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The parachute payments controversy

Parachute payments mean that the Championship is anything but a level playing field.  In many ways it is a de facto Premier League 2.

Relegated clubs receive 55 per cent of the Premier League media rights revenue for each club in year one, 45 per cent in year two and 20 per cent in year three. Clubs who are relegated after one season receive parachute payments for only two years.

That adds up to about £42m for each club in year one, £34m in year two and £15m in year three.   The remaining Championship clubs receive £4.5m each, while those in League One and League Two receive £675,000 and £475,000 respectively.

QPR chief executive Lee Hoos told The Times: 'The balance is tipping away from the original purpose which was to prevent a fire sale of players and cover the cost of relegation and contractual commitments, to where we are now, where clubs have a ton of extra financial firepower and can blow everyone else out of the water.'

The origins of parachute payments are rather obscure.  Some believe they were a means of securing support for the idea of the Premier League rather than a means of compensating for relegation.  However, their value soared alongside Premier League broadcasting revenue.   In 2006/07 six clubs received total parachute payments of £39m.  This season eight clubs received about £240m.

Premier League solidarity payments to the EFL total about £400m each season, but eight of the 72 clubs received 60 per cent of the available funding.

Rob Wilson of Sheffield Hallam University collected data over 11 seasons and found that clubs with parachute payments are twice as likely to be promoted as those without them.  Nearly one in five clubs with parachute payments gained promotion in a given season (this year it will be at least two-thirds).

Wilson's personal view is that they are not necessary and clubs should be more robust in their contract negotiations with players.   If players were tied to 75 per cent relegation clauses, there would be less need for parachute payments.  [I can't see sought after players accepting that].   If parachute payments were abolished, the Premier League could distribute about £120m more in solidarity payments.

Hoos commented that 'Anyone who has been in the Premier League, and has been relegated, will know it's not as simple as stopping the payments.   For clubs who have been there for a while and then go down it can be hugely damaging.  You can't just tear up onerous contracts.'

A reasonable compromise might be to limit payments to one year at, say, 40 per cent.   Certainly a third year of payments is hard to justify.

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