Scrap Promotion And Relegation? It's The American Way.

It was revealed on Monday through tenuous sourcing that, apparently, some of the Premier League's foreign born owners were hoping to scrap the idea of promotion and relegation:

"There are a number of overseas-owned clubs already talking about bringing about the avoidance of promotion and relegation in the Premier League," Bevan said at the Professional Players Federation conference in London. "If we have four or five more new owners, that could happen."

Though no specific numbers -- we know there are 10 foreign owners in the Premiership -- or names were given, it's easy to figure out that the owners most likely to object to the idea of promotion and relegation are the Americans: Stan Kroenke at Arsenal, Randy Lerner at Aston Villa, Fenway Sports Group, specifically Tom Werner and John W. Henry, at Liverpool, Malcolm Glazer at Manchester United, and Ellis Short at Sunderland.

David Conn, an English journalist with a focus on the financial aspects of the beautiful game, released a two-part interview with Werner and Henry last week after he sat down with the ownership duo and discussed their baseball (they also own the Boston Red Sox) and soccer interests. Unsurprisingly, the piece provided a less-than-flattering portrait of the pair of neophyte Premiership owners.

While Conn missed the mark on some of his baseball analogies and analysis, he provided a strikingly clear picture of the minds of Henry and Werner through some surprisingly earnest quotes from the pair. They admitted to everything from how little they actually knew of English soccer before investing in Liverpool to, unsurprisingly, not enjoying the idea of sharing their money:

It became quickly clear, talking to them, that a prime attraction to the Americans of buying English football clubs is that in the Premier League the clubs keep all the money they make, from everything except television rights. So it was no surprise that the managing director they appointed, Ian Ayre, talked this week about beginning the break-up of even that, the collective TV deal. "That is the difference with the EPL," Werner said. "If we can generate interest in Liverpool here and around the world, we will benefit from that."

What is another obvious way of not sharing money? Cutting off promotion and relegation and severing ties with the Football League, an idea clearly born in North America.

Structure, Sharing And Socialism

The Premier League is not, in fact, an extension of the Football League. Rather, it is its own separate entity. In 1992 the then-First Division broke away from the English Football League, creating its own competition. This allowed the top teams in England to collectively negotiate television deals on their own and keep more money within their newly dubbed Premier League.

Though the main reason given was the need to make England more competitive in international club competition, the elephant in the room was greed, and it was impossible to ignore. While the Football League lost its ability to govern the Premier League, ties still remained. The institution of top-flight promotion and relegation was still kept a part of the machine.

Since splintering, the Premier League has been run by a 20-man Board of Directors headed by the club owners, each with an equal say in governing matters. When a team is relegated, its owner is essentially forced to resign. Promotion equals membership in the pseudo-meritocracy.

Alongside promotion and relegation, foreign investment in English soccer has seen a meteoric rise through savvy businessmen and millionaire fanboys alike.

The problem with the Premier League as an investment for a foreign owner is that, if things go poorly, your investment may get relegated. If your investment gets relegated, you lose access to tens-to-hundreds of millions of pounds (or dollars) in possible revenue from television contracts, prize money, continental competitions, gate revenues, merchandising, notoriety, and other financial buzz words.

As not-so-subtly hinted towards earlier, the idea of sharing money to Fenway Sports Group is not a positive one. Negotiating their own television deal would mean they could avoid having to share in a deal with the Wolverhamptons, Wigans and, yes, Fulhams of the world. You know, the "smaller" clubs.

Henry, and another top Fenway executive, made no bones about how much they dislike revenue sharing, and feel little, if any, obligation to anyone but themselves:

All clubs' income is taxed, then shared out, a system Lucchino described, drily and without obvious enthusiasm, as "very socialistic". Werner was quite open that, as a richer franchise, Fenway resents how much money it is taxed, which is not publicly disclosed. "It is a balance," he acknowledged. "We realise we are part of a league, but we feel the burden on the top is higher than appropriate. We feel we deserve the fruits of our labour."

From Their Perspective...

Now you have to put this in perspective and, to do this, you need to understand where the Red Sox get their money from and what their standing is in Major League Baseball. While they are required to share a portion of their local revenues (money they generate on their own, mainly through the Boston market) with the other 29 MLB clubs, they have full control over the majority of this revenue generation, and most importantly, through television:

Local revenues consist of gate receipts, local television, radio and cable rights fees, ballpark concessions, advertising and publications, parking, suite rentals, postseason, and spring training. In a 2007 study, Gennaro found that local revenue contributes 70-80% to a team's total revenue. Therefore, economic factors such as attendance, per capita income, and other Standard Metropolitan Statistical Area census figures are largely responsible for the level of total revenue baseball teams receive.

