Parachute payments and their use by the FA Premier League

Income generated by playing in the FA Premier League

The football clubs which are able to ply their trade in the Football Association Premier League in England are able to gain huge amounts of income simply by being part of the league.

There is no doubt that attendances will increase for a club newly promoted from the football league as there will be a chance to see some of the top stars from the world game but there are also huge monetary benefits coming direct from the league.

Prize money for teams in the FA Premier League

All the teams competing in the FA Premier League will receive a base sum paid to them at the end of each season.

This base sum will then be increased for each individual club depending on the final position of that club in the Premier League table at the end of the season. This therefore means there is a financial incentive for teams to finish higher up the table.

The collective selling of television rights

One of the main factors that sets the Premier League apart from many other top divisions in European football is the way that the rights to broadcast the games are sold. All rights to Premier League matches are sold by the Premier League collectively and not by the individual clubs, meaning that each club will get a shared slice of the income.

This effectively means that a newly promoted club will gain a stake in the matches of the top Premier League sides.

The incentive to stay in the Premier League

This therefore means that there is not only a footballing incentive for teams to stay in the Premier League but there is also a huge monetary incentive. This means that clubs will often spend outside their budgets to ensure they buy players to keep them in the league.

If the club does not manage to do this and they get relegated to the Championship then the financial effects can be catastrophic.

Parachute payments for relegated clubs

When Premier League clubs are relegated to the Championship they will receive payments from the Premier League called parachute payments.

What is the purpose of the parachute payments?

The purpose of the parachute payments is to ensure that the club can cope with reduced income from not being part of the Premier League and also the fact that many of the players remaining at the club will still be under contract on so called Premier League wages.

How much do clubs receive in parachute payments and how long do these payments go on for?

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For more information on:

  • Has there been a change to the rules?
  • What is this change?
  • What is the reason for this change?
  • Legally, how is a change such as this brought about?
  • What was the reason for this problem?
  • How did the FA Premier League get around this opposition?