The season is just five games old but West Ham United became the second Premier League club this season to pull the trigger and replace their manager.

Graham Potter’s race at the Hammers, despite having only started back in January, was abruptly ended over the weekend following meetings by owners, and his replacement is already in situ, with former Nottingham Forest boss Nuno Espirito Santo, who was sacked by Forest at the start of September following a row with club owner Evangelos Marinakis, the man to take the helm at the London Stadium.

Nuno’s reign begins straightaway, with Monday night’s visit to Everton’s Hill Dickinson Stadium to face a Toffees side who have started the season strongly under David Moyes, still enjoying the feel-good factor that their new 52,888-seater stadium has delivered.

Potter’s position as boss had been under internal review, as GIVEMESPORT had previously reported, with the Hammers’ hierarchy knowing that they could ill afford to let a bad situation drag on indefinitely given the huge financial impact of relegation to the Championship, and how wasted time can be crucial when it comes to the picture at the end of the season.

Sullivan had to Act at West Ham With Relegation Hugely Impactful

Five games in, relegation shouldn’t be a consideration, but such is the financial need to remain a Premier League club, especially for those clubs who have been mainstays of English football’s top flight for some time, that preserving status as a member of the 20 elite clubs is crucial. That is why David Sullivan, West Ham’s long-standing owner, expedited the exit of Potter as boss, bringing in Nuno as his replacement, with the Portuguese seeing his stock high after a fine season with Forest last term. Off-field friction between him and Marinakis, and not poor performance, was the reason for him exiting the City Ground.

Relegation is hugely impactful for Premier League clubs. The reason for that is largely down to the drop in broadcast rights that clubs receive from the League, which are derived from the money that comes in from the sale of both the domestic and international media rights for the competition, which combined over the current four-year cycle equates to more than £12bn.

From both markets, clubs receive their money via an equal share distribution and merit payments determined by competitive performance. They are also in receipt of facilities fees from the domestic market in relation to how many live games they featured in, as well as taking an equal slice of the commercial revenue, which works out as £7.9m per club, per year.

In West Ham’s case, for the 2023/24 financial year the club brought in £167m from broadcast-related income. That was a figure up from £143m the previous year due to an improved position in the Premier League. That was the biggest sum of any club in the division outside of Arsenal, Chelsea, Liverpool, Manchester City, Manchester United and Tottenham Hotspur.

The immediate impact of clubs falling into the second tier is mitigated in no small way by the existence of parachute payments, a sum that comes from the Premier League and is designed to soften the landing for clubs exiting the lucrative nature of English football’s elite domestic men’s competition.

Parachute payments provide clubs with financial aid for a three-year period after relegation. Year one sees them in receipt of £40m, which is 55% of the broadcast revenue share they would expect from the Premier League, with it dropping to £35m in year two and £15m in year three, on the basis that the club had been a Premier League member for more than a season.

West Ham made £130.9m from central funding from the Premier League when factoring in merit payments, equal share and commercial share, meaning that a £45m sum received from the Championship would be a significant decline in centralised funding from the league.

It isn’t just the value of broadcast rights that takes a pretty hefty beating. Commercial income is also often significantly affected, with existing deals sometimes containing clauses to either break or reduce in value in the event of relegation.

The value of front-of-shirt sponsorship, if the club needs to go to market again, falls, as does the value of pitchside advertising through LED boards, which carries a premium price for most Premier League clubs as they can offer brands significant exposure to millions in both the domestic and international markets through games being broadcast.

Attendances can also suffer. While big clubs such as West Ham may well expect to keep hold of a bulk of their support and not see too much drop off for a campaign in the Championship, away attendance sometimes doesn’t meet what was expected in the Premier League due to smaller fan bases, while ticket prices often have to be looked at in terms of price reduction by owners due to the on-pitch product not being at a premium level.

The same could be said for hospitality and how much can be generated from selling boxes, suites and lounges, with the price point impacted by virtue of the club not being a member of the Premier League and not drawing the biggest names to the stadium.

Merchandising is another area which can be negatively impacted. Shirt sales can dip, while global exposure and interest can wane when clubs are out of the Premier League limelight, with the Championship getting far less shine on the world stage, thus less appealing to casual fans in other markets, and commercial partners alike.

To look at the kind of impact that can be felt, Leeds United’s relegation from the top flight back to the Championship in 2023 saw them fall from £189.7m to £127.6m, a drop of just over £62m, or 33%.

But that was deemed a relatively strong performance as the club had managed to player trade effectively, bringing in £33.7m profit on player sales, while slashing the wage bill by 42%, from £145.8m to £84m.

The difference is that Leeds weren’t fully established back in the Premier League at the time of their relegation. The infrastructure was built upon time in the Championship, and the increase in spending was driven by the extra cash available after promotion. Like most promoted clubs, relegation release clauses and wage reductions upon relegation featured heavily in summer recruitment, meaning some element of pain had already been planned for.

West Ham Not Set up for Championship-Level Revenue

West Ham have been setting their targets higher and have been a Premier League side since 2012. They are not set up for Championship-level revenue, and with a wage bill for 2023/24 of £161m, around 60% of revenue, they would need to shave that considerably.

Relegation is seldom the great reset that some fans might believe it is, and while there may be some elements of ‘cleaning house’ with the exit of high-earning, under-performing players, the reality is that it is an extremely costly failure, one that takes time to recover from, and one where the pressure exists to bounce back at the first attempt or risk being cast into EFL purgatory, as has happened to the likes of Reading, Portsmouth, Sheffield Wednesday, Watford and West Bromwich Albion, among others, down the years.

The reason why managerial changes occur with such regularity in the Premier League nowadays is that owners want to act as soon as they can to protect themselves from the risk of relegation and the financial losses that come with it, not to mention the significant impact it has on the overall value of the football club, which is the chief reason why owners acquire these clubs in the first place.

Forbes magazine ranks West Ham as the 18th most valuable football club in the world at £900m. That is something that is predicated to no small extent on them being part of the elite 20 clubs, and with that in mind the club’s owners weren’t minded to provide many more opportunities to Potter.

Having signed a two-and-a-half-year contract in January, Potter had two years remaining, although quite how much compensation will be is difficult to ascertain with Potter’s deal, which the Hammers had initially wanted to be six months at the start of the year, included a number of performance-based break clauses.

In hiring Nuno, West Ham have avoided having to pay any compensation, with any severance due to Potter likely to be considerably lower than what would usually be expected to have to be shelled out. That will be beneficial for the Hammers and their plans for January, something that will provide a boost for their plans to make sure a survival battle is not on the cards.