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Premier League Parachute Payments Explained


July 30, 2015

The Basics

Parachute payments are funds provided by the Premier League to clubs relegated from the Premier League to the Football League Championship. They are primarily to provide a financial cushion for the relegated clubs to adjust to life outside the lucrative Premier League competition.

The Premier League for a number of years had distributed parachute payments over four years to relegated clubs. Due to the current three year broadcasting deal in place (covering the 2013/14-2015/16 seasons), the most recent relegated clubs Burnley, QPR and Hull will receive around £65m over four seasons. It is worth noting that, if a relegated club were to get re-promoted to the Premier League, they would forfeit any further parachute payments. Such regulations are however changing and the detail is set out below.

The Detail

As explained above, Premier League clubs relegated in the 2014/15 season will receive around £65m over a four year period. The payments are front-loaded so that a club receives approximately £25m in the first year of relegation, £20m in the second year and £10m in the third and fourth years. The most recent parachute payments made by the Premier League to previously relegated clubs within the four season window are set out below.

2014/15 Parachute Payments to Clubs
Equal Share Overseas TV Total Payment
Birmingham City 5,492,198 4,639,343 10,131,541
Blackburn Rovers 5,492,198 4,639,343 10,131,541
Blackpool 5,492,198 4,639,343 10,131,541
Bolton Wanderers 5,492,198 4,639,343 10,131,541
Cardiff City 12,082,836 12,966,554 25,049,390
Fulham 12,082,836 12,966,544 25,049,390
Norwich City 12,082,836 12,966,554 25,049,390
Reading 9,885,957 10,191,817 20,076,774
Wigan Athletic 9,885,957 10,191,817 20,076,774
Wolverhampton Wanderers 5,492,198 4,639,343 10,131,541
All figures in £ 83,481,412 82,478,011 165,959,423

The new regulations for the 2015/16 season mean that Premier League clubs who are relegated at the end of the 2015/16 season will receive starting in the 2016/17 season:

•             parachute payments over three, not four, seasons; but

•             if a promoted club is then relegated in its first season, it will only be entitled to two years’ worth of parachute payments. For example, if recently promoted clubs Bournemouth, Watford or Norwich are relegated at the end of this 2015/16 season, they will receive only two parachute payments.

Parachute Payments for the Next Bumper 2016-17 Broadcasting Deal

Until the final new cumulative global Premier League broadcasting figures are known, it is difficult to speculate as to the value of the new parachute payments to be distributed to relegated clubs come the following 2016/17 season. Nonetheless, the excellent Swiss Ramble (albeit before the new parachute payment formula was announced by the Premier League) estimated that the bottom placed club in the 2016/17 season could earn around £92m per season in the Premier League with parachute payments for three years totalling £86m . It means the 2015/16 play-off final could be worth a staggering £178m to the winner.

Parachute Payment Summary Table

Type of Club Parachute Payments Received
Club Relegated in 2014-15 season Payments over 4 seasons
Established Premier League Club Relegated in 2015-16 season Payments over 3 seasons
Newly Promoted Club immediately relegated in the 2015-16 season Payments over 2 seasons

Practical Example

Watford are promoted and participate in the Premier League in the 2015-16 season. Unfortunately, they are relegated at the end of the season. For the 2016-17 season they compete in the Football League Championship. They will receive the first of two parachute payments following relegation. In year one, the club receives 55% of the equal share of broadcast revenue paid to Premier League clubs and in year two, 45% of the equal share of broadcast revenue paid to Premier League clubs. Based on the equal share figures in the 2014/15 season being almost £48m and the likely uplift from the new broadcasting deal, the club could expect to receive a similar amount to Burnley, QPR and Hull will receive (£60m+) but over a two year period[1].

Similarly, if West Ham for example, were relegated at the end of the 2015-16 season, they would receive the first of three parachute payments. In year one, the club receives 55% of the equal share of broadcast revenue paid to Premier League clubs and in year two, 45% of the equal share and in year three 20% which could equal around £70m+ over three years.

 

 

[1] This figure may well be at odds with the above Swiss Ramble numbers due to the new calculation methods used by the Premier League. Additionally, the final figures cannot be verified until the equal share figures for the 2016/17 season are communicated by the Premier League.

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