The Pursuit of Happiness: Does Money Really Buy Success In The Championship?

Christopher Winn, programme leader for Msc Football Business at UCFB explains why the promised land of the Premier League has never looked a more attractive proposition to Championship clubs.



The latest Premier League broadcast deal, worth a reported £9.2 billion over the current 2019-2022 three-season cycle, is a world away from the deal agreed last year by the EFL with Sky for the rights to broadcast EFL competitions such as the Championship, worth a reported £595m over five years, albeit a 35% increase on the previous contract.


Parachute payments, based on a set percentage of Premier League broadcast distributions, are also paid to relegated Premier League clubs in order to ease the transition to the far less lucrative financial environment in the domestic second tier. These are currently worth a minimum of £75m to a relegated club if promotion to the Premier League is not immediately regained.


And let us not forget the overall attraction of Premier League football to both matchday attendances and commercial sponsors alike, the latter of which are often willing to part with significant sums given the global exposure the Premier League can provide to their brands.


As a result, Deloitte calculate that the race for promotion is currently worth an incremental revenue uplift of at least £170m to a club that finishes bottom of the Premier League in their first campaign- rising to an incremental revenue uplift of at least £300m if a club extends their stay in the top flight beyond one season.


And it is on the basis of such staggering potential financial returns that we can begin to understand at least the rationale for the current levels of wage spending in the Championship, where in three of the six seasons up to and including 2017/18, clubs spent an average of 106% of their revenue on wages, with the average never falling below 99% (Source: Deloitte).


Such a model is clearly unsustainable without further debt or equity owner contributions, however given the EFL’s Profitability and Sustainability regulations do not directly regulate wage expenditure, gaining a competitive advantage through wage spending is the avenue Championship clubs turn to most often in the pursuit of happiness.


But does wage spending really lead to success for Championship clubs? We looked at the wage expenditure of Championship clubs over the aforementioned six season period (2012/13-2017/18) and compared to both league finishing position and number of points gained in each season, to determine if a strong relationship does indeed exist:


Applying basic statistical analysis, it can be observed that over the time period in question, when clubs on average spent between 99% and 106% of their revenue on wages, just 14% of clubs’ final league positions could be explained by the amount spent on wages. Indeed, wage expenditure for promoted teams has been matched by those relegated within this timeframe.


Granted, league position is relative to how other teams perform in any given season, as such it is important to also extend this analysis to points won during the seasons in question. However, applying the same technique suggests just 17% of points accumulated by clubs over the course of the season can be explained by the amount spent on wages.


As such, the weak relationship between league performance and wage expenditure suggests that the Championship may be characterised as a competitive battleground, where the levels of competitive balance and uncertainty of outcome outweigh the assumed merits of over-investment in player wages.


Higher wages will always attract the top talent in theory- but the strength of other on and off pitch variables in the Championship demonstrates there is much more to the pursuit of happiness in England’s second tier than meets the eye.