The Premier League’s Parachute and Solidarity payment proposals aim to appease their members.

For any form of competitive balance to remain then the Football League will have to focus on cost controls in the Championship.

When the Premier League Chairmen meet for their monthly gatherings, they are simply titled ‘shareholder meetings’. When trying to rationalise some of the decisions taken by the League, it is important to understand its structure and ultimately in whose interests it is working for.

A lot of attention is focused on Chief Executive Richard Scudamore, but in reality he and the rest of the Premier League Board are servants of their ‘Shareholders’. Each member club owns a single share in the money making machine that is the Barclays Premier League. The clubs control the League, not the other way round.

The recent news on the lengthening of parachute payments to relegated clubs and the solidarity offer to the Football League is yet another example of the Premier League keeping their shareholders happy. Credit to the hierarchy of the Premier League for the mouth watering increase in the value of the international broadcast rights. The issue of what to do with the extra £1bn+ coming into their coffers has clearly caused some interesting debate at recent shareholder meetings. In the face of well documented internal pressure from clubs like Bolton, the League has responded with measures that further boost their shareholders short term revenues, but also their ability to plan for the longer term.
Clubs like Bolton and others who populate the bottom half of the Premier League can now budget more effectively for the next 5 years. Such certainty in income will clearly help future conversations with banks and other lenders, while helping to keep creditors (including HMRC) at the door. So, for shareholders the financial future at least looks a lot healthier.

If ratified then the new parachute payments will in effect turn the Championship into the Premier League 1.5. It is conceivable that as we start the 2013/14 season that half of the Championship will be receiving direct parachute payments from the Premier League (3 newly relegated teams a season over a four year period). This would ultimately create a split league and remove a large part of the unpredictability that makes the Championship such a compelling division. The Premier League, in the spirit of ‘solidarity’ with their brothers across the corridor at 30 Gloucester Place, has proposed that each non parachute club shall receive an annual payment of £2.2m. League One and Two Clubs may not like how this money is being divided up, but the reality of championship club finances dictates the Football League will ultimately accept an offer similar to this one.

This will still leave potentially half of the Premier League 1.5 (sorry – The Championship) with a £6m income advantage over their competitors. The challenge for the Football League will be how this new income is managed and the protection of the competition. The Football Industry does not have a great record of financial prudence, and so the time is ripe for the Championship to agree on effective wage caps. The Football League, and its new Chairman Greg Clarke should seek to prioritise these discussions at their summer AGM in Malta.

Yet the very same shareholders who have recently graced the top division may disagree. While on the face of it, you may think that all clubs will welcome a plan to keep their costs down, executives at club’s who have recently been relegated, come under intense pressure from the manager and fans to keep investing in the team and help push for promotion. Wage controls would impair a clubs ability to do this, and so while ultimately good for both the club and competition, any meaningful plans may well be discarded as executives seek to get out of Premier League 1.5 and back into the real thing.