Should Premier League Clubs Bet On Their Own Demise?

The Premier League: 20 clubs,  10 months, 380 matches.  There is no escaping the fact that by the end of May three of those clubs will be at the bottom of the table and say goodbye to the Premier League.  This Survival Sunday more clubs than usual find themselves at risk after an extremely tight season has made it conceivable that a team could go down with 41 points.  Relegation is much like Russian Roulette in that you are extremely excited for it not to happen to you, and rightly so because relegation is a cold bath for most clubs and nearly catastrophic for smaller clubs.  Dropping out of the top flight causes a minimum loss of  £37m pounds in revenue from broadcast-sharing revenue, for smaller clubs this constitutes a sizable percentage of their income and in some cases all their income.  While parachute payments cushion some of the impact (they are being increased) it is somewhat akin to believing that a helmet is going to blunt the garbage truck barreling towards you.

If you were frequently at risk of being run over by wayward trucks you might buy health insurance to compensate for your medical bills and lost income.  If you were running a business you would buy insurance to ensure that a random act of destruction would not threaten your main source of income.  Why not insure a football club then?  In fact institutions already exist which would provide exactly the risk coverage that a relegation candidate like Blackpool or Wigan might need: the bookies.  Sports betting is entertainment for the punters but for bottom table clubs it has the potential to be something game changing, at least financially.

Take as an example Wolverhampton, a team heavily against the odds to survive at the beginning of the season.  Wolves spent a net amount of €14.7m euros on seven new players for the 2010-2011 campaign, should they go down that would be €15m ill spent on Premier-level wage earners to play in the Championship.  If, instead, the club bought fewer players and spent half the transfer kitty, €7m, on insurance from Ladbrokes the club would still have some new players as well as an extra cash to spend on long term club development.  How much more though?  At the beginning of the season odds on Wolves’ relegation were offered at 9/4, meaning for every €1 wagered you would receive €3.25 back (€2.25 profit + €1 original bet).  At those odds* half the transfer money, €7m, would have returned a total amount of €22.75m, or €15.75m in profit.   A sum that easily covers the season’s player acquisitions and leaves the club with a net gain of €8m.  Undoubtedly a better outcome than a net loss of €15m.

There are plenty of issues that arise from clubs profiting on their poor performances, the most pressing one being whether such a policy would dampen the excitement of the league.  Additionally, there is the small question of whether it is legal or not as well as whether any sportsbook would be willing to take on that much risk.  Significant concerns, but given the rather poor state of club finances perhaps it is worth the risk?

Should Premier League Clubs Bet On Their Own Demise?

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