It is evident that parachutes have a major impact on the competitive balance in the Championship, as the 6 clubs with the highest revenue in 2016/17 all benefited from these payments, most notably the 3 relegated the previous season: #NUFC £86m, #NCFC £75m & #AVFC £74m.
Eight Championship clubs received Premier League parachute payments in 2016/17 with #NUFC, #AVFC and #NCFC getting £41m (up from £26m in 2015/16 thanks to the new TV deal), followed by #QPR £31m, then #CardiffCity, #FFC, #Royals & #WAFC, all £16m.
If parachute payments were excluded, the same 3 clubs would still have the highest revenue (#NUFC, £49m, #NCFC £39m and #AVFC £37m), but different clubs would fill the next 3 places: #LUFC £34m, #BHAFC £29m and #DCFC £29m – plus the gap would be much smaller.
Although the Premier League solidarity payment rose from £2.3m to £4.3m in 2016/17, most Championship clubs only receive £7-8m TV money (including £2.3m distribution from EFL). Clubs that receive parachute payments do not receive solidarity payments as well.
Clubs relegated from the Premier League now receive £91m over 3 years. If a club is promoted in this period (like #NUFC in 16/17), it forfeits any further parachute payments. Total parachutes in 17/18 were £243m (8 clubs), rising to an estimated £274m (9 clubs) in 18/19.
Parachute payments are calculated relative to Premier League equal share: year 1 – 55%, year 2 – 45%, year 3 – 20%. If a club is relegated after only one season in the top flight, it is only entitled to 2 years of payments, so £74m instead of £89m in 2016/17.
In 2016/17 the Premier League equal share amounted to £74.4m, split between the domestic UK deal £35.3m and the overseas deal £39.1m. It excludes merit payment (based on finishing position), facility fees (based on number of times a club broadcast live) and commercial revenue.
It is worth noting that the parachute payments for clubs relegated in earlier seasons can change in line with any updated TV deal. In this way #AVFC and #NCFC received £34.0m in their second year, compared to the £33.5m originally calculated in 2016/17.
Up to 2015/16 relegated clubs received 4 years parachute payments, amounting to £68m: year 1 – £26m (55%), year 2 – £21m (45%), year 3 – £11m (25%), year 4 – £11m (25%). However, £2.3m (equivalent to the solidarity payment) was deducted from gross calculation to give net amount.
The higher TV deal in 2016/17 has benefited clubs relegated in previous seasons. For example, #QPR actually got more in their second year after relegation (£31.2m) than their first year (£25.9m), while they get £16.6m in each of years 3 and 4, compared to the original £10.5m.
Parachute payments for 17/18 show that relegated clubs will receive £91m over 3 years: year 1 – £42m, year 2 – £34m, year 3 – £15m. This is the case for #SAFC, even after further drop to League One, but #HCAFC & #Boro only get £76m, as they were relegated after one season in PL.
If a club is promoted to the Premier League, it will receive a minimum of £170m TV money, even if immediately relegated: £95m for last place in PL plus £76m parachute payments. This helps explain why so many Championship clubs “go for it”, as the rewards are so lucrative.
The argument in favour of parachute payments is that they encourage promoted clubs to invest to compete, safe in the knowledge that if they are relegated, then there is a safety net. However, they do undoubtedly create a huge revenue disadvantage for other Championship clubs.

