The Premier League, as it likes to remind everyone, is very generous.
If it was out for an evening with the Bundesliga, La Liga and Serie A, it would be the first to the bar, leave the biggest tip at the restaurant and pay for the cab home. And if the English Football League was allowed to tag along, the Premier League would pay its share, too.
That’s certainly the narrative which underpins the oft-repeated claim that it invests £1.6billion across a three-year cycle “to the wider game… the biggest voluntary contribution to communities and other good causes of any football league in the world”.
The fact that almost half of that sum goes to a few relegated clubs in parachute payments, giving them a leg up when it comes to bouncing back to the Premier League, and that the top division of English football’s open pyramid is sharing significantly less in percentage terms — 16 per cent now versus 50 per cent then — with the rest of the game than it did before it broke away in 1992 is not mentioned so often.
That said, £1.6bn is a lot of money and it includes £400million that the Premier League calls its “public purpose budget”. This is the cash it gives to the community programmes run by clubs up and down the pyramid, as well as projects led by the Professional Footballers’ Association, and the annual grants it makes to the Football Foundation and Premier League Stadium Fund, charities which finance infrastructure projects.
This munificence has become more relevant in recent seasons as the UK government has taken a bigger interest in how the national game shares its wealth. The government appears to believe that Premier League clubs could be a tiny bit more generous with the rest of game, which is why it is pushing on with a Football Governance Bill that should be law later this year.
The Premier League invests £1.6billion across a three-year cycle “to the wider game” (Robbie Jay Barratt – AMA/Getty Images)
The Premier League is unhappy at the idea of being told it must share more of the money generated by English football’s top division and does not believe the game needs an independent regulator to oversee a fairer financial distribution.
Yet even the league’s biggest fans must agree now would be a strange time to cut how much it shares with the rest of the game. But that is what Premier League clubs were told at their shareholders’ meeting in London last week.
In a written update on the league’s future spending commitments, clubs were informed that “Total Public Purpose Spending has decreased by £75m, as the £85m Exclusion Order provision is not required in 2025-26.”
The “exclusion order provision” was a commitment the Premier League made to the government in 2021 when it asked for permission to scrap the usual media-rights auction and simply roll over the existing domestic deals with Amazon, the BBC, BT and Sky Sports.
The rationale was that football needed stability more than satisfying competition law, as it was dealing with Covid-19. The government agreed, with the proviso that the league upped the amount it shares “in solidarity and good causes funding over the same time period to 2024-25, in roughly equal shares to the National League, League One and Two, grassroots football and cross-game initiatives”.
Last week’s league announcement made it clear that the “£400m specific commitment on Public Purpose initiatives” for the 2025-28 commercial cycle remains in place, with an extra £10m being allocated to ensure the overall budget is spread evenly over the period.
With the league’s international media revenues continuing to climb, nobody at the meeting complained that they were not getting the full benefit of that £85m provision returning to the main pot but one club source, speaking off the record to avoid getting their knuckles rapped, told The Athletic this looks like “a significant cut to public purpose funding as soon as we’re not being forced by government to do more”.
The Premier League declined to comment on the specifics but assured us its financial support for the EFL is unchanged and pointed out that it is sharing more money than ever with the National League, the fifth and sixth tiers of the English pyramid.
Do parachute payments ‘abuse the system’?
One thing that cannot be disputed in any debate about the Premier League’s generosity is that its clubs are always careful to look after each other should they suffer the indignity of relegation.
The Premier League says it gives promoted teams the confidence they need to invest in better players and provide a safety net for relegated teams while they reacquaint themselves with their reduced circumstances. The EFL believes these payments, which can stretch to three seasons if the relegated club spent more than one year in the Premier League, skew competition in the Championship and force the rest of the division to overspend.
Again, the current UK government would appear to agree more with the EFL than the Premier League, as it has tweaked the previous regime’s Football Governance Bill by adding parachute payments to the list of things the independent regulator can assess. The original bill, which ran out of parliamentary time last summer, kept parachute payments out of the regulator’s remit.
But the government has said the regulator, should they be asked to intervene in any dispute between the leagues, will not scrap parachute payments entirely, so it is not a total win for the EFL, which is only fair as the EFL itself gives parachute payments to clubs relegated to the National League. The argument will come down to how big these payments should be and how long they should last.
