Premier League parachute and solidarity payments

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The Premier League distributes a formulaically derived financial payment to each English Football League (EFL) club every season. There are two mechanisms with which funds are calculated and distributed, these are known as "Parachute Payments" and "Solidarity Payments". The payments are linked to the value of the Premier League’s broadcasting rights. In the 2017–18 season the Premier League paid £243m in Parachute Payments split amongst 8 clubs, [1] and £100m in Solidarity Payments split amongst the remaining 64 clubs. [2] This compares to £88m of UK TV revenue the EFL distributed to its 72 clubs for the 2017–18 season. [3]

Contents

History

Before the Foundation of the Premier League in 1992, monetary distribution of television revenue was split between the top four divisions, with half paid to First Division clubs (equivalent to the Premier League); 25 percent to Second Division clubs (equivalent to the EFL Championship), and 12.5 percent paid to each of the bottom two divisions (equivalent to EFL League One and EFL League Two). Until the 2006-07 season the Premier League did not share any of their broadcasting revenue with the English Football League other than £4m a year for youth development, and participating in the EFL Cup which added value to the English Football League television deal.

In the 2006-07 season "parachute" payments were introduced which meant for two seasons following relegation a club would receive half of the per club Premier League basic TV money, this would lower the risk of a club going into administration due to the high cost base (mainly player wages) they incurred in the Premier League. In addition "solidarity" payments from the Premier League worth £1m were paid to each EFL Championship club to help mitigate concerns about the impact the parachute payments might have to the competitive balance of the league. [4] The structure and value of the "parachute" and "solidarity" payments have continually evolved since then.

Premier League broadcasting rights

The Premier League splits the UK broadcasting income into 3 categories. 50 per cent equally shared between Premier League clubs; 25 per cent shared based on how often a club’s matches are broadcast in the UK (known as "Facility Fees"); and 25 per cent shared based on where a club finish in the league table (known as "Merit Payments"). [2]

Overseas broadcasting income is currently split equally between Premier League clubs. [2]

Payments to EFL clubs are linked only to the equally shared element of the broadcasting income (i.e. 50% of UK income, and 100% of Overseas income). [5]

Parachute payments

Parachute payments are unique to the English game and currently see clubs relegated from the Premier League receive a percentage of the equally shared element of broadcasting rights each Premier League club receives. This percentage drops progressively over a three year period – 55% in the first year, 45% in year two and, if the club was in the Premier League for more than one season before relegation, 20% in the third year. This system was introduced for clubs relegated in 2015/16 onwards, with the previous system having a similar structure but with payments spread over 4 years. [6] If a club is promoted back to the Premier League during the parachute payment period, then it no longer receives parachute payments. [7]

ClubSeason Relegated2015/16
(million) [8]
2016/17
(million) [9]
2017/18
(million) [1]
2018/19
(million)
2019/20 (est.)
(million)
Bolton Wanderers F.C. 2011/12£10.5
Blackburn Rovers F.C. 2011/12£10.5
Wolverhampton Wanderers F.C. 2011/12£10.5
Reading F.C. 2012/13£10.5£16.3
Wigan Athletic F.C. 2012/13£10.5£16.3
Cardiff City F.C. 2013/14 2018/19£20.8£16.3£16.6£42.6
Fulham F.C. 2013/14 2018/19£20.8£16.3£16.6£42.6
Queens Park Rangers F.C. 2014/15£25.9£31.1£16.6£17.0
Burnley F.C. 2014/15£25.9Promoted (£0)
Hull City F.C. 2014/15 2016/17£25.9Promoted (£0)£41.6£34.9£0
Newcastle United F.C. 2015/16£40.9Promoted (£0)
Aston Villa F.C. 2015/16£40.9£34.0£15.5
Norwich City F.C. 2015/16£40.9£34.0£0
Sunderland A.F.C. 2016/17£41.6£34.9£15.5
Middlesbrough F.C. 2016/17£41.6£34.9£0
Swansea City F.C. 2017/18£42.6£34.9
Stoke City F.C. 2017/18£42.6£34.9
West Bromwich Albion F.C. 2017/18£42.6£34.9
Huddersfield Town A.F.C. 2018/19£42.6
TOTAL£172.1£219.0£242.6£265.0£248.0

The EFL also operates a Parachute Payment system within the EFL Leagues and the National League. From 2016-17 season onwards payments are:

Solidarity payments

Clubs within the EFL who are not eligible for Parachute Payments receive Solidarity Payments. These are calculated as a percentage of the third year Parachute Payment amount a club relegated from the Premier League would receive (currently 20% of the equally shared element of Premier League broadcasting rights). This percentage drops progressively for each EFL league – 30% in the EFL Championship, 4.5% in EFL League One, and 3% in EFL League Two. [6]

League2018/19 Per Club
(million) [1]
2018/19 League Total
(million)
EFL Championship £4.65£79.1
EFL League One £0.70£16.1
EFL League Two £0.47£11.2
TOTAL£106.3

Changes to distribution of overseas TV rights

From 2019-20, the current level of revenue from international TV rights sales will still be shared equally between all 20 Premier League clubs. Any increase on that level, will then be distributed according to where a team finish in the league. As the Parachute and Solidarity Payments are linked only to the equally shared element of TV rights, any increase of international TV rights is likely to have little benefit to EFL clubs. [5]

Debate and criticism

There are several concerns often raised around the structure and amount of the payments. These generally relate to the perceived level of fairness, and the impact on the competitive balance of the second tier (EFL Championship). Concerns often raised include:

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