A city like Boston will generate significantly more money than a city like, say, my hometown of Pittsburgh. A larger stadium, higher population base, more historical success, and a higher per capita income translates to great access to revenues and a more successful team. But, as the above piece goes on to say, as all of these MLB franchises share the same labor pool, it can lead to severe competitive imbalance.

Further, there is no threat of promotion or relegation, no worry of another team taking their seat at the table. A draft system has been forever instituted, making the idea of youth academies moot. High schools, colleges and amateur clubs develop the baseball players of the future. MLB franchises then divvy the this labor pool up among themselves and effectively loan the stars of the future out to minor league (lower division) teams. They have full control over whether to recall or demote the players. A single MLB team, at any time, will have rights, in one capacity or another, to something like 250-300 players. Probably more, I'm roughly estimating.

They also have no obligation to play games against these lower clubs. No FA or League Cup-like gate receipt sharing, ever. They pay certain institutional costs to the minor league clubs they partner with, but nothing of any merit to the minor league system as a whole. They providing enough by "sharing" their talent pool.

Fenway Sports Group doesn't mind the freedom MLB allows them to generate their own money, they just detest having to share any it. And while the growth of their Liverpool brand is seemingly endless, the idea of having to split television revenue and potentially sacrifice some exposure is sickening to them.

The Case Of Major League Soccer

A weird case study of the merging of the European and North American systems is in Major League Soccer. The league runs on a very complexly staggered salary cap, hoping to promote parity among its participants. There is a draft, but there are also youth academies, from which teams can benefit and sign a very limited number of players.

There is also no promotion and relegation. A significant portion of fans, though not necessarily a majority (Heresy alert: it could be a majority, I'm not positive.), are keen to the idea of instituting promotion and relegation within the North American top flight. There are a few key problems they run into with this.

  • MLS uses their aforementioned salary cap and draft as ways to enforce parity. By enforcing parity, you give teams little chance to flex their financial muscle and stand out, effectively forcing everyone's name into the hat of who could be excluded from the league on a yearly basis.
  • The league is still trying to expand, granting franchises to ownership groups located in cities with significant fan potential and high financial prospects. Those expansion teams are rarely of the dominant variety and the potential for a new team to be immediately relegated, as they subsist on lower division players and scraps from MLS teams at the start, is not an enticing proposal.
  • Why would a prospective North American sports owner want to risk relegation? How could you convince them to spend tens of millions of dollars to enter the league, with there being a real threat of immediately being expunged from that very same league? Here, we'll convince you to join this league, but if you're poor at the start, you'll be kicked out and have to earn your way up. Sorry, that's how it goes. Every other major North American league rewards failure with the bounty of youth and potential. But us, no, we're the exception. Good luck recruiting on that.

Why Play By The Rules When You Can Make Your Own?

While hearing the idea of scrapping relegation from these nameless, likely North American, Premier League owners proved shocking to many English analysts, players and fans, it should be unsurprising. It is incredibly rational to those nameless, faceless, likely North American owners.They threw all of this money into an attractive investment and they want it shored up. The prospect of relegation is enough to scare any financier caught in this deadly battle of pockets.

Would scrapping relegation be to the detriment of the English game? Fairly obviously, yes. When explaining the European league system to a new soccer fan, lower division clubs are frequently juxtaposed with their minor league kin in the U.S.

But it's not the same. In England, these are, instead, small clubs, not minor league clubs. Theoretically, they're all in the same league.

The prospect of improving your lot in life is always there, moving up the competitive ladder to bigger and better things. If not for that institution, the likelihood of this blog even being around is almost non-existent.

That moment of moving up the ladder, or barely defying relegation on the last day of the season is what makes the English, and European, game so attractive. There are no all-out rebuilding years, there's always this year. Can't hack it? No worries, someone will take your place. You may not have a shot at the league title, but you always have something to play for.

It was funny reading Henry espouse the virtues of UEFA's Financial Fair Play rules in Conn's article and, subsequently, hear Ayre speak frankly of breaking away from the Premier League television deal to craft their very own, more profitable deal. Or at least to get a bigger share of whatever pie is collectively negotiated.

It's clear that Henry and Werner don't mind playing by the rules at all -- so long as they get to make them.

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