Fan-led Review: Distribution Of Revenues

12 Jun 2021 | 6 comments

Distribution Of Revenues

The football industry generates billions of pounds in revenue every year, but this revenue has become more and more concentrated in the hands of the biggest leagues and the biggest clubs. Existing mechanisms for solidarity and distributing income down the pyramid are insufficient to address the growing imbalance in the spending power of clubs. One effect has been the reduction of competition and killing the dream that any club can reach the highest levels of the sport.

Football Revenues

The football industry in Europe is estimated to have generated nearly €30bn (£26bn) in the 2018/19 season, of which almost 25% is generated by English clubs in the top four leagues. Club revenue is generally derived from three primary sources:

  • Broadcasting
  • Commercial
  • Matchday

But it is that first category that most clearly drives the gulf between the top and the bottom of the pyramid, as can be seen in the following diagram (source: Deloitte Annual Review of Football Finance 2020):

Birmingham encapsulates this when looking at how the club’s revenue has decreased over recent history. From roughly £60m in our last two years in the Premiership to an average of £26m during our parachute payment years, to an average of £18m since.

Existing solidarity and revenue distribution

There are several means by which revenue currently flows down the pyramid.

Training rewards – When a player becomes a professional or transfers for some value at both an international and domestic level, money is paid to the clubs that trained that player at a young age. These amounts are small in value and do not have a significant impact on club finances.

Parachute payments & solidarity – Money is provided to clubs in the first few years after relegation to ease the financial hit due to reduced revenue (Over £40m for a newly relegated club in the 2018/19 season). Some funds (£4.65m for a Championship club) are paid to the remaining clubs, not receiving solidarity payments directly. This mechanism has led to more relegated clubs either yo-yo-ing between the leagues or falling into financial difficulty.

Transfers – Clubs at a lower level who are able to find and nurture talent and sell them for a profit are essentially pulling money down the pyramid, but there are no guarantees.

What can be done?

The distribution of revenue between clubs requires an overhaul to redress the financial and competitive balance between clubs. Some ideas to be considered include:

Collective bargaining – While the “Project Big Picture” had many deplorable aspects, the proposal to increase the amount of solidarity paid to the lower leagues from 8% to 25% was a good one and should be implemented.

Removal of parachute payments – In line with increasing the amount of solidarity paid to the EFL, the broken parachute payments system should be abolished. It should become mandatory that player contracts contain relegation clauses to ensure a club does not slip into insolvency after relegation.

Central revenue ratios – The EPL has a fixed ratio that ensures that the proportion of money from central funds distributed to the highest club does not exceed 1.8x the amount allocated to the lowest club. This principle could be expanded to cover between the leagues as well.

“Soft” salary caps – While the League 1 & 2 clubs unsuccessfully tried to implement a salary cap for the last season, it is still a mechanism that should be considered. One aspect that can have a redistributive element would be to implement a “soft” cap. This would allow clubs to spend more than the cap, but any amounts over the cap level would be subject to “taxation”, with the collected taxation redistributed to clubs who keep within the cap and clubs in the lower leagues. This would ideally need to be implemented at a UEFA level across the leagues and European cup competitions with different levels depending on the competition.

 What are your thoughts?

We would like to know what you think about revenue distribution and what can be done to maintain competitive balance in football.

Please send your thoughts to fanledreview@bluestrust.org , subject “Fan-led Review: Distribution Of Revenues”, no later than 15 June 2021.

Blues Trust

 

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6 Comments

  1. WayCoolBlue

    Salary caps most definitely. But they must be fair not silly pittance. 20K a week Individual salary for a club with excellent financial rating . So that championship clubs can still be competitive obviously you can’t set or lower division clubs at 20K per week. Maybe Division 1 clubs would be 8K per week.
    Maybe 10k. But again they would need to have excellent financial ratings.
    Are clubs financial rating does not have to be publicised this is private and confidential so you could not get ripped off in the transfer market when it comes to buying or selling.

    I believe parachute payments should be removed altogether why award a club for Failing.

