Why promotion and relegation no longer fits the economics of modern soccer

Notes on Format

Honestly, as a fan, this is not the sort of argument I want to make.  I’ve been emotionally invested in this game for 50 years … as a player, a coach, referee, fan, writer, YouTube influencer and administrator and still find myself immersed in all aspects of the game.

Over the years as this topic has surfaced and resurfaced, my own research has let me down a path I, as a fan, did not anticipate.  Maybe it’s my age, but when called, I do deep dives into economics and history to come to more thoughtful opinions than simply creating the latest (and useless) hot takes on whatever the subject is.

And on this, promotion and relegation is the latest where my opinions have changed as a result of the research.  And what you are about to read is the sum of what I have collected over time.  And what forms the basis of my thesis.

If you are reading it is likely because you have a deep interest in the subject and the sport itself.  Much of what I tried to do is to document for future reference all the information I could that made me arrive at that conclusion.  So the use of footnotes and endnotes was liberal to say the least.

Finally, I hope you enjoy, no matter what your point of view is.

What this is not arguing

I am not saying fans are wrong to love the mystique. A late winner that keeps a club up is one of the best hours the sport produces.  Still the best moment of all time are the last 10 minutes of Manchester City against Queens Park Rangers ending with Sergio Aguero scoring in the final moments to win the league.[1]   I am not saying a closed league is morally better, or that MLS should be the template for the FA or the RFEF. Sporting merit should still matter.

This is an argument about history.

What I am suggesting is narrower, and less satisfying. In a marginal market, or a very unequal one, you do not get healthier clubs by tying a wage bill built for a richer division to a result that can strip most of that revenue in one summer.  In the US you get failed clubs, fire sales, and then a fight over who is to blame for the wreckage. England can have that fight because the Premier League prints enough money to fund it even though it is a subsidy and it is not self-funding. Most countries cannot. Australia looked at the damage and closed the door. Japan kept the door and then had to waive its own solvency tests. Mexico paid the second tier to stop climbing.

The following pages are intended to compare and contrast the history of promotion and relegation, the roots of the structure of leagues in the United States, and whether or not an open pyramid is an option in the US.

A short primer of pyramids … and money

The major European leagues are organized as open pyramids, meaning clubs move up and down based on results.  In England, perhaps the reference point for most US supporters of promotion and relegation, the top five professional tiers currently look like this –

• Premier League (20 clubs) – The richest, with the majority of national broadcast money.
• Championship (24 clubs) – The second tier. A club relegated from the Premier League receives declining “parachute” payments for up to three seasons to soften the drop. Clubs without parachutes receive far less league money.
• League One and League Two – Third and fourth tiers. Revenues and league distributions fall further.
• National League – The top of the semi-professional/regional structure.

As will be illustrated later in this paper, the financial gap between the League and Championship is significant.  According to the recent report by the Independent Financial Regulator in the UK, the average Premier League club earns approximately 8.7 times more than the average Championship team.  In the 2024-25 season alone, the average Premier League club generated $457 million in revenue, compared to just $52 million for the average Championship club.[2]

Parachute payments are the mechanism by which the Premier League softens the blow for clubs that have been relegated.  These generally take the form of three annual declining payments.  If your club receives these payments, and wins promotion, the payments stop.  Solidarity payments in contrast, as smaller payment based on which league your club is in, are paid to all clubs.  The intent is to provide the entire pyramid with a degree of financial certainty.  These both exist because the financial gap between the Premier League and the rest of the pyramid is large enough to threaten the stability of a club.

In the United States, how we organize our sports is different.  Major League Soccer operates as a traditional US, closed league of franchise licenses.  Owners buy (or are awarded) a protected slot and do not have to deal with relegation. The United Soccer League runs its own competition below MLS and is anticipated to experiment with promotion and relegation.  The two are separate leagues and entities and there is no promotion or relegation from one to the other.

These differences matter for the argument that follows.

How did we get open pyramids and promotion and relegation?

