Although the EFL Championship may be the biggest and most lucrative second tier football championship in the world, the revenues available to clubs competing in it from prize money and TV revenues are surprisingly small compared to what is on offer in the Premier League.

In fact, clubs are not dependent on the prize money that they get from playing in the Championship. If they were, most of them would quickly go out of business.

The money they derive from finishing in various places in the league, is just a small fraction of the revenue pie.

Prize money

The prize money on offer in the Championship is comparatively little, with the winner expected to pick up around £100,000, and the second placed team £50,000.

Read: Premier League prize money

Thereafter, prize money drops in increments, with the side finishing bottom of the EFL Championship (Barnsley last season) earning around £7,000 in prize money.

Meanwhile, the team that claims the third promotion spot, via the play-off final, takes part in which is colloquially known as the richest game in football.

That is not because of the prize money for winning the game itself but because of the financial implications of getting promoted to the Premier League.

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TV revenue alone is estimated at £3.1 billion a season in the Premier League, with even the lowest ranked team in the league set to earn a minimum £100 million.

A leading consultancy firm has estimated that, excluding TV agreements, club revenues may increase from as much as £135 million to £265 million following promotion to the Premier League.

TV Revenues

A Championship club will receive between £7 million and £8 million from TV revenues.

Included in this figure are the solidarity payment received from the Premier League YV deal (£4.5 million), an equal share based on the Football League’s own TV deal (£2.5 million) and the amount received each time their team is featured in a broadcast match (around £100,000).

These figures are just a fraction of what is on offer at Premier League level.

The total TV revenue pot is just £330 million compared to £2.3 billion, the equal share per club £2.5 million as opposed to £77 million, and the fee for game anywhere between £10,000 and £100,000, which compares with £11 million in the Premier League.

Parachute payments

In addition to prize money, teams that have recently been relegated from the Premier League receive what are known as “parachute payments’’. These are intended to initially shield them from the full financial impact of dropping into the second tier of English football, and are recognition of the fact that clubs may not have time to adjust budgets to their new reality.

The money for these payments comes from the Premier League’s equal share dividend of TV revenues. This is a baseline figure shared between the 20 Premier League clubs, on which they receive incremental revenues each time they are selected for a live match.

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In their first season back down a relegated side received 55% of that they would have earned had they still been in the Premier League. This drops to 45% in their second season and 20% in the third, with the proviso that they must have spent at least one season at Premier League level.

Based on recent figures, Burnley, Norwich City and Watford, all relegated from the Premier League at the end of the 2021/2022 season were all expected to receive around £40 million.

Solidarity payments

Clubs in the EFL who are not eligible for parachute payments receive Solidarity Payments instead. These are calculated as a percentage of the third year parachute payment. The amount drops the further down the football pyramid one goes – 30% for the Championship, 4.5% in League One, and 3% in League Two.

Gate Money

In addition, clubs also earn money from the paying public on the day in terms of gate money, although average attendances vary greatly. A club like Blackpool, for example, has an average attendance of around 10,000, whilst Newcastle United, when they were in it, sold out St. James Park every week with a capacity of 51,000.

The system is biased

Critics of this system argue that the current system is heavily biased in terms of recently relegated Premier League teams, and would explain the phenomenon of yo-yo clubs – Teams that seem to alternate between the Premier League and the Championship on a regular basis.

Norwich City, Watford, West Bromwich Albion and Fulham all fall into this category.

Because of the parachute payments, they begin life back in the Championship with an innate financial advantage over many of their rivals, and they can afford to dip into the transfer market to fuel a bid for promotion back to the Premier League again.

Some also believe that it rewards failure. Clubs that find themselves at the wrong end of the Premier league are less inclined to include relegation clauses in players’ contracts – which would automatically see their wages drop if their team dropped into the lower league – because they were effectively insulated from the worst of the results.

Others consider that it encourages recklessness and overspending at Championship level. Clubs are tempted to live beyond their means in the hope they can earn promotion to the Premier League and the riches that come with it.

The Premier League subsidises the rest

The Premier League, in fact, is bankrolling much of the league structure under it, and, whilst this was agreed when the league itself was set up, there are those who do not like the present system.

Football, after all, is supposed to be a meritocracy, and that is hardly suggested by the concept of parachute and solidarity payments.

It also explains in part, why the concept of a European Super League was greeted with so much abhorrence, not only by the supporters of the teams involved, and that of other clubs in the league, but those throughout the entire football system in England.

The Premier League is the golden goose in terms of the TV revenues that it produces, and which trickle down even to non-League level. Had the six big clubs succeeded in breaking away, they would have taken a big chunk of that money with them.

What was left to the rest would have been seriously diminished, and the amounts that percolated through to the Championship level would have been disproportionately much lower as well.

Many might not have survived.