Yo-yo clubs and parachute payments...

Pavilionaire · Aug 4, 2016

Following on from a lot of chatter about this on the Pritchard thread, much is being said about the increasing difficulty for clubs like the Albion to compete with relegated Prem sides who are in receipt of parachute payments.

Will the heftier parachute payments make the Prem a closed shop for 23 clubs? I tend to think that it's going that way.

Newcastle, Norwich and Villa have sold big and spent big but in terms of combined amount spent I'm certain they've spent more than the other 21 sides in the Championship combined.

As for those Championship sides that got promoted it is interesting to see that both Burnley and Hull have yet to splash the cash. It makes you wonder whether the chairman of those clubs have cottoned on to a brilliant business model, i.e. sit tight and trouser the Prem cash, get relegated, collect the parachute payments, spend just enough to get promoted and keep repeating the process. Football to them is, after all, just a business.

Whoislloydy · Aug 4, 2016

If Hull go down this season (looking likely) will they be living off TWO parachute payments?

It depends on time spent in the Premiership doesn't it?

Kinky Gerbil · Aug 4, 2016

I just posted this in the Pritchard thread.

But if you look at the net spend of the past few clubs promoted with parachute payment it is mostly minus.

Hulls net spend was - 20 million this season

Whilst Brightons was £11 million.

Granted there are factors behind that, but it does raise a question of where that money is going

WonderingSoton · Aug 4, 2016

I'm sure our view of parachute payments would quickly change if the Albion got our snout in the trough!
Just got to get there first, and plenty of 'non parachute payment clubs' have gone up at the expense of those PL money banked sides down the parachute payment era..

Ernest · Aug 4, 2016

Doesn't always work though, they may splash the cash but does it get results ? Birmingham, Blackburn, Cardiff, Derby, Fulham, Leeds, QPR, Reading,Sheffield Wednesday, Wigan, Wolves, Bolton, Charlton, Coventry, Sheffield United & Blackpool have had the parachute money and none of them have gone close to getting back up despite some HEFTY spending

Brovion · Aug 4, 2016

Forget the parachute payments. This coming season PL clubs will earn 100 million from TV money alone - just by existing! So when clubs come down in future, unless they're appallingly badly run, they will have financial clout the like of which the Championship hasn't seen before. We'll look back soon and say "Do you remember when clubs coming down from the PL only had parachute payments?"

Blue Valkyrie · Aug 4, 2016

Pavilionaire said:
Following on from a lot of chatter about this on the Pritchard thread, much is being said about the increasing difficulty for clubs like the Albion to compete with relegated Prem sides who are in receipt of parachute payments.

Will the heftier parachute payments make the Prem a closed shop for 23 clubs? I tend to think that it's going that way.

Newcastle, Norwich and Villa have sold big and spent big but in terms of combined amount spent I'm certain they've spent more than the other 21 sides in the Championship combined.

As for those Championship sides that got promoted it is interesting to see that both Burnley and Hull have yet to splash the cash. It makes you wonder whether the chairman of those clubs have cottoned on to a brilliant business model, i.e. sit tight and trouser the Prem cash, get relegated, collect the parachute payments, spend just enough to get promoted and keep repeating the process. Football to them is, after all, just a business.

The business model you suggest makes the owner more money than spending all the PL TV money on wages each year and just staying in the PL each time.

Pavilionaire · Aug 4, 2016

Ernest said:
Doesn't always work though, they may splash the cash but does it get results ? Birmingham, Blackburn, Cardiff, Derby, Fulham, Leeds, QPR, Reading,Sheffield Wednesday, Wigan, Wolves, Bolton, Charlton, Coventry, Sheffield United & Blackpool have had the parachute money and none of them have gone close to getting back up despite some HEFTY spending

The bigger Prem TV deal - and the improved parachute payment arrangement - is a game-changer.

Some of those clubs you mentioned spent way too much chasing the dream, and the parachute payments weren't big enough to cushion the blow. Now that the financial gap between Championship and Prem is wider why would the chairman of Burnley and Hull spend big when they could take some of that money for themselves? The absolute worst case scenario for them is they get relegated, in which case they spend just enough to go up.

Look what Burnley have done. Got promoted, didn't spend, got relegated, spent £7mill on Andre Gray, got promoted. Now they're not spending again.

HitchinSeagull · Aug 4, 2016

Whoislloydy said:
If Hull go down this season (looking likely) will they be living off TWO parachute payments?

It depends on time spent in the Premiership doesn't it?

I think parachute payments are not paid if you are promoted again, they get redistributed so the other premier league clubs directly benefit from yo-yo clubs. It makes it unlikely that the status quo will change.