This season, there are six parachute-payment clubs in the Championship: Sheffield United, Leeds United, Burnley, Watford, Norwich City and Luton Town. They are currently first, second, third, ninth, 10th and 23rd in the table, with only Luton letting the gang down.
Leeds and Sheffield United are among the Championship clubs boosted by parachute payments (George Wood/Getty Images)
Under the current system, teams relegated from the Premier League get 55 per cent of the central payment that every top-flight club receives, regardless of where they finish or how many times their games are shown live in the UK, in their first season back in the EFL. If they are still in the EFL in year two, they get 45 per cent of the central payment and, if they lasted more than a year in the Premier League, they get 20 per cent in year three.
Just for comparison, the other Championship clubs receive solidarity payments worth 11 per cent of the central award. So, last season’s relegated trio, Burnley, Luton and Sheffield United, got £49m each this season, compared to solidarity payments for the rest of just under £10m.
I am sure you can see the bone of contention here. The good news is that a new independent study has just been published by the University of London’s Birkbeck Sport Business Centre.
The 32-page paper uses unfathomably complicated equations to answer a straightforward question: how much money do relegated clubs really need to cover their Premier League-level wage bills while they bring them down to Championship levels?
To answer this question, the study looked at the financial data for all clubs relegated from the Premier League, some of them more than once, between 2004 and 2022.
They found that relegated clubs saw their own revenues from broadcasting, match days, merchandise and sponsorships fall by an average of 74 per cent but this was mitigated by a 43 per cent reduction by parachute payments. However, their wage bills only decreased by 28 per cent.
Of the 116 separate parachute payments for which they had data, they found that 87, or 75 per cent, “abused the system”, in that the clubs involved had the benefit of extra money not immediately soaked up by Premier League contracts.
Their conclusion is that parachute payments should be reduced from 55 per cent and 45 per cent in years one and two, to 25 per cent for two seasons, with no payment in year three. And the savings made should be added to the solidarity pot to reduce the “cliff edge” between the Premier League and Championship.
In other words, halve them, don’t scrap them.
Premier League’s £4.5m bonus if Luton stay up
Despite being the best of the relegated trio last season, Luton Town are having a miserable campaign in the Championship. With seven games to play, they are two places and two points from avoiding a second straight relegation.
But on Saturday they went to Hull City, another former Premier League club in danger of dropping into League One, and won 1-0, which narrowed the gap between them to three points. In fact, Luton are only four points behind Stoke City, yet another top-flight old boy, in 18th place, so there is a path out of this predicament.
And they will be cheered every step of the way by their former pals in the Premier League, as their survival would save £4.5m from the solidarity pot.
Confused? Well, Luton will get their year-two parachute payment of about £39m whether they are in the Championship or League One, but if they are relegated the Premier League will have to pay an extra Championship solidarity payment next season and they are £4.5m more expensive than League One solidarity payments.
Crisis at Reading
That is a first division-style problem compared to the crisis the EFL is dealing with at League One’s Reading.
The former Premier League club are in a terrible mess and it is almost entirely their owner Dai Yongge’s fault.
The Chinese businessman bought Reading in 2017, shortly before they lost the Championship play-off final to Huddersfield Town on penalties. It was the closest they would get to leaving the second tier until 2023, when they managed to get out but in the wrong direction — a six-point deduction for failing to follow an agreed budget sent them over the edge.
Last year, following more points deductions for late payments, job cuts, the scrapping of the women’s team and a botched attempt to sell the training ground, Dai finally put the club up for sale but even that has been a disaster, as potential buyers have come and gone.
(Marc Atkins/Getty Images)
In the meantime, he has failed the EFL’s Owners’ and Directors’ Test (OADT), which is basically a checklist of disqualifying criteria. Dai was found to be a “dishonest debtor” by a senior Chinese court last year after a long row over a £21m debt owed by a fruit and veg importer to a Chinese bank.
“Dishonest debtor” is a Chinese legal concept but the EFL decided it was the equivalent of being struck off as a company director and that is enough to fail the OADT. It started the process last October and finally served him with a notice of disqualification on February 11. He refused to engage with the league throughout.
