Premier League finances: The importance of league positioning

Premier League television deals have skyrocketed over the years and clubs are reaping the rewards. The Premier League will earn a total of £5.5 billion between 2013-16

Premier League television deals have skyrocketed over the years and clubs are reaping the rewards. The Premier League will earn a total of £5.5 billion between 2013-16 Photo by: Ronnie Macdonald

After an abysmal start to the year that saw Newcastle United winless in their first seven league matches and sit in the bottom three of the Barclays Premier League table, fans were sparing no passion in their efforts to convince owner Mike Ashley to sack their manager of four years.

An online petition, directed at Ashley, on the fan-created website, recently reached just over 2,000 signatures. The webpage cites the manager’s “general incompetence” as the main reason for the campaign, as supporters are growing impatient with a manager that they believe “cannot make [them] proud or make [them] believe that he can take this great football club in the right direction.”

Many believed the only way to save Newcastle from relegation was to part ways with the manager as, according to an article by Mark Douglas at The Chronicle, only two clubs in Premier League history have been able to avoid the drop, after sticking with their manager who has only four points from seven league games.

But something has changed in the northeast of England that has fans changing their tune. No longer are the “Pardew Out” banners seen at St. James’s Park: They have been quickly replaced by signs that read “Pardew – back from the dead.”

After months of uncertainty, United manager Alan Pardew has saved his job and, to no surprise, he’s done it by winning games and climbing up the league table.

After four consecutive wins – against Leicster City, Tottenham, Liverpool and West Bromich Albion – the Toon currently hold eighth spot in the Premier League table and hope has once again been renewed in Tyneside.

North American sports fan might wonder what all the fuss is about, with the manager of a team that is not good enough to win the league title this season or challenge for a Champions League qualifying position. What’s the difference between finishing 13th or 15th? What’s so bad about being relegated into a weaker division?

The answers lie in a club’s bottom line.

How many divisions are there in English football? 

There are 24 levels of league competition, with 7,152 clubs separated into 535 divisions.

The top four levels are:

  • Level 1 – Premier League (Barclays Premier League) – 20 clubs, 3 relegation spots
  • Level 2 – Football League Championship (Sky Bet Championship) – 24 clubs, 3 promotion and 3 relegation spots
  • Level 3- Football League One (Sky Bet League 1) – 24 clubs, 3 promotion and 4 relegation spots
  • Level 4 – Football League Two (Sky Bet League 2) – 24 clubs, 4 promotion and 2 relegation spots

*Below Level 4 exists Conference and Regional leagues, followed by local County leagues.

How does the relegation system work? 

At the end of each season, a number of clubs that finished at the bottom of the league table will be relegated into the next lower division. The bottom three clubs in the Premier League will be relegated into the Football League Championship for the next season’s league competition.

There are two different methods for a Championship level club to win promotion to the Premier League. Finishing within the top two of the league table allows for automatic entry into the top flight of English football. Teams that finish between third and sixth play in a four-team, two-legged, playoff to decide who will get the last promotion spot.

How much money really is in the Premier League?

The Barclays Premier League is one of the most profitable sporting league in the world, with a good chunk of its revenue coming from overseas and domestic TV deals. At the end of the 2012/’13 season, the Premier League had finalized a broadcast deal worth £5.5 billion over three seasons. The deal will expire at the end of the 2015-’16 season.

The Premier League splits its television revenues fairly evenly among the 20 clubs, one of the only European leagues to do so. All overseas broadcasting revenues is split evenly among all teams, while 50 per cent of domestic broadcasting incomes are also split evenly. The other half of the domestic television incomes is split into merit money (25 per cent) and “facility fees” (25 per cent).

“Facility fees” are based on the number of times a club’s matches are shown live on TV within the UK, while merit money relies on final league position in the table. Clubs receive £750,000 every time they are shown on live TV and cannot receive less than £7.5 million, regardless of how many games are broadcasted.

For the 2013-’14 season, the Premier League allotted each club £1.2 million for each position they finished in. For example, last-place Cardiff City received a merit amount of £1.2 million, while the second-last-team received £2.4 million and the third-last-team received £3.6 million. Liverpool earned the most money last season, acquiring £98 million despite finishing second in the league. Premier League champions Manchester City acquired £97 million due to playing three fewer games on live television in the UK.

* For a full list click here

Do profits from television deals frequently increase? 

As television broadcast deals continue to grow larger with each new renewal, profits for Premier League clubs will also increase. Last year’s bottom feeders, Cardiff City, earned a total of £62 million, which is more than the £60.8 that Manchester United earned for winning the Premier League in 2012-’13 under the previous television rights deal. A total of £1.56 billion was distributed among Premier League teams, an increase of 60 per cent from last season’s £972 million.

Is being relegated really that bad? 

Playing in divisions below the Premier League has little to no advantages. Apart from not being able to attract top-quality players, clubs will also not have enough cash to purchase the players they need to win promotion. Don’t let the”‘weaker” competition fool you, as winning promotion isn’t easy. It’s not always the case that newly-relegated Premier League sides are much stronger than lower division teams.

Take Leeds United as an example. The club, considered one of England’s elite throughout the 1990s and early 2000s, ran into money troubles and has yet to fully recover. Attempting to build on a successful 2001 season, where they had reached the semi-finals of the Champions League, Leeds had spent money it didn’t have. In 2003, they just escaped relegation by finishing 15th after winning their last game of the season. After not earning back any of the money they had spent, they were forced to sell the majority of their players in order to keep from going bankrupt. The following season they were relegated.

Ten years after relegation, Leeds is a mid-table team still toiling away in the Championship division. Staying up in the Premier League and finishing as high as possible is integral to the financial stability of a club. Relegation has the ability to destroy the finances of a team and crush the spirits of those that so faithfully support them, which is why we can’t really blame Newcastle supporters for wanting Pardew out.

Ryan Lehal

Journalism student at Kwantlen Polytechnic University. Lover of the beautiful game.

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