Eric Youngs Contact Lense · Aug 4, 2016

I commented on these yesterday, and do think that the scenarios that gave birth to these payments were the financial horror stories -. I probably should do more research but the Leeds and Portsmouth scenarios that Football wanted to avoid. Whilst those scenarios are not impossible now (QPR close?), it happening to Clubs who get relegated from the PL seem more unlikely given the huge hike in TV money in recent years. It feels that it could be more likely to happen to Clubs who believe they have to gamble the pot on getting promoted. FFP of course is supposed to temper this, but I cannot see that it has had much impact. For me, the Parachute payments are just another way of giving recently relegated Clubs a couple of free hits at getting back quickly -free hits that most don't need assuming they still benefit from TV money, transfer fees from prized players and no doubt clauses in contracts that have wage implications for players should they get relegated.. If it doesn't happen in those 1st couple of years, then they may have to take a different strategy, but not necessarily.. If the problem has changed, I think the solution has to change..

Greg Bobkin · Aug 4, 2016

I think the parachute payments help but, like others, I tend to agree it is more about the revenue from the TV deal. I totally subscribe to the OP's 'closed shop' scenario, unless something is done, but I don't think that's ever going to happen.

Bear in mind that the NEXT TV deal is rumoured to be in the region of £15bn as opposed to £5.1bn and you can easily see that the rich get richer and the not-so-rich become cut adrift. I'm not talking short-term, I think in 10 years' time it will be a permanent 17 in the PL and six yo-yoers.

RohanInceEnthusiast · Aug 4, 2016

I'm not particularly fussed about Newcastle & Villa getting parachute payments as, in my opinion, they're an established PL clubs so it's almost as if they have deserved some financial support for being in the top flight for so long.

The problem I have however, is with (as you mentioned) yo-yo clubs. Clubs that go up, make no effort of signing players to stay in the PL (Hull) as they know they've already had one big pay day and will get another one once they get relegated. Therefore, they're gaining money for promotion and in parachute payments, but not using it for anything, therefore making a profit and using the club as a business.

Totally unfair for Championship clubs and should be on the long list of things that the Football League need to sort out ASAP. Rant over.

halbpro · Aug 4, 2016

The problem with parachute payments, in my opinion, is that they're blindly given. They're meant to be a way of stopping clubs going bust from high wage demands, but they don't actually take account of a clubs actual situation when giving the money. If, instead, relegated clubs were allowed to protect the wages of some players (up to a cap) then surely that would be a better system? Rather than just giving a lump sum, you're stopping clubs from getting into financial difficulty by helping to cover one of their significant outgoings.

FatSuperman · Aug 4, 2016

Some numbers, using Villa as an example.

Finishing bottom, they earned around £65m last season
In addition, they will receive £40m in parachute payments this year (around £30m and then £15m for the following years)

Clearly they would have spent a significant chunk of their money on wages etc, but given relegated teams tend to sell a few of their valuable players and buy strong Championship level replacements, they are normally flush - sometimes reporting a net gain in funds.

Whoever is relegated this season will be at least £30m better off, so assuming they don't spunk that cash during the season, they'll all be serious contenders for promotion. Part of me thinks it's going to get much harder and this season is our last best shot before the even bigger money comes down, but on the other hand it seems like prices and wages have simply risen to take into account the extra money floating about, so perhaps it won't be quite so different than the current problems.

Just need to start turning out stars from the academy, getting one great season out of them and selling them to the mugs upstairs.

BBassic · Aug 4, 2016

Abolish them entirely.

If nothing else it will force clubs to start putting sensible clauses in contracts like wage reductions on relegation. You could put a further clause on that which states a return back to previous wage, plus 15%, if promoted back to the PL the next season, 10% the season after and so on and so on.

Pavilionaire · Aug 4, 2016

The other point about the yo-yo clubs is that if it keeps happening then the Prem will be a closed shop at both ends.

There have been times when one club has walked the title and the real interest has been the relegation dogfight, but that will fall by the wayside if it turns out to be any three every season from Burnley, Hull, Watford, Boro, Norwich and Swansea.

Pardew at Palace seems to have taken them away from the relegation places, I fancy in time Moyes and Benitez could do the same for Sunderland and Newcastle.

Leicester winning the Prem was a freak event - it has never happened before and it won't happen again any time soon. The only variable to the Prem norm - top and bottom - will be when a club loses a good manager.

I fancy that a Top 4 of Man City, Man Utd, Arsenal and Chelsea, a bottom three of Burnley, Hull and Boro and a promoted three of Newcastle, Norwich and Villa won't be a million miles from the actual outcome come next May.

worthingseagull123 · Aug 4, 2016

Ernest said:
Doesn't always work though, they may splash the cash but does it get results ? Birmingham, Blackburn, Cardiff, Derby, Fulham, Leeds, QPR, Reading,Sheffield Wednesday, Wigan, Wolves, Bolton, Charlton, Coventry, Sheffield United & Blackpool have had the parachute money and none of them have gone close to getting back up despite some HEFTY spending

Derby and Wednesday have come close to getting back up

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