Revealed! The harsh financial reality of Sunderland’s relegation to League One

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“We acknowledge that our financial performance must improve significantly.”

The words of Sunderland owner Ellis Short as he reflected, in April last year, on the last set of financial results - released 24-hours before Premier League relegation was confirmed.

Chris Coleman.

Chris Coleman.

Fast forward 12-months and Sunderland have suffered the humiliation of back-to-back relegations.

Those results covered the 2015-16 season and showed a debt of £110million, with the latest figures - for the 2016-17 season - due out soon.

Another relegation was not part of the plan yet here we are, with the club up for sale and uncertainty looming over the Stadium of Light like a huge, dark cloud.

But what are the financial implications of relegation to League One?

Sunderland skipper John O'Shea.

Sunderland skipper John O'Shea.

Parachute payments:

Let’s start with the good news. With a mountain of debt and a huge wage bill, Sunderland can consider themselves fortunate to still be able to rely on a parachute payment next season.

Clubs relegated from the Premier League receive three years worth of payments, with the club receiving around £40million this season.

It drops to around £33million for 2018-19 and £15million the season after.

Jack Rodwell.

Jack Rodwell.

Clearly, £33million into the coffers will give Sunderland an advantage, just don’t expect millions to be spent on the team.

The last set of accounts showed Sunderland had annual losses of £33million, coupled with the debt and wage bill, the parachute payments will help manage those significant losses and service the debt.

Until it’s sold, Short will continue to fund the club to keep it running but don’t expect much, if anything in the way of transfer fees. Just £1.25million spent in the last two windows.

Chris Coleman has already stated it wouldn’t take a King’s ransom to rebuild Sunderland, with immediate promotion the aim.

Wage bill and player turnover:

The annual wage bill was dramatically reduced following relegation from the Premier League but is still around £35million and one of the highest in the Championship.

The squad relegated from the top flight had 40 per cent wage cuts, minus £70,000-a-week Jack Rodwell, whose 40 per cent cut comes in this summer.

Players signed since relegation from the Premier League - and those that have since signed new contracts - will see a 40 per cent cut this summer.

However, those relegated from the top flight who had their wages slashed last summer won’t see a further cut; the likes of Lee Cattermole and Lamine Kone.

It means unless Sunderland can move them on, the club will be paying huge wages by League One standard, where top earners earn around £2,000 a week.

Sunderland have no choice but to slash the wage bill further.

John O’Shea, Marc Wilson, Billy Jones and Kazenga LuaLua are out of contract, while the seven loan players will leave.

Jeremain Lens and Fabio Borini will officially move to Besiktas and AC Milan respectively, those deals already confirmed.

Besiktas will pay £6million in total, including a £1.5million loan fee paid last summer.

Sunderland need to move the high earners on including Wahbi Khazri (Rennes) and Papy Djilobodji (Dijon), both on loan in France.

Coleman won’t see his wages cut, there is no such clause in his contract.

TV money and EFL funding plummets:

You just have to look up the road to see what Sunderland are missing out on.

If a tenth place Premier League finish is taken as a barometer, Newcastle could earn around £121.5million for season 2017-2018, made up of TV money from domestic and overseas rights, facility fees for live games and merit payment.

Unlike the Premier League, there is no prize money in the Championship or money linked to final league position.

Each Championship club receives a flat ‘basic award’ payment of just over £2million.

Yet, 2016-17 figures show in League One that drops to around £670,000 and in League Two less than half a million.

There is also a so-called ‘solidarity payment’ from the Premier League, money donated from the huge TV deal.

Each club gets £4.3million in the Championship, £645,000 for League One clubs.

So relegation wipes around £5million off Sunderland’s income stream immediately with the cuts to basic award and solidarity payments.

In terms of TV revenue, Championship clubs receive £100,000 for a home game selected for TV broadcast and £10,000 for an away game.

It is a fraction of that in League One, just £30,000 for the home club.

Other key factors:

Sunderland’s average attendance has dropped significantly, with an average gate of 27,699 in the 48,000-seat Stadium of Light.

That is paid for tickets including season cards, the reality has often been far lower.

Relegation would likely see a further dip, though if Sunderland do mount a promotion charge then the Black Cats will still be backed by big crowds. The number of fans in the away end, however, will likely decrease due to smaller fan bases.

Other revenue streams including advertising, retail and match day income will all take a further hit.

The club has already announced plans to close the Premier Concourse next season.