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More from @SwissRamble

Oct 4, 2018
#RealMadrid 2017/18 accounts cover a season when they finished third in La Liga, but won the Champions League for a third consecutive year, the fourth time in 5 years, plus the Club World Cup and European and Spanish Super Cups. Some thoughts in the following thread.
#RealMadrid profit before tax increased by €17m from €26m to €43m (profit after tax up €10m from €21m to €31m). Revenue (Madrid’s definition) rose 11% (€76m), their largest rise since 2000, to a record high of €751m, while profit on player sales was 4% (€2m) up at €54m.
All #RealMadrid revenue streams increased with the largest growth in marketing €41m (16%) to €295m, followed by international & friendly matches €13m (17%) to €100m, broadcasting €13m (8%) to €178m and membership fees & stadium revenue €8m (5%) to €174m.
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Sep 25, 2018
Manchester United are the second Premier League club after #MCFC to publish 2017/18 financial results, covering a season when they were runners-up in the league and FA Cup, but were eliminated by Sevilla in the Champions League last 16. Some thoughts in the following thread #MUFC
#MUFC profit before tax down from £57m to £26m, mainly due to higher player costs, as wage bill shot up £32m and player amortisation rose £14m, while revenue only up £9m. Tax bill increased from £17m to £63m as a change in US corporate tax rate led to a £49m non-cash write-off.
#MUFC revenue only grew £9m (2%). Only meaningful increase was broadcasting, up £10m (5%) to £204m. Commercial income was basically flat at £276m, while match day dropped £2m (2%) to £110m. Profit on player sales rose £7m to £18m.
Read 39 tweets
Sep 17, 2018
Ten years after Sheikh Mansour acquired the club, Manchester City’s 2017/18 financial results covered a season when they won the Premier League in some style, won the League Cup and reached the Champions League quarter-finals. Some thoughts in the following thread #MCFC
#MCFC profit before tax up from £0.1m (£1.1m after tax) to £10.4m, as previous season was adversely impacted by change in year-end resulting in an extra month’s costs with minimal revenue uplift. Revenue rose £27m (6%) to £500.5m, only second English club above £0.5 bln.
All #MCFC revenue streams up: commercial income rose £14m (7%) to £232m; broadcasting increased £8m (4%) to £212m; and match day was £5m (9%) higher at £57m. Profit on player sales was up £4m to £39m.
Read 37 tweets
Sep 10, 2018
Prize money for UEFA club competitions significantly increases in 2018/19, including a new coefficient ranking payment that better rewards historically successful clubs rather than those with larger national TV rights deals. Some thoughts follow on Champions League distribution.
The amount distributed to clubs in UEFA Champions League (group stage onwards) will rise €681m (54%) from €1.269 bln to €1.950 bln in 2018/19. This is split: participation €488m (25%), performance €585m (30%), TV pool €292m (15%) and coefficient rankings €585m (30%).
In 2018/19 each of the 32 clubs qualifying for Champions League group stage gets €15.25m plus €2.7m for a win and €900k for a draw. Additional prize money for each further stage reached: last 16 €9.5m, quarter-final €10.5m, semi-final €12m, final €15m and winners €19m.
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Sep 4, 2018
Atletico Madrid’s 2016/17 accounts cover a season when they finished third in La Liga and reached the semi-finals of the Champions League under coach Diego Simeone. Some thoughts on their finances in the following thread #Atleti #AúpaAtleti #AtleticoMadrid
#Atleti profit before tax improved from €1m to €5m (profit after tax up from €4m to €5m), as revenue rose €48m (21%) to a record high of €281m, though profit on player sales fell €7m to €37m. No repeat of the 15/16 €27m extraordinary charge linked to stadium development.
The main driver of the #Atleti revenue increase was the La Liga TV deal, up €31m to €99m, though Champions League TV money was €9m lower at €61m. Commercial rose €22m (41%) to €76m, while match day was €4m (11%) higher at €45m.
Read 41 tweets
Aug 27, 2018
A long-suffering Newcastle United fan asked how their financial performance compared with Tottenham Hotspur since Mike Ashley bought the club in July 2007, so here’s a few thoughts in the following thread #NUFC #THFC
Both #NUFC and #THFC have focused on profit. #NUFC have essentially broken even during Ashley’s tenure with £4m aggregate profit, while #THFC have reported an impressive £215m. Worth noting that £188m of that came in last 4 seasons, when #NUFC had a £47m loss in Championship.
#NUFC revenue has fallen by £1m since Ashley’s arrival from £87m to £86m, deflated by the lower money in the Championship. In the same period, #THFC revenue has tripled, rising £203m from £103m to £306m. In fairness, #NUFC 2018 revenue will be much higher (£175-180m estimate).
Read 17 tweets

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