NEW YORK (The Deal) -- Fans of Aston Villa may still be reeling from a 4-0 pounding by Arsenal FC in the FA Cup Final at the end of May, but team owner Randy Lerner, who is nearing a sale of the club, is quietly celebrating as the Villans avoided relegation and steep decline in valuation.
Industry sources say that Lerner, who is seeking around £150 million ($232 million) for the club from an unnamed buyer, would likely have had to accept a far lower price if Aston Villa, which finished 17 out of 20 teams in 2014-15 season, had been relegated for the 2015-16 season. Relegation from the Premier League would have meant being sent down to the Football League Championship, the second, far less lucrative tier of English soccer.
"Upon relegation I wouldn't be surprised if the club was worth £80 million to £100 million," explained one sports banker who steered clients away from the team when it hit the auction block in May 2014 because of its initial asking price of £200 million. "Relegation significantly hurts the value because you lose out on substantial media payments."
Unlike many U.S. professional sports leagues that have revenue-sharing programs, salary caps and regional sports networks, the Premier League shares a portion of media contracts with its 20 member clubs, but the funds are not split equally. Larger, more popular teams such as Chelsea, Manchester United and Manchester City get a larger portion of the profits, in what sources say is a system where the rich get richer and the poor get poorer.
The three teams dropped from the top league every year receive "parachute payments" for the three years following relegation to ease the losses incurred from smaller media deals. However, if a team does not work itself back into the Premier within three years, those parachute payments stop.
"It is hard to sustain if you get relegated," said a sports banker familiar with the Aston Villa sale.
Such was the case with Fullham FC, the London-based team that was relegated after the 2013-14 season. Shahid Khan, the Pakistani-American billionaire who also owns the NFL's Jacksonville Jaguars, purchased the team in July 2013 for £200 million from Egyptian billionaire Mohamed Al Fayed. After the team was relegated just months after Khan purchased it, its value dropped by almost 50%, two sources said. The saving grace for Fullham is that the team is located in London, making it easier to generate cash from a large fan base in a huge market.
Villa, said one source, does not have that luxury given the team's location in Birmingham.
"This is Birmingham, not London, and you don't get the London pricing or sponsorship dollars ... It is a lot harder market to survive in once you are relegated," the source said.