The BackPage Weekly | The Premier League’s ‘New Deal’ proposal

By Alex Harvey and Daniel Geey

As the UK government presses ahead with its plans for an independent regulator for English football, the Premier League appears to have stepped up its efforts to strike a new financial deal with the EFL amid mounting political pressure.

The Premier League’s so-called ‘New Deal’ proposal, a follow-on from Project Big Picture, was “proactively debated” at a recent meeting between the EFL’s 72 clubs last month, but the EFL was quick to make clear in its official statement that “nothing has been agreed with either the Premier League or its Clubs”.

With EFL clubs now engaging in a “targeted consultation” process, we take a closer look at the details of the Premier League’s latest proposal and the various “conditions” which it has attached to its offer.

⚽ The ‘New Deal’

So, what are the terms of the ‘New Deal’, and how does it differ from the status quo?

Based on The Athletic reporting, the headline change being mooted is for the two leagues (i.e. the EPL and EFL) to pool together their broadcast rights income, with 14.75% of that combined income being distributed to EFL clubs as solidarity payments and a further 4.5% being used for “financial sustainability payments” (currently known as ‘parachute payments’).     

This would represent a considerable increase in the payments currently flowing down the pyramid. At present, the Premier League distributes around £350m in solidarity and parachute payments, which equates to approximately 16% of its media rights income. Under the New Deal, this would rise to north of 19%. According to The Athletic, the increase in solidarity payments alone would result in non-parachute clubs in the EFL sharing an estimated £466m by 2025/26 (after the two season transition period), compared to an estimated £297m under the current model; representing a £169m uplift.

According to the Guardian, EFL clubs would also benefit from an additional £88m this season and £101m next season.

The second notable change being proposed is for the EFL solidarity payments to be partially ‘merit-based’ – i.e. dependent on where each club finishes in the league – which would be a significant change from the EFL’s historic approach of sharing its money equally within each division. A merit-based approach has been adopted in the Premier League for quite some time, with 1/4th of the EPL’s revenue distribution being performance-related. Interestingly, the New Deal proposal goes even further; suggesting that 1/3rd of the Championship’s revenue distribution should be performance-related (albeit dropping to 1/5th in League One and 1/10th in League Two).

⚽ The ‘Conditions’

The Premier League has sought to impose a number of ‘conditions’ to its proposal.

At the top of the list is the Premier League’s insistence that parachute payments must remain. The EFL has been steadfast in its opposition to parachute payments for a long time, arguing that it gives a disproportionate and unfair advantage to newly-relegated clubs, which results in the other (non-parachute) Championship clubs having to spend recklessly just to compete.

The Premier League, however, believes the payments are needed to help relegated clubs cushion the blow of dropping down to the Championship. Under the New Deal proposal, the level of parachute payments would remain largely the same (£52m in the first season after relegation, £41m in year two and £20m in year three).

The second condition relates to the adoption of a ‘squad cost ratio rule’, which would set a maximum percentage of revenue which clubs would be permitted to spend on player wages, transfer fees and agents’ fees. It has been reported that EFL clubs are largely in favour of the concept, but the exact percentages being proposed are less palatable.

Under the New Deal proposal, Premier League clubs would be permitted to spend 85% of their revenue on squad costs, reducing down to 70% in the Championship and 50% in League One and League Two. There appears to be concerns amongst League One and League Two clubs in particular that such an approach would stifle movement up and down the pyramid.   

Also on the Premier League’s wish-list is a new tariff system for determining the compensation payable for out-of-contract players under the age of 24. Currently, the Professional Football Compensation Committee (PFCC) is tasked with deciding the level of compensation payable by the new club (which can include, for example, sell-on clauses), but the Premier League is pushing for a more predictable, tariff-based system dependant on the player’s age and how long the player was with the original club. 

Lastly, the Premier League is reportedly looking to push through a number of changes to the sporting calendar too. Most notably, the New Deal proposes an end to all cup replays; no more two-leg semi-finals in the EFL Cup; and moving the FA Cup final from its usual date at the end of the season to the penultimate weekend of the Premier League campaign.  

⚽ What Next?

It’ll be fascinating to see how the EFL responds to this latest proposal. The immediate and considerable uplift in solidarity payments will undoubtedly be difficult to turn down, particularly given the financial state of many EFL clubs, but perhaps they might rather wait and see what the incoming independent regulator has to say.

As the Culture, Media and Sport (CMS) Select Committee pointed out back in June, if the two leagues can’t come to an agreement between themselves soon, the independent regulator may be forced to “impose a deal”.