Promotion and relegation did not descend from the laws of the game. They were not handed down from somewhere on high.   It’s not the long lost XI commandment. It was a late-Victorian administrative fix that Europe then copied because it fit the way clubs already existed and functioned within the social structure of their time.

In 1888, when the Football League was formed, in a sense it was organized as a closed league. Twelve professional clubs in the North and Midlands guaranteed each other games and a standardized schedule. Membership in the Football League was a privilege. The bottom clubs had to seek re-election. Outside clubs applied and were voted in or turned away. Sporting merit decided who won the league championship, but little else. And it did not yet decide who was allowed to play for it.

That changed because the Football League had a rival. The Football Alliance was established in 1889 as a rival league to the Football League for clubs excluded from the original 1888 competition.  After three seasons, the two organizations merged in 1892, leading the Football League to expand from a single division to two.  The merger resulted in the creation of the Football League Second Division, which absorbed 11 of the 12 Football Alliance clubs, while the top three Alliance teams (Sheffield Wednesday, Nottingham Forest, and Newton Heath, later Manchester United) were promoted to an expanded First Division.[3] Now with two tiers it immediately created a political problem the founders of the original Football League had not had to solve in the past: what to do with the worst of the first division and the best of the second? The first answer was not automatic movement. It was “test matches,” a phrase borrowed from cricket.[4] From 1893 the bottom of Division One met the top of Division Two in end-of-season deciders. Winners were invited into the higher division. Losers were invited into the lower one. The champion of the Second Division in 1892–93, Small Heath—later Birmingham City—won the league and still failed to go up after losing a replay to Newton Heath, the club that became Manchester United.

The test-match era lasted six seasons and ended in a farce. On 30 April 1898, Stoke and Burnley met at the Victoria Ground knowing a draw would keep Stoke in the First Division and send Burnley up. Contemporary reports described a match without a shot.[5] The League declared the method “unsatisfactory,” expanded the First Division to eighteen clubs so that nobody involved that spring had to live with the result, and from 1898–99 replaced tests with automatic promotion and relegation: bottom two down, top two up, on the table alone.

“Promotion by merit” was not the founding principle of English league football. It was the remedy for a playoff that clubs had learned to game.

Europe opted for the same structure because of the soil it was planted in, its proximity and transplanted British miners and factory workers that brought the game with them, not because a committee sat down and invented sporting justice. Originally, English clubs were civic associations and limited companies rooted in towns, works, churches, and pubs.[6] They predated the League. There were already too many of them to freeze into a small cartel of territorial franchises. The Football Association, older than the League, ran a cup that any affiliated club could enter. The governing idea was membership of an association, not ownership of a protected market.[7]

When other European countries professionalized in the early and mid-twentieth century—Italy, Spain, the German regional structure that later became the Bundesliga, France’s national league from 1932—they inherited the English template along with the laws and structure of how to operate a Federation and league. National associations sat above clubs. Clubs sat in towns that already had more than one team. [8]

North America made the opposite choice in the same era for the opposite reason. Early baseball and later the NFL, NBA, and NHL were organized as leagues of scarce franchises in large territories. The asset was the license. The threat was a rival league, not a second division full of existing clubs demanding a ladder. European soccer had the clubs first, many of them, and built the league around them. American major leagues had the league first and admitted clubs as partners in a joint venture.

Promotion and relegation is what you get when the landscape is already crowded with teams and the governing body claims to speak for all of them.

The model hardened in the early twentieth century because it was cheap to copy and cheap to survive. After the First World War the Football League expanded again: 22-club First and Second Divisions in 1919, a Third Division drawn from the Southern League in 1920, a Third Division North the next year, four divisions of 22 by 1923. One club up from each regional third tier was enough to keep the ladder honest without asking a Grimsby or a Plymouth to carry a First Division wage bill. Italy’s pre-war Valvassori–Faroppa reforms [9], and the later national structures in Spain, Germany’s regional-then-national system, and France’s professional league from 1932, all borrowed the same device as they professionalized: connect the clubs that already existed rather than liquidate them. A crowded map of civic teams however, needed a membership rule. Automatic movement was that rule.

