Millions of reasons for Norwich City to stage great escape

The Premier League has sold its domestic television rights for a staggering £5.136billion across jus

The Premier League has sold its domestic television rights for a staggering £5.136billion across just three years. Picture: Peter Byrne/PA Wire - Credit: PA

Norwich City writer David Freezer looks at the financial implications for the Canaries if they can't avoid relegation

Why would dropping out of the Premier League this season be even more costly than previously?

The financial impact of relegation has risen consistently in tandem with the rise in profile and wealth of the Premier League – the most watched football league on the planet, with an estimated global reach of 730 million homes – as broadcast revenue continues to rocket. A new three-year TV rights deal comes into force from the start of next season though, worth £5.1billion in domestic rights and reportedly to be taken up to £8.3bn once overseas rights deals are completed, making the impact even greater. Although relegated clubs will miss out on the full benefits of this, those new riches will also lead to increased parachute payments. These provide a cushion for relegated clubs facing a drop in revenue, although the selling of players and relegation clauses in player contracts can play a part in the adjustment as well. City's chief executive David McNally, inset, has previously emphasised the importance of these clauses.

How much less do clubs in the Championship make in television broadcast revenue?

Sky Sports own the current rights to live coverage of games in the Football League through until the end of 2018/19. Details are scarce but the deal was described as the 'most lucrative' in the Football League's history. The previous rights, for 2012 to 2015, were reportedly worth £195m. City's accounts for the year ending in June 2015 showed the impact of relegation last time, with a drop in broadcast revenue of almost £40m from £68.2m when in the Premier League in 2013-14 to £28.5m when in the Championship in 2014-15.

Why is there such a massive financial gap between clubs in the Football League and clubs in the Premier League?

Before the launch of the Premier League in 1992 the Football League gave 50pc to the old First Division clubs, 25pc to Second Division clubs and 25pc to clubs in Division Three and Division Four. With the rise of televised matches and subscription channels ever since, the disparity between the top flight as a separate entity and the lower leagues has continued to increase.

Most Read

How much of its vast wealth does the Premier League share with the Football League?

A new agreement comes into force next season which will see the Premier League spend 20pc of its £5.14bn domestic TV rights package in facilities for grassroots football, solidarity payments to lower-league clubs, encouraging participation, and support for disadvantaged groups. For Championship clubs this will be the equivalent of 30pc of the final year of parachute payments, with League One clubs getting 4.5pc and League Two clubs 3pc.

How effectively do parachute payments soften the blow of the huge decrease in income?

The payments have played a key role in relegated clubs finding stability and those who are relegated this season will be the first to operate under new terms for parachute payments, which would affect Norwich in particular. Teams relegated after a single year in the Premier League will no longer benefit from full parachute payments, starting in 2016/17. This is due to changes which will see the money – currently at least £64m – paid over three years, rather than four. Clubs who go back down after one season will only get the first two years of payments. However, with the Premier League's new television broadcast deal of around £8.3billion coming into force next season, the parachute payment amounts are set to grow. Relegated clubs are to receive 55pc of the equal share of broadcast revenue paid to top-flight clubs in the first year after relegation, then 45pc in year two and 20pc in the final year, which would not be inclusive of team's relegated after one season.

Do the Canaries have the financial strength to handle the impact of the drop, if Alex Neil's team can't salvage their season?

It is difficult to say for certain but City would certainly seem in a good financial position initially, having announced they were free of all external debt in 2013 – a far cry from the financial troubles of 2009 after relegation to League One, when debts had hit £23m. At the club's AGM in November last year David McNally revealed income was forecast to grow 91.6pc, from £53.6m to £102.7m, for the 2015/16 financial year, emphasising the huge figures City are now dealing with – and fighting for. Clearly with the financial adjustments that relegation would entail, City would need to tread carefully, but with the benefit of large parachute payments the club are likely be in a financial position which would allow them to mount an immediate push for promotion back to the Premier League.