The Promotion and Relegation Thesis

Part One – The Trap Door is a Business Model Problem

Broadcast rights, the global transfer market, stadium debt, and owners who treat the club as an investment have turned relegation into a balance-sheet event. Under those conditions, the open pyramid does not make clubs better businesses. It makes them more fragile.[1]

It’s not like there are no voices extolling the virtues, both sporting and financial, of the open system and promotion and relegation. In 2002, Roger G. Noll wrote, “The crucial findings are: players tend to earn higher wages in promotion and relegation systems; promotion and relegation apparently has a net positive effect on attendance (teams gain more from promotion than they lose from relegation); and the effect of promotion and relegation on competitive balance is ambiguous, with the negative effect arising because the system inevitably places some teams in leagues for which they have no realistic chance to afford a winning team, thereby causing teams to spend less on players during their (brief) stay in a higher league than they spent while trying to be promoted from as lesser league.”[2]

Noll is still the best defense of the pre-2000 open model, and he should be quoted rather than caricatured. Higher wages. An increase in attendance, because the club going up adds more fans than the club going down loses. An ambiguous effect on balance, with one warning attached: the system parks some clubs in a league they cannot afford, so they spend less once they arrive than they spent trying to get there.

In 2002 that warning was a footnote. In the Championship it is the season. The division lost about $590 million at operating level in 2024/25 precisely because wages are bid to the value of going up, not to the value of staying where you are. Attendance still moves with promotion. It no longer pays the bill. Noll was measuring a drop into a league that still lived on game attendance figures. The league on the other side of the door now lives on national media, multi-year commercial deals, and stadium debt. Those do not survive the drop. The Championship does, on parachute payments and owner checks. 2026 England is the clearest case of a pyramid held together by parachute payments[3] and owner subsidies.[4] In other parts of the world where revenues … and fandom … is much less, it tells a different story.

Australia tried a more open model, watched it concentrate clubs and starve itself of facilities, and built the A-League as a closed shop.[5] [6] Japan imposed the most business-minded licensing structure in Asia and still lives with chronic pressure in J2 and J3.[7] Mexico suspended the system because the second tier was heading toward insolvency.[8] Even Saudi Arabia has a functional “open” system but is largely supported through government subsidies, sovereign wealth fund ownership of clubs, and what is called the “Clubs Support Strategy,” which financially rewards roughly 68 professional clubs based on performance across a whole series of metrics.[9]

The 2021 Super League was the same diagnosis from the other end of the table: lock fifteen clubs into a competition with no relegation so the midweek product, and the valuation, could never fall.

[1] Commonly accepted definition of an Open Pyramid – “An “open pyramid” in soccer is a connected league system in which clubs move between divisions based on results, not franchise fees or league approval.”

[2] Roger G. Noll, “The Economics of Promotion and Relegation in Sports Leagues: The Case of English Football,” Journal of Sports Economics 3, no. 2 (2002): 169–203. See the Expanded Information Section at the end of this paper for further detail.

[3] Parachute Payments are “extra money paid to clubs after they are relegated, so they do not collapse financially when they drop out of a much richer league. In the English system they come from Premier League broadcast revenue. A club that goes down from the Premier League to the Championship keeps receiving a declining share of the “equal share” TV money for up to three seasons:

Year 1: 55% of a Premier League club’s equal broadcast share
Year 2: 45%
Year 3: 20% (only if the club spent more than one season in the Premier League before going down)

Payments stop if the club is promoted back. Typical recent Year-1 figures have been in the £45–55 million range.” 19 April 2026, Premier Pulse.com

[4] England’s Premier League parachute is an outlier: large, multi-year, and tied to a share of top-flight TV money. Other countries use smaller, shorter “soft landings,” or none. For additional detail see the Expanded Information Section at the end of the this paper.

[5] The History of Football in Australia, FootballAustralia

[6] Kerr, Anthony K., and Aaron J. Wijeratne, ‘Taking the pulse of new football franchise’: team identification and the Melbourne Heart FC in Australia’s A-League, Soccer and Society, 7 June, 2020

[7] The J League, Grokipedia.com. Summarizes how the J League and lower leagues are organized and outlines the requirements to be promoted. The 60 professional clubs across the 3 divisions as of the 2025 season must obtain a license to participate, which confirms their adherence to criteria set by the league and the Japan Football Association. Criteria include financial viability, sporting merit, infrastructure that meet league minimum requirements, personnel requirements, youth development and fan engagement programs aligned with licensing regulations.

[8] Mexican League Owners Suspend Promotion and Relegation for Five Years, 20 April 2020, Sports Illustrated. Originally, the suspension of promotion and relegation was for a 5-year period. Both Liga MX and the second division, Ascenso MX approved the suspension. Ascenso MX clubs received $845,000 a year for five years as part of the agreement. Liga MX scraps promotion and relegation, ends payouts to second-tier clubs, Sportcal, 16 July 2026. In July of 2026, Liga MX announced that it was ending promotion and relegation. In addition, the yearly payments of $845,000 would stop.

[9] Saudi Arabia runs a standard European-style pyramid with promotion and relegation at every professional level. The money that makes the top of that pyramid unusual comes from the state. Lower division clubs receive subsidies through what is called the “Clubs Support Strategy.” For additional detail see the Expanded Information Section at the end of this paper.