What made the rule an easy fix was something close to financial parity across the different divisions. Before television, the cost of being a professional club had the same ingredients in every division: a field or proper ground, a modest paid squad, rail fares, a secretary, a groundskeeper. First Division gates were larger, but they were still based on attendance and cost per ticket. A promoted club did not inherit a media contract worth ten times the division it had just left.[10] A relegated club did not lose a league distribution that paid most of its wages. Players were local or regional. England’s maximum wage, in force in various forms until 1961, capped how far a top-flight salary could run away from a third-tier one.[11] Stadiums were often owned by the local municipality. Debt… and in many cases, overhead … was small. Being relegated changed the size of the crowd and the prestige of the fixture list. It did not change the species of the business. That is why so many clubs could go up and down between divisions for decades without dying.

Stefan Szymanski, the Stephen J. Galetti Professor of Sport Management at the University of Michigan, put it bluntly: until quite recently, “money didn’t matter that much.” The organizing principles of the European game … including the open pyramid … “served the sport well for more than one hundred years,” he wrote, with nationalism as the great promoter. Civic identity and the hope of a small town were the fuel. The pyramid gave lesser clubs a reason to stay interested and gave every supporter a story that the door was not locked.[12]

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[1] Man City 3-2 QPR, 13 May 2012

[2] The Independent Football Regulator, 2026 State of the Game, 13 October, 2026

[3] Jensen, Neil Frederick.  The Football Alliance: The Forgotten League from the Victorian Age, Game of the People.com, 11 February 2022

[4] Bowen, Rowland (1970). Cricket: A History of its Growth and Development. London: Eyre & Spottiswoode. p. 99.  And from Wikipedia, “The term “test match” was coined during the English tour of Australia in 1861–62 but in a different context. It meant that the English team was testing itself against each of the Australian colonies..”

[5] Interesting random fact…  As if past were prologue, in the 1982 World Cup, West Germany and Austria played in a game that would go down in infamy called the “Disgrace of Gijon” where the West Germans won by the minimum, 1-0.  The game itself was a complete bore with both teams happy for the result.  See the Expanded Information Section at the end of this paper for further detail.

[6] The Football Group, The Evolution of Football Club Ownership in Europe: From the 1800s to Today, See the Expanded Information Section at the end of this paper for further detail.

[7] The History of the FA, TheFA.com

[8] History of German Football, Wikipedia

[9] de Veroli, Marco. Storia del Calcio Italiano, La riforma Valvassori-Faroppa, 23 September 2014 See the Expanded Information Section at the end of this paper for further detail.

[10] For context, the financial disparity between the Premier League and the Championship is massive, with top-flight clubs earning roughly 15 to 20 times more in central television revenue than their second-tier counterparts.  A bottom tier Premier League club earned about $131 million dollars in TV money.  Clubs like Liverpool and Manchester United earned 2x that.  Meanwhile an average Championship club earned roughly $11 million dollars a year in television money.

[11] A Short History of Wages in English Football, 26 October 2024.

“Formal regulation of professional footballers’ income followed with the introduction of the maximum wage in 1901, capped at £4 a week (in season). It rose to £5 in 1910 and by 1920 up to £9, only to be reduced back to £8 (£6 in the summer months) two years later. It took until 1947 for the players to secure another increase, to £12 (for players with five years unbroken service), and that remained in place for a decade. At the Football League’s AGM of June 1957, the maximum wage was fixed at £20 a week during the season (equivalent to approximately £407 in 2024), which reduced to £17 over the summer. The campaign to abolish the wage restriction was spearheaded by Fulham’s Jimmy Hill, leader of the players’ union, the Professional Footballers’ Association (PFA), assisted by Secretary Cliff Lloyd. On behalf of the players, Hill demanded “the freedom to earn as much as they can negotiate with their employers. There should be no artificial ceiling.” “

[12] Stefan Szymanski, 2005. The passage on money and on the century of organizing principles appears in his mid-2000s writing on why U.S.-style competitive-balance restraints never took hold in European soccer; reprinted/related discussion in Szymanski and Zimbalist, National Pastime (Brookings, 2005).