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Premier League to increase Football League Solidarity Payments

Wed 3rd Jun 2015 | Money & Finance

The Premier League will increase solidarity payments to the Football League from the 2016/17 season and will introduce a mechanism that links the payments, which are made to all Championship, League One and League Two clubs, to the value of Premier League broadcasting revenue.

Additionally, the League will reduce Parachute Payments paid to relegated clubs from 2016/17 and introduce a separate Parachute Payments system for clubs only in the Premier League for one season.

Under existing Premier League Rules, Parachute Payments are paid to all relegated clubs for four seasons. Under the new system clubs will be paid Parachute Payments for three seasons following relegation, save for if they have only been in the Premier League for one season, when they will receive two years of Parachute Payments.

"The Premier League and our Clubs are committed to sharing a significant amount of revenue for the development of football outside of the League," Premier League Chief Executive, Richard Scudamore, said. "The increase in Solidarity Payments to Football League clubs across seasons 2016/17 to 2018/19 is an important part of that, as is our continued support for community facilities, sports participation programmes, and other groups and projects."

Parachute Payments to relegated clubs from 2016/17 onwards

Clubs will receive Parachute Payments for three seasons* following relegation as follows:

  • Year 1: 55% of the equal share of broadcast revenue paid to Premier League clubs
  • Year 2: 45% of the equal share of broadcast revenue paid to Premier League clubs
  • Year 3: 20% of the equal share of broadcast revenue paid to Premier League clubs

 

*Clubs in the Premier League for only one season will receive Parachute Payments following relegation for two seasons as follows:

  • Year 1: 55% of the equal share of broadcast revenue paid to Premier League clubs
  • Year 2: 45% of the equal share of broadcast revenue paid to Premier League clubs

Solidarity Payments to Football League clubs from 2016/17 onwards

The changes to Premier League Rules regarding parachute payments coincide with Premier League clubs agreeing to increase Football League Solidarity Payments, and to introduce a mechanism that links the value of solidarity payments to the value of the Premier League's central broadcast income.

From 2016/17 onwards Football League clubs will receive solidarity payments which amount to a percentage of the value of a year 3 parachute payment. The system will work as follows:

  • Championship clubs will each receive 30% of the value of a Year 3 Parachute Payment
  • League One clubs will each receive 4.5% of the value of a Year 3 Parachute Payment
  • League Two clubs will each receive 3% of the value of a Year 3 Parachute Payment


Example
: the current system of Premier League solidarity payments to Football League clubs for seasons 2013/14–2015/16 is not based on a mechanism but an agreement between the two leagues.

A Year 3 Parachute Payment is currently worth about £10million. If the new system (to come in from 2016/17) were in place now, Solidarity Payments would be significantly higher than they are under the current agreement with the Football League.

The example below compares the two. The final column is illustrative only as the value of a Year 3 Parachute Payment for 2016/17–-2018/19 is not known until the Premier League's broadcasting and commercial rights sales process for that period has concluded.

Premier League Solidarity Payments to FL clubs: 2013/14-2015/16 v 2016/17-2018/19

Solidarity Payments to FL clubs, based on agreement with Football League (wtih no existing formula/mechanism) for 2013/14-2015/16 
FL Championship clubs: £2.3million/season
FL League One clubs: £360,000/season
FL League Two clubs: £240,000/season

Illustration of Solidarity Payments to Football League clubs if new agreement (from 2016/17) were in place now. Based on a % of Year 3 Parachute Payments
FL Championship clubs: £3million/season
FL League One clubs: £450,000/season
FL League Two clubs: £300,000/season

As the value of Parachute Payments is based on the equal share of broadcasting revenue paid to Premier League clubs, any increase in the value of the Premier League's broadcasting rights in the future will lead to increased Solidarity Payments to Football League clubs.

Posted by: Kev Howland

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