Post by Macmoish on Nov 22, 2010 8:56:38 GMT
Evening Standard
Just champion! England’s second tier of football clubs is booming too
Stefan Szymanski 19.11.10
When we talk about the state of the game in England, we too often focus on the top tier of the Premier League, and forget the remarkable transformation that has taken place at lower levels over the last quarter of a century.
More people now go to watch Football League Championship games in England — 9.9 million last season — than attend Serie A games in Italy — 9.5 million. In 1986, the old Second Division attracted only 3.5 million paying spectators.
Increasing ticket prices and the scarcity of seats at the top level have generated a renaissance beneath it.
These figures show the strength in depth of English football. While in other countries the second tier is a minority affair, in England it is coming to rival the Premier League in significance, at least as far as fans going to watch in the grounds is concerned (Premier League attendance stands at 13 million).
The Championship has also produced a higher quality of football, thanks to imported players paid for out of rapidly expanding revenues, as well as English players who would in the past have been good enough to play in the Premier League. Income has grown at the rate of 10% per year for the last 15 years, notwithstanding the wobble caused by the collapse of the ITV Digital deal a decade ago.
Broadcasting revenues contribute about one quarter of the current total income of £375 million (2008-09 figures) while another quarter derives from the largesse of the Premier League in the form of parachute and solidarity payments.
The parachute payment system instituted by the Premier League at its foundation gives relegated teams a share of its broadcast income. The league has extended the payments this season from £22 million over two years to £48 million over four years (16 in each of the first two years, eight in the following two, paid only so long as the team is not promoted back).
Together with the £2.4 million paid to each Championship club not receiving a parachute payment, this will increase the subsidy to the championship by up to 25% this season. Once the system has been running a few years, payments could increase to about £130 million per season.
Whilst this may sound welcome, some of the Football League clubs were wary of accepting the new scheme, fearing that the extended parachute payments would create an elite group of yo-yo teams and effectively turn the Premier League into a semi-closed league.
Since the start of the Premier League 52 teams have been relegated, 15 have been promoted straight back up and a further seven after two seasons. Only nine teams have returned to the Premier League after a break of more than two years, and 21 teams have not yet made it back since relegation.
To put it another way, a relegated team has a 40% chance of making it back within two years, but your chance of being promoted back after three or four years is only 4%.
This seems like fairly strong evidence that the parachute system has had a big effect. If the extra payments increased the probability of a return within two years to 60%, and a return in years three and four to 30% (figures in line with the current impact of parachute payments), then the consequence would be that the Premier League would be restricted to a pool of little more than 30 teams. If the new system does create a two-tier system in the Championship, it may also serve to create more financial stability.
The paradox of English football is that while the leagues lead the world in terms of their capacity to attract fans and generate income, a large fraction of the clubs are financially unstable.
Teams in the Premier League currently spend about two thirds of their income on wages, which many would argue is unsustainable, but in the Championship the figure is closer to 90%. This reflects the mad scramble to achieve Premier League riches.
In a two-tier world, the clubs without the parachutes might be less tempted to try the financial equivalent of skydiving and restrict themselves to more manageable budgets.
Stefan Szymanski is Professor of Economics at Cass Business School
www.thisislondon.co.uk/markets/article-23899174-just-champion-englands-second-tier-of-football-clubs-is-booming-too.do
Just champion! England’s second tier of football clubs is booming too
Stefan Szymanski 19.11.10
When we talk about the state of the game in England, we too often focus on the top tier of the Premier League, and forget the remarkable transformation that has taken place at lower levels over the last quarter of a century.
More people now go to watch Football League Championship games in England — 9.9 million last season — than attend Serie A games in Italy — 9.5 million. In 1986, the old Second Division attracted only 3.5 million paying spectators.
Increasing ticket prices and the scarcity of seats at the top level have generated a renaissance beneath it.
These figures show the strength in depth of English football. While in other countries the second tier is a minority affair, in England it is coming to rival the Premier League in significance, at least as far as fans going to watch in the grounds is concerned (Premier League attendance stands at 13 million).
The Championship has also produced a higher quality of football, thanks to imported players paid for out of rapidly expanding revenues, as well as English players who would in the past have been good enough to play in the Premier League. Income has grown at the rate of 10% per year for the last 15 years, notwithstanding the wobble caused by the collapse of the ITV Digital deal a decade ago.
Broadcasting revenues contribute about one quarter of the current total income of £375 million (2008-09 figures) while another quarter derives from the largesse of the Premier League in the form of parachute and solidarity payments.
The parachute payment system instituted by the Premier League at its foundation gives relegated teams a share of its broadcast income. The league has extended the payments this season from £22 million over two years to £48 million over four years (16 in each of the first two years, eight in the following two, paid only so long as the team is not promoted back).
Together with the £2.4 million paid to each Championship club not receiving a parachute payment, this will increase the subsidy to the championship by up to 25% this season. Once the system has been running a few years, payments could increase to about £130 million per season.
Whilst this may sound welcome, some of the Football League clubs were wary of accepting the new scheme, fearing that the extended parachute payments would create an elite group of yo-yo teams and effectively turn the Premier League into a semi-closed league.
Since the start of the Premier League 52 teams have been relegated, 15 have been promoted straight back up and a further seven after two seasons. Only nine teams have returned to the Premier League after a break of more than two years, and 21 teams have not yet made it back since relegation.
To put it another way, a relegated team has a 40% chance of making it back within two years, but your chance of being promoted back after three or four years is only 4%.
This seems like fairly strong evidence that the parachute system has had a big effect. If the extra payments increased the probability of a return within two years to 60%, and a return in years three and four to 30% (figures in line with the current impact of parachute payments), then the consequence would be that the Premier League would be restricted to a pool of little more than 30 teams. If the new system does create a two-tier system in the Championship, it may also serve to create more financial stability.
The paradox of English football is that while the leagues lead the world in terms of their capacity to attract fans and generate income, a large fraction of the clubs are financially unstable.
Teams in the Premier League currently spend about two thirds of their income on wages, which many would argue is unsustainable, but in the Championship the figure is closer to 90%. This reflects the mad scramble to achieve Premier League riches.
In a two-tier world, the clubs without the parachutes might be less tempted to try the financial equivalent of skydiving and restrict themselves to more manageable budgets.
Stefan Szymanski is Professor of Economics at Cass Business School
www.thisislondon.co.uk/markets/article-23899174-just-champion-englands-second-tier-of-football-clubs-is-booming-too.do