Football’s Financial Crisis: Three Ideas to Help Lower League Clubs

By Daniel Geey and Jonny Madill

EFL Chairman Rick Parry has explained that without serious intervention, lower league clubs face a £200m funding blackhole come September 2020. When providing information to the Digital Culture, Media and Sport committee, Parry was clear that systemic change is needed to ensure EFL club finances are future proofed – whether through tighter cost controls, sustainability tests or more robust financial practices generally. 

The Context

The reasons for the concerns around the financial sustainability of clubs have been well documented in recent weeks: significant lower league reliance on gate receipts and matchday revenue; high wage to revenue ratios; loss of other income streams including sponsorship and hospitality; and the fact that the restart of the league season will mean clubs will no longer be able to rely on the ‘furlough’ scheme as a means of off-setting the wage bills of players and other staff.

With the above in mind, below are three examples of how the EPL, if the current 2019/20 season can be restarted and concluded, could provide additional solidarity assistance in order to help protect lower league clubs and avert the potential crisis.

1. TV Monies for this Season and Next

In the event that the current EPL season does restart, games will in all likelihood be played behind closed doors for an extended period of time. It is not inconceivable that this could continue deep into next season (2020/21). With that in mind and because not every game is televised live in the UK (due in part to the 3pm blackout rule), the EPL has the opportunity to sell the remaining TV games to the incumbent broadcasters. 

The current season (2019/20)

With 92 games still to play in the current EPL season, and 47 being shown live (Sky having the UK rights to 39 and BT to 8), there are 45 games that could presumably be offered to Sky, BT, Amazon or others. With the current ‘cost-per-game’ approximately £9m for Sky and £6m for BT, even at a heavy discount, part of those monies could be distributed to a central solidarity pot. If 45 additional games were to be screened at circa £2m per game (accounting for a deflated rights market), an additional £90m could – on the face of it – be made available for the EPL to distribute.

Next season (2020/21)

Similarly, with Sky, BT and Amazon having the rights to broadcast 180 EPL games in the UK next season, should all 2020/21 games be played behind closed doors, this would result in an additional 200 games available to broadcast. The prospect of 200 games at £2m a game potentially provides £400m worth of additional revenue for the league to distribute. 

The above would be in addition to the potential additional broadcasting revenues that the EFL could commercialise through selling the allotted 3pm games that previously were prohibited from being shown (due to the blackout period) to its incumbent broadcasters.

 Gary Neville had previously suggested on Sky Sports that the EPL should forward finance a proportion of future TV monies to assist the lower leagues. Even if that came by way of a loan from the EPL that the EFL could pay back out of its central funds, this would no doubt be of assistance to cushion the significant financial blow. 

2. EFL Draft

Once the transfer market re-opens (and on the basis that clubs have funds to spend), one requirement could be for EPL teams to commit to spending a minimum transfer amount of, say, £5m per season over say a two-season period. A large percentage of the transfer proceeds would go to the selling club with a small percentage distributed across the lower leagues according to a designed, weighted formula. Sell-on clauses could be built in too, so that a league solidarity pot potentially benefits from a subsequent transfer. 

3.    Taxing Transfers

In contrast to the draft, which would no doubt be a complicated practical and regulatory proposal, a more straightforward mechanism would be to mandate that a % of any transfer fee paid by an EPL club is collected in a central league solidarity pool to be distributed across the football pyramid. This type of redistribution already occurs within the FIFA transfer system by way of solidarity payments and training compensation and in, for example, the EPL through a 4% transfer levy. A transfer tax of, say, 1% could be agreed for players being bought by EPL clubs that could be pooled accordingly and distributed.

Conditions

The suggested funding streams outlined above would ideally be contingent on clubs showing evidence of financial discipline, including:

• having in place sensible and robust business plans;
• the provision of future financial club information and attainable budget forecasts; and
• adherence to particular ratios in relation to debt and wage parameters. 

Concluding thoughts

There are no obvious or easy solutions to the unprecedented challenges facing the current game, in particular the potentially devastating financial impact on EFL and lower league clubs (as well as clubs in similar leagues across the UK, Ireland and across the globe) as a result of the ongoing disruption to competitions. 

There will inevitably be practical, legal and commercial barriers to overcome when exploring the above three ‘ideas’ in more detail. That said, there is an opportunity to think creatively here – as a means of sourcing and raising additional funds which can be distributed across the football family.