Soccer: The high cost of relegation

By Ant Sims 29 April 2013

Reading and QPR both got the chop from the Premier League over the weekend, and the cost of relegation, especially with the Premier League’s new TV deal, is likely to tremendous. It’s QPR who’ll bear the brunt of it, and while there will be some assistance from the EPL, the West London outfit could fall from grace if it isn’t careful. By ANT SIMS.

Reading and Queens Park Rangers were both relegated from the English Premier League over the weekend after playing out a 0-0 draw against each other – with either side needing a win in order to keep fighting for survival.

Reading dropped back to the Championship after just a season in the top flight, while QPR got the chop after managing two seasons in the EPL. Despite splashing the cash, they failed to make their chances count.

Reading and QPR have 25 points with three matches to play, seven adrift of third-bottom Wigan Athletic. Aston Villa, one place above the drop zone, has 34, with four games remaining.

The bottom two sides are condemned to the drop because Villa will play Wigan on the final day of the season, May 19. This means one of those clubs will get to the 35-point mark that Reading and QPR cannot reach.

The biggest problem comes from  the loss of television revenue. Even a bottom-feeding club in the Premier League can expect to earn around £40m in United Kingdom and overseas broadcast income, but that figure drops significantly to £3m when a team hits the Championship. The Premier League, however, doesn’t completely forget about the sides that get demoted, and they do try to help them out in the form of “parachute payments”.

The system was started during the 2006-07 season, and aims to help soften the blow of the loss of TV revenues. The figures currently total around £16m per year for the first two years spent in lower tiers, and then halves in year three and four. The downside to this particular system, though, is that it does widen the gap between the teams who have never played in the top flight. Those who drop down a division, therefore lose around £21m per year from the absence of the TV revenue streams.

It’s expected to rise at the start of the next season, with the Premier League having signed a new three-billion pound TV deal; however, it won’t help much. QPR manager Harry Redknapp knows that it will be tough to bounce back.

“I haven’t thought about it (relegation) today really. I thought it was done. A pretty near certainty, wasn’t it?” he told Sky Sports.

“It’s been on the cards since last week. There is a lot of work to be done here. A lot of work to get promoted… make no mistakes about that. There are some good teams in the Championship.”

Reading manager Nigel Adkins, who came in as a replacement for Brian McDermott last month, had some pretty stern words for his players.

“I have told the players to bottle up the feeling as it is never nice to get relegated, and make sure they never feel that way again,” he said.

Along with the loss of TV revenue, clubs also make a commercial loss as the sponsors often have relegation clauses in their deals with clubs. This usually means they will pay less in sponsorship fees, which often leads to additional losses in revenue. The cost of perimeter adverting also becomes harder to sell and leads to a loss of around £4m a year.

QPR is likely to bear the biggest brunt, as its finances were already in disarray – it had pulled out all the financial stops in a bid to stay in the Premier League.

Earlier this year it was revealed that their wage bill had doubled to £56million even before their spending in the last two transfer windows. They broke the transfer record twice in January to recruit Loic Remy and Christopher Samba as they tried to avoid the drop.

Their turnover rose from £34.6 million to £74 million, but the wage bill increased astronomically  from £27.6 million to £56 million, despite their only managing to secure survival on the final day of the season.

QPR chairman Tony Fernandes had previously said that the focus was on being successful on the pitch. Now, that statement is rendered null and void.

“The financial results reflect the club’s focus on on-pitch success,” he said.

“There are a number of potential risks and uncertainties that could have a material impact on the group’s long-term performance. These risks and uncertainties are monitored by the board on a regular basis.”

Reading will also suffer financially, but not nearly as much as the West London outfit. This begs the question once again of whether there needs to be a more controlled approach from those in charge when it comes to clubs and their spending.

One doesn’t have to look too far to see just how badly things can go when financial woes get too much for a club, and it’s crucial for the Premier League as well as the FA to step in in order to prevent the gap widening even further.

Portsmouth, which made it to the FA Cup final in the same year it was relegated from the Premier League, was sold to the Pompey Supporters Trust (PST) just a few weeks ago, after it entered administration for the second time in two years. Portsmouth is a prime example of just how fast and hard teams can fall from grace when their finances get muddled up.

Pompey endured a torrid season this year. Their season included a record winless streak lasting from October 2012 to February 2013 – 23 matches in total. It finally ended on 2 March 2013. That poor run of form, along with financial struggles which resulted in difficulty finding a long term manager, saw them relegated to League Two over the weekend. That is a long way down from winning the FA Cup in 2008 and almost defying the odds again a few years later. DM

Photo: Queens Park Rangers’ Jose Bosingwa (R) clears the ball off the line during their English Premier League soccer match against Reading at the Madejski Stadium in Reading, April 28, 2013. REUTERS/Darren Staples


While we have your attention...

An increasingly rare commodity, quality independent journalism costs money - though not nearly as much as its absence.

Every article, every day, is our contribution to Defending Truth in South Africa. If you would like to join us on this mission, you could do much worse than support Daily Maverick's quest by becoming a Maverick Insider.

Click here to become a Maverick Insider and get a closer look at the Truth.

Election 2019

Maimane takes hardline on illegal immigration at DA’s 2019 campaign manifesto launch

By Ferial Haffajee

Adolf Hitler was the first European leader to ban human zoos.