Parachute payment (Sports)

In English football, a gulf has arisen between the finances of clubs from the Premier League and English Football League since the First Division clubs broke away to form the Premier League in 1992. Some have argued that this disparity is wider than in other European leagues where the top flight is combined with at least one division below in a league, such as Germany's Bundesliga, Italy's Serie A and Spain's La Liga. However, England has five tiers of single national divisions, compared to only two in Spain and Italy and three in Germany.

Since the Premier League began at the start of the 1992–93 season, its member teams have received larger amounts of money in TV rights than their Football League colleagues. Prior to the formation of the Premier League, television revenues from top flight matches were shared between the 92 Football League clubs across four unified national professional divisions. The breakaway of 22 clubs to form the Premier League resulted in top flight revenues being shared exclusively between Premier League clubs. The Premier League agreed to maintain the promotion and relegation of three clubs with the Football League, but the Football League was now in a far weaker position – without its best clubs and without the clout to negotiate high revenue TV deals. This problem was exacerbated in 2002 when ITV Digital, the holder of the TV rights for the Football League, went into administration. Many League clubs had invested in ground improvements and the player transfer market with anticipated television funds that never materialized, causing several clubs to enter receivership – most notably Bradford City, who were faced with debts of £36 million and almost lost their Football League status as a result.

As a result, financial disparity has been cited as a reason for newly promoted teams finding it increasingly harder to establish themselves in the Premier League, thus worrying more about avoiding relegation than winning the title. The three Premier League relegation places have been filled by at least one newly promoted club in all but three of the 21 seasons since its introduction, and in the 1997–98 season all three clubs (Bolton Wanderers, Barnsley and Crystal Palace) were relegated.

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Wikipedia