    All clubs regardless of your standing/stature should have to pay into an insurance scheme which protects them against loss of earnings whether that be relegation liquidation or bankruptcy. Obviously this would be worked out on the likelihood of your club or the club being relegated the more chance of relegation you have the more insurance you would pay against this. So it would also be based on your finances and financial commitments. all of these things would effect your insurance policy payments. So the better financially you are in the more secure your club is of relegation the cheaper/Less this obligation to pay insurance would be.

    These funds can only be accessed due to any of the above reasons.

    without parachute payments but having a decent insurance package this should take care of those clubs. And more of league funds can be dispersed down the leagues for placing and finishing within the league. And more money can be dedicated to grassroots football. And also women’s football.

    Hope that makes sense KRO

    • John Paget

      I only have one disagreement with everything you say. No club enters into a season with the intention of being relegated, therefore all contributions for that particular division should be the same.

      Waycoolblue for BCFC CEO

      • WayCoolBlue

        No they don’t enter the Premier League with the intention of relegation. But do you have a massive advantage if they do get relegated over other championship clubs. And their finances do not even get looked at for the first three years.

        It’s just a complete unfair system. If every club in the whole entire football pyramid have to pay into a mandatory insurance scheme takes away the need for parachute payments gives clubs more money and everyone gets an equal share.

      • Richard Walker

        Wage caps…

        I mentioned this in the email I’ve sent you and in previous posts in the other topics.

        The biggest problem we have is the wages clubs are forced to pay that are driven up by the wages in the premier League are so disproportionate to the incomes clubs can receive in a league outside the prem.

        The % a club can earn from TV rights etc etc has to match the % players can expect to get paid.

        You can not run clubs were the wages push the club’s into debt just because a player expects to get paid a certain amount because his fellow players above him get paid £200,000 a week, when the incomes clubs receive are a fraction of what is required to pay these inflated wages.

        Players should have as mandatory a % wage increase when promoted and a mandatory wage decrease when relegated. This would protect the club and create a bigger desire to stay up as a player.

        Players from the PREM also should have apart from paying their own agents fees get the agents to also pay into a fund which helps players that have been relegated. A form of insurance for lose of income. Players have to start looking after there own players.

        American baseball style wage caps will allow for overspending and more financial control. It will work across all football.

        I would love to say that increasing the money clubs get outside the Prem will bring clubs back into the black. But it won’t because as we see above in the prem, the more money these clubs get paid the more money the players and agents take/demand.

        Wage control/cap is a must.

        To also help narrow a gap and encourage home grown talent I also think clubs should also have to pay a tax to a football association to which a player belongs to help them grow more talent from said country and also encourage home grown tallent from our country England.

        Anything that is talked about has to be for the good of the whole game and not just the top clubs or top leagues.

        FIFA, UEFA don’t help either.. with not compensating clubs properly for the use of there players in tournaments and also with the ticket pricing.. I mean €185 a ticket for England Vs Croatia… Is just rediculas and just shows their greed.

        KRO

        The list is endless.. Money and greed… The route of all that’s wrong in football… So take away the desire and make winning the prize not more money.

  2. Eric Jones

    Thank you for all your work – the parachute payment is very unfair and well done for suggesting a better method. Your hard work on behalf of fans is well appreciated,

  3. JohnP

    Parachute payments give such an advantage to the relegated clubs whereas those promoted need that cash to be able to compete at their new level.

    As for salary caps my brother-in-law and myself have discussed this many times over the past three or four years and we believe that there’s only one way it will work without lower league clubs being penalised and it must be forced worldwide at all levels of professional football. For example (and these are not definitive figures, just a number off the top of our heads), 18-25 year olds get paid £8,000 per week, 26-30 year olds earn £20,000 per week, 31-end of playing career £30,000 per week.

    before everyone jumps on me and states that it wouldn’t be fair for league 2 players to earn the same as Premiership players I’m sure the advertising bonuses for wearing boots etc. would sort that out.

    At least this way every division of every country would be paying the same basic wage and therefore not only become more sustainable for the lower league teams but the higher earners can actually feed more money into the lower leagues and grass roots football …… Well I think the principle is worth a thought.

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