Who Wants to Be a Millionaire? Why is the English Second Division game considered the most valuable in football?
Understand the context and values of the Championship Playoffs final
Football as a business presents itself more and more robust in the values that it involves. Sponsorships, television rights and sales of athletes, among others, were the main accounts inflated with the development of the sports market.
A match that involves teams with great appeal, tends to attract a lot of public attention and for this reason, it becomes valuable. In the 2019/20 season, for example, UEFA distributed € 2.5 billion to the clubs that participated in the Champions League (€ 2 billion) and Europa League (€ 500 million). Only that club that participates in the group stage of the main competition on the continent already guarantees € 15.25 million, even if it loses all the matches it plays.
But the game considered the most valuable in the world does not take place in any continental competition … nor in the first division. The confrontation that guarantees more money to a club, is the final of the Playoffs of the Second Division of England, the Championship that this season will be between Brentford x Swansea City on the 29th.
The term, however, has nothing to do with the award, but for a composition of revenues guaranteed by the club that ascends to the first division. Let’s go to the numbers (and the context):
*if you already understand how the competition dynamics works, feel free to skip to the next topic.
Championship 101
The English second division is one of the top leagues in the world in terms of revenue and is up against other top national competitions. A Championship club raises an average of € 40 million per season, more than a Dutch (€ 33 million) and Portuguese (€ 24 million) first division rival, for example.
The competition has 24 teams, of which the last three are relegated to the third division (called League One) and the first two have direct access to the Premier League next season. The third access slot, however, is played in a different format: the playoffs are woods in which the four best teams not classified automatically (that is, 3rd, 4th, 5th and 6th place) compete for the slot with each other.
In round-trip confrontations, the 3rd place will face the 6th, and the 4th will play against the 5th. The winners of this first match traditionally face each other at the Wembley stadium, in the capital London, in a single match, the so-called Final of the Playoffs.
Revenue distribution in England
When ascending to the Premier League, the winning club will have a financial leap (and consequently, probably sports). This is because the amounts collected by the league with the sale of transmission (national and international) of the matches is gigantic. The deal, which involved the 2017/17, 17/18 and 18/19 seasons, was negotiated for £ 5.1 billion for example (read more here).
Part of this money and commercial revenue is passed on to clubs as follows: of the proceeds from national broadcasts, half is divided equally between clubs (called “Equal Share”). 25% is distributed based on the number of times a club has had its match broadcast in the United Kingdom (account called “Facility Fee”); and the remaining 25% are tied to the final ranking of the team (the “Merit Payment”) that pays more to the best teams placed (more or less £ 2 million for each position in the table).
International broadcasting rights, in turn, are equally distributed among clubs (“International TV”), the same logic as commercial revenues (“Central Commercial”). In the 2018/19 season the league transferred £ 2.45 billion to the twenty first division clubs, with the accounts detailed in the table below.
Parachute system
In addition to these transfers to members of the first division, the demoted teams also receive financial assistance: the parachute system (or parachute payments).
Created by the League in the 2006/07 season, the system, as the name says, intends to mitigate, for up to three seasons, the fall of an elite team to the Championship through the transfer of percentages of the broadcasting rights.
In his first season in the second division, the newly demoted player receives 55% of the amounts earned in the first division for broadcast rights (national and international). In the second season it still pockets 45% of the amount and, if the club has remained in the Premier League for at least two seasons before falling, it will receive 20% in its third year. If you return to the elite during this triennium, the benefits will cease.
These annual payments represent a great advantage for those eligible to receive them. A benefited club has revenues almost 250% higher than its Championship rivals (table below), which offers a great advantage in the search for future accesses.
According to a study published in the Journal of Global Sport Management, which took into account nine seasons of the Championship, clubs that receive parachute payments are twice as likely to return to the elite and considerably less likely to fall to League One (read the study here).
In the 2018/19 season, the main sources of revenue for Championship clubs came, first, from broadcasting rights (including parachutes, 54%), after commercial revenues (25%) and matchday revenues (21%) . Payments from the isolated parachute system contributed 30% of the amount collected, becoming the main source of revenue for the competition, according to a report by Deloitte.
As a curiosity, the Premier League still has solidarity payments for Championship, League One (3rd Division) and League Two (4th Division). The distribution consists of percentages of the third year of the parachute system (20% of transmission revenues): the 4th division receives 3% of the value, the 3rd earns 4.5% and the Second Division clubs that do not have the “help” of the parachute system, receive 30% of the value.
How much is the Playoff Final then?
As explained so far, the playoff final is extremely valuable in that it represents access to the Premier League and all the economic consequences that this represents. Take Huddersfield Town for the 2019/20 season, which came in last place with just 16 points and was therefore relegated to the Championship.
The club received £ 96.2 million in the First Division and, in the following season, in the Championship, received the first year of payment from the parachute system (55% of the equal share, which based on the values of its fall was 42, £ 6 million) and will receive in the coming seasons, some 34.8 million (corresponding to 45% of the second year) and 15.5 million more (in the third year for having stayed in the Premier League for two seasons before the fall) ).
Defining these values as a base, a club that will rise and fall in the following season would be £ 173.6 million. In the case of Huddersfield the amount would be even higher, 189.1 million, for the payment of the third year of the parachute system.
This value varies according to the clubs involved in the decision (since a Playoff finalist may be receiving payments corresponding to the parachute system and for this reason this estimate would be lower) and with season (since it depends on television rights negotiations).
This season the final will be between Brentford vs Swansea, clubs that beat Bournemouth and Barsnely respectively. The confrontation serves as a practical example of the variability of values: while the first tries its first access after 74 years, the Welsh club receives this season its third year of parachute payment since it remained seven seasons in the Premier League after being relegated on 17/18.
Other indirect economic advantages of playing the Premier League involve several other types of winnings, such as increased sponsorship and commercial revenue amounts. When Leeds United moved up to the Premier League, they switched from sporting goods supplier, from Kappa, to Adidas, in a “record” deal for the club. Box office and player transfer revenues (since they are valued for playing in the competition), also have their increase influenced by participation in the Premier League.
Twitter: TheoMontoto
