Stupid Questions Part 2: The Merit Payments Fund

I suppose in some ways it was weird to begin an in-depth look at Premier League finances with the Fit-and-Proper test, but in discussing this sort of thing, there really is no good jumping in point.  Anyway, after awhile you start to see a clear pattern, clearer still if you've been slavishly following the league tables year after year like most football people.  None of this should be a surprise, but as Orwell said, "To see what is in front of one's nose requires a constant struggle."  And I think I can speak for David Conn when I say, boy has this been a struggle.

So, revenues.  The Premier League publishes all its rules on its website, including those related to finance, so if you really want the Articles of Association handy, go nuts.  Needless to say, I've downloaded them. But perhaps it would be better for now to refer to the handy Premier League FAQ:

How are television revenues distributed to Premier League clubs?
50 per cent of total money goes on an equal share basis to the 20 Premier League clubs, while relegated clubs also receive some of this money in the form of a parachute payment. 25 per cent of the money is paid as facility fees, which are determined by the number of appearances on television. 25 per cent is paid in merit payments, determined by the position that a club finished in the league.

The caveat to that first 25% is that it's pretty much expected each Premier League team will get on telly at least once.  It should also be said that this is UK TV revenue; overseas broadcast revenues go to operating costs first, and the rest is divided equally among Premier League clubs with less going to relegated clubs.  PL sponsorship money is also distributed equally, with less going to relegated clubs  Boring?  Perhaps.

But note the built-in bias in that little twenty-five percent toward clubs that finish farther up the table; the Premier League calls it the Merit Payments Fund.  Sounds nice; everyone likes a meritocracy.

But this is top-tier football here.  "Merit"—that is, league table finish—is largely determined by the quality of players on a particular team (despite the currently in-vogue romanticization of "The Manager" in England).  Yes; contrary to the radical socialists in our midst, "merit" cannot necessarily always be bought or sold—but as Fredorrarci masterfully pointed out the other day, money does buy you a good measure of probable success.  In any case, this notion of merit is important and I'll be returning to it in future posts.

Now this 25% chunk might not seem like that much in the scheme of things, especially when you compare it to other sources of club revenue like season tickets and club sponsorship and all the rest. But when you compound the Merit Payments Fund with the TV rights money lavished on Champions League qualifiers, and the quite-a-bit-smaller TV money given to Europa Cup qualifiers, the amount of revenue a club can expect from finishing a bit higher increases exponentially.  The idea is a club can use this money to buy the sort of players in order to climb even higher, or at least stay where you are.  Hence, in large part, the Big Four (although their dominance involves more parsing out, which I'll tackle in the next post on club revenues).

The MPF is really just a symptom of how the PL works: a club's financial health is intricately tied to its on-pitch success.  Twas ever thus you might say, but the Premier League's peculiar link between the football and the money is one of the main reasons we're seeing so much financial damage today, why Premier League clubs are so reliant on capital from wealthy foreign owners, why Pompey have had four such owners in the last six months, why Liverpool are on a massive precipice simply because they might not finish fourth.  It is also one of the main reasons why the Premier League is doesn't generate as much revenue as the NBA, NFL, or MLB, which will become clearer when we discuss how individual clubs earn money, and player wage/transfer fee inflation.

I didn't ask any questions I know, but there are lots coming down the pipe.  Okay, is any of this wrong so far?