If there's one thing that's true about football, it's that there's a huge amount of money involved. The sport generates a ridiculously large amount of income and is able to pay its top players five- or even six-figure salaries.
There's also a lot of money in online football betting, with millions spent in bets on the latest matches and tournaments. Many of the best casino first deposit bonuses are available at sites that offer football betting in addition to casino games.
Even though there's a lot of money in football, it's still possible for clubs to face financial problems. Parachute payments are there to help prevent this.
What Is a Parachute Payment in Football?
Making it into the Premier League can greatly benefit a club's income. However, once a club's in the league, there's no guarantee it's going to stay there. After all, there's always the chance that it won't perform well enough in the tournament and get relegated, i.e. moved back down to the tier below, which is the Championship. A team that gets relegated is going to miss out on a lot of money from not being in the Premier League any more; this includes Matchday income, commercial revenue and broadcasting rights for matches the team took part in.
In the 2006-07 season, parachute payments were introduced to financially assist clubs that got relegated from the Premier League. Clubs would typically spend a lot of money while in the Premier League then if they got relegated, they would lose out on a lot of income and potentially face going into administration. Parachute payments were introduced to prevent this and to ensure clubs that got relegated were able to manage their finances effectively afterwards. Parachute payments are so-called because the amount of money a club receives decreases every year. When they were first introduced, a club would only receive them for the two seasons following their relegation.
As of the 2019-20 season, all clubs that are entitled to parachute payments receive them for three years. However, if a club's only been in the league for one season, it will receive the payments for two years only. The amount of money a relegated team receives is equal to 55% of the broadcasting rights for the first year; this then goes down to 40% in the second year and 20% in the third year. If a team happens to be promoted back to the Premier League, it will no longer qualify for parachute payments. Up until the 2015-16 season, relegated clubs would receive parachute payments for four years, not three. A typical year sees seven to ten clubs qualify for the payment. Since the 2015-16 season, the minimum payout handed to a relegated club has been £10.5 million.
Biggest Parachute Payments in the Last Decade
In the 2018-19 season, the Premier League spent a total of £265 million on parachute payments. This was the most it's ever spent in a single season. It's estimated that for the 2019-20 season, £248 million will be spent on parachute payments – this would be the second-highest amount of money the league will have spent.
The sums paid to relegated clubs has slightly increased year-on-year. Some of the biggest parachute payments over the last decade are listed below:
- £42.6 million to Cardiff City F.C., Fulham F.C. and Huddersfield Town A.F.C. in 2019-20, plus Swansea City F.C., Stoke City F.C. and West Bromwich Albion F.C. in 2018-19
- £41.6 million to Sunderland A.F.C, Hull City F.C. and Middlesborough A.F.C in 2017-18
- £40.9 million to Newcastle United F.C., Aston Villa F.C. and Norwich City F.C. in 2016-17
- £34.9 million to Swansea City F.C., Stoke City F.C. and West Bromwich Albion F.C. in 2019-20, plus Sunderland A.F.C, Hull City F.C. and Middlesborough A.F.C in 2018-19
Even though these payments are meant to help relegated clubs, they haven't been without criticism. It's thought by some that the payments give clubs that have been relegated to the Championship, and that its competitive balance could be negatively affected as a result.
Also, some have expressed concern over the fact that the Premier League is effectively subsidising the Championship through handing over money to up to 10 clubs a year. Even so, it's unlikely that the system is going to go away anytime soon, especially since it's set up to prevent clubs going into administration. Since being established, it has undergone a few changes, so there's a chance it may undergo further changes in the next few years.
