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Sport

The true cost of relegation to League One for Ipswich Town

Ipswich Town have been relegated from the Championship. But what exactly are the financial implications of League One football?

Television and Broadcast income

During the 2017-18 season, Town received £8.07 million from the EFL for broadcast rights (including radio and television). In League One, this figure would drop dramatically.

Championship clubs each receive £4.5 million in solidarity payments — money that trickles down the football pyramid from the Premier League’s huge TV rights deal.

In addition to the solidarity payments, each Championship club also receives a basic award of £2.3 million, plus £100,000 for every home game broadcast on Sky Sports and £10,000 for every away game.

In League One, the solidarity payment would be around £680,000. In addition, the basic award is just £732,000, with £30,000 for every home game broadcast on TV and £10,000 for an away game.

In short, the club’s revenue from TV and broadcast could drop from £8 million to around £1.4 million in League One.

Player salaries

In its latest financial statements Ipswich Town revealed it spent £18.5 million in salaries—108% of its income. So for every £100 the club earned, £108 was spent on salaries.

One big difference between the Championship and League One is the Salary Cost Management Protocol (SMCP). In League One a club can spend just 60% of its turnover on player salaries–though newly-relegated clubs are allowed a transitional year of 75%.

Additional transitional rules also allow newly-relegated clubs to exclude the wage costs of all players that the club signed pre-September of the relegation season, if they were signed on contracts in excess of three seasons. Wage costs for Youth players on a professional contract are excluded too.

At the start of each season clubs in League One must submit a forecast of turnover for the upcoming season that’s backed up by data from previous years and any major changes in a club’s financial situation must be reported to the Football League.

This means that Town could have to enter the season with player salaries equalling less than 75% of its projected turnover.

Donations from the owners do count as turnover though so Marcus Evans could subsidise any losses in revenue through donations to the club in order to bolster the budget. Evans has also noted that there are relegation clauses in player contracts.

“We’ve got prudent contracts in place, so from that point of view people don’t have to worry that the club is going to find itself in a massive financial problem.

Marcus Evans, Ipswich Town owner speaking to the EADT

Matchday income, and other revenue streams

Matchday income is another area Town will likely take a hit on if the club is relegated to League One.

In the 2017-18 season it generated £4.7 million in gate receipts. Relegation would likely cause another dip in season ticket sales and matchday revenue.

In January, 2018, the club announced a three-and-a-half year sponsorship deal with Magical Vegas. When the deal was announced Town said it would generate ‘close to £2m’ from the deal (around £570,000 per season). It’s unknown whether there was a clause about relegation as a part of this deal.

The bottom line: Relegation would likely see a decline of £7m in revenue from television rights, and the club could have to significantly decrease player salaries to align with Salary Cost Management Protocol (SMCP) in League One.

Update: A previous version of this story mentioned Ipswich Town spent £18.5m on player salaries in 2017/18, that figure was actually overall wages paid by the club to all staff. We've also included additional SMCP details. Thanks to TWTD for the extra details.

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