Premier League Promotion: Sportsrisq spotlight onů Hull City v Derby County
Fri 27th Nov 2015 | Money & Finance
These are unprecedented times for Championship Clubs, with the prize of a Premier League place never greater. A ticket to the top flight next season is reported to be worth in excess of £100m for the promoted teams, widening the gap of the ‘haves’ and ‘have nots’ in English football.
Two teams heavily backed for promotion are up in the first Championship game of the weekend, Friday night’s match where Hull take on Derby.
Both have been hotly tipped to go up and the investment in their squads has been substantial. Hull have largely managed to keep their Premier League side, with “flex-down” contract clauses enabling them to reduce wages in the event of relegation. The Tigers have been on or near the top of the league all season with no apparent hangover season slump (see QPR, Fulham, etc).
As for Derby, even the neutrals had some sympathy last season – they were in the running for automatic promotion until a dreadful run of form from March saw them pick up just 12 points from a possible 39, seeing them drop out of the play-off positions on the final day of the season.
Wealthy benefactors are involved at both clubs and the infrastructure is there to take advantage of Premier League status. Both have excellent attendances, no competitor in the same Town / City and a strong fan base.
This season Derby have invested heavily in a new manager and significant signings to avoid the same situation, and the East Midlands club have started brightly again, but in a league as unforgiving as the Championship there are no guarantees.
For some of the league, January will be the time to invest in a promotion push, given the unprecedented financial rewards there could be more business than ever done this coming window. Currently the top ten clubs are separated by ten points, so what price would they put on promotion?
Sportsrisq’s model has both Hull & Derby currently at 40% to be promoted. The outcome of the match will affect these prices by +/-7%, which in turn presents an opportunity to both clubs. Sportsrisq offer a unique proposition in “Future Rights Purchase” (FRP) where based on these probabilities, a club can sell a % of their potential future Premier League earnings, to use as they see fit to aid promotion.
For instance, If Derby were to sell 10% of their potential future Premier League earnings (10% of £100m = £10m) at the rate of probability (40%), this £4m could then be used in January to bring in players to strengthen the squad. Derby would pay the £10m back only if promoted, from their Premier League 2016/17 revenues. If the club missed out they would pay back nothing.
Of course there is no guarantee of success solely from the transfer market - injuries and good fortune can play their part - but some clubs are sensibly looking at new alternatives to the traditional owner or borrowing-reliant financial model.
The same opportunity exists for teams involved in the current Premier League relegation battle, with just as much at stake as clubs seeking promotion. The traditional route of “throwing the kitchen sink” at staying up is never more apparent than this season. For example, Bournemouth have been unlucky to date with injuries and will be trying to add to their squad in January with fresh investment. They can support their January player purchasing with a similar sale of potential future Premier League earnings, based on an agreed price of probability of staying up.
With such rewards on offer to join the Premier League, clubs are sensibly now looking to new methods to finance this. For more information on Future Rights Purchase and Sportsrisq please visit www.sportsrisq.com.
Sportsrisq is a specialist sports finance firm based in London, which helps businesses understand and manage sports performance opportunities. Over the past five years Sportsrisq has managed over £250m in transactions for clients that include international rights holders, global sports brands, leading football clubs and sports marketing agencies. For more information visit www.sportsrisq.com or for a free consultant session on Future Rights Purchase call +44 (0) 20 7151 4800
Posted by: Kev Howland
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