He then had 14 days to respond, which he again ignored. The EFL then sent a notice of suspension to Reading, giving the club 28 days to remove Dai as a director and for him to divest his shares in the club.
It was at that point that the club asked for a bit more time, as Reading are in a period of exclusivity with a potential buyer, Robert Platek, the co-head of global credit at BDT & MSD Partners, an American merchant bank that has a steady business in lending money to European football clubs.
The 60-year-old Platek, however, has a side hustle in club ownership, having recently bought and sold Danish side Sonderjyske and Italian team Spezia, while still owning Portugal’s Casa Pia.
Whether the EFL is willing to separate Platek the corporate lender from Platek the private investor remains to be seen. No request for him to take the OADT has yet been made by the club, but he does represent some hope for Reading fans desperate to free themselves from Dai’s grip.
There is, however, another option, although Dai appears more willing to let the club die than take it, as it involves him selling the club, as agreed last year, to former Wycombe Wanderers owner Rob Couhig. The fact that their lawyers were in a London court last month arguing about who is blocking a takeover at the club suggests they are not ready to bury their differences.
And just to complicate things further, Couhig has held onto the property liens, a form of security, he asked for when he lent the club more than £5m last year. This means he could theoretically take possession of the club’s training ground and stadium.
The next key date in this saga is this Thursday, when the EFL board holds its next regular monthly meeting. It will have to decide whether Dai can have more time to do a deal with either Platek or Couhig before Reading are suspended — not expelled — from the league.
There would be no good time for Reading to be suspended but it is hard to think of a worse one than now, as an 11-game unbeaten run has propelled them into the League One play-off spots. They have eight games left and those matches have implications for the top and bottom of the table.
Hedge fund gets prickly with Bournemouth owner
Few have tried harder this season than Black Knight Football Club, the group that owns stakes in the Premier League’s pound-for-pound darlings AFC Bournemouth, Scottish side Hibernian, French team Lorient and new A-League outfit Auckland FC.
They have certainly impressed us, which is why we invited Black Knight Football president Tim Bezbatchenko onto The Athletic FC podcast last week to talk about their multi-club model.
But we are clearly an easier crowd to please than Carronade Capital, a Connecticut-based hedge fund that owns 2.9m shares in Cannae Holdings, Black Knight’s publicly-listed parent company.
Last month, Carronade wrote to Cannae and then issued a press release to tell us all about it. The letter said Carronade believes Cannae could and should be better managed, and proposed four new directors who would “halt persistent underperformance and restore shareholder confidence”.
Carronade added that it believes Cannae’s share price, which has fluctuated between $16 and $20 this year, could be 50 per cent higher by the end of 2025 if the company listens to its advice.
Cannae, which was founded and is still run by Bournemouth chairman Bill Foley, replied last week, pointing out that it was already taking several steps to “drive long-term value creation”, such as selling shares in several of its investments and buying back its own shares to boost the share price.
In a press release, it also said “Black Knight Football is yielding strong results in improving team performance and the implementation of the multi-club model”. For example, it noted that Bournemouth had climbed from 19th to 10th in the table since Cannae’s arrival and revenues have grown by 19 per cent to $203m, or £157m.
A few days later, however, the club revealed that it lost £66m last season, which may explain why Carronade needs some convincing on Cannae’s investment strategy.
£31m for a Serie A club, anyone?
As this column has taken a few weeks off — no excuses, I was being very unbusinesslike — here is a bonus item about the purchase of Serie A side Hellas Verona by Texas-based private equity firm Presidio Investors earlier this year.
The financial details of the deal were not initially revealed but The Athletic has been sent a document that Presidio has circulated to potential investors who may want to join the Italian club’s new ownership group.
It explains that the initial price for the 1985 Italian champions was €37m (£31m), with performance-related bonuses that could boost that price by €16m over the next six years. The club’s former owner Maurizio Setti banked €32m on completion and is staying on for 18 months to help the new guys out with his player-trading expertise.
This means Presidio and its fellow investors have bought a Serie A club and its successful women’s team for half their annual revenue last season and about a third of the estimated value of the men’s first team, which sounds like a bargain.
On the flip side, the new owners have taken on about €70m in debt and Verona do not own their own stadium. If everything was peachy, the club would not have been for sale, right?
(Top photo: Jakub Porzycki/NurPhoto via Getty Images)
