Promotion and relegation

Promotion and relegation is used by sports leagues as a process where teams can move up and down among divisions in a league system, based on their performance over a season. Leagues that use promotion and relegation systems are sometimes called open leagues. In a system of promotion and relegation, the best-ranked team(s) in a lower division are promoted to a higher division for the next season, and the worst-ranked team(s) in the higher division are relegated to the lower division for the next season. During the season, teams that are high enough in the league table that they would qualify for promotion are sometimes said to be in the promotion zone, and those at the bottom are in the relegation zone (colloquially the drop zone or facing the drop). These can also involve being in zones where promotion and relegation is not automatic, but subject to a playoff.

An alternate system of league organization, used primarily in Australia, Canada, the Philippines, Singapore, and the United States, is a closed model based on licensing or franchises. This maintains the same teams from year to year, with occasional admission of expansion teams and relocation of existing teams, and with no team movement between the major league and minor leagues. Some competitions, such as the Belgian Pro League in football or the Super League in rugby league, operate hybrid systems which allow for promotion and relegation between divisions but which allocate this based on a mix of financial and administrative scores with competition performance.

The number of teams exchanged between the divisions is almost always identical. Exceptions occur when the higher division wishes to change the size of its membership, or has lost one or more of clubs (to financial insolvency or expulsion, for example) and wishes to restore its previous membership size, in which case fewer teams are relegated from that division, or (less often) more teams are accepted for promotion from the division below. Such variations usually cause a "knock-on" effect through the lower divisions. For example, in 1995 the Premier League voted to reduce its numbers by two and achieved the desired change by relegating four teams instead of the usual three, whilst allowing only two promotions from Football League Division One. Even in the absence of such extraordinary circumstances, the pyramid-like nature of most European sports league systems can still create knock-on effects at the regional level. For example, in a higher league with a large geographical footprint and multiple feeder leagues each representing smaller geographical regions, should most or all of the relegated teams in the higher division come from one particular region then the number of teams to be promoted or relegated from each of the feeder leagues may have to be adjusted, or one or more teams playing near the boundary between the feeder leagues may have to transfer from one feeder league to another to maintain numerical balance.

The system is said to be the defining characteristic of the "European" form of professional sports league organization. Promotion and relegation have the effect of allowing the maintenance of a hierarchy of leagues and divisions, according to the relative strength of their teams. They also maintain the importance of games played by many low-ranked teams near the end of the season, which may be at risk of relegation. In contrast, the final games of a low-ranked US or Canadian team serve little purpose, and in fact losing may be beneficial to such teams because they offer a better position in the next year's draft.

Although not intrinsic to the system, problems can occur due to the differing monetary payouts and revenue-generating potential that different divisions provide to their clubs. For example, financial hardship has sometimes occurred in leagues where clubs do not reduce their wage bill once relegated. This usually occurs for one of two reasons: first, the club can not move underperforming players on, or second, the club is gambling on being promoted back straight away and is prepared to take a financial loss for one or two seasons to do so. Some leagues (most notably English football's Premier League) offer "parachute payments" to its relegated teams for the following year(s). The payouts are higher than the prize money received by some non-relegated teams and are designed to soften the financial hit that clubs take whilst dropping out of the Premier League. However, in many cases, these parachute payments just serve to inflate the costs of competing for promotion among the lower division clubs as newly relegated teams retain a financial advantage.

In some countries and at certain levels, teams in line for promotion may have to satisfy certain non-playing conditions in order to be accepted by the higher league, such as financial solvency, stadium capacity, and facilities. If these are not satisfied, a lower-ranked team may be promoted in their place, or a team in the league above may be saved from relegation.

While the primary purpose of the promotion and relegation system is to maintain competitive balance, it may also be used as a disciplinary tool in special cases. On several occasions, the Italian Football Federation has relegated clubs found to have been involved in match fixing. This occurred most recently in 2006, when the season's initial champions Juventus were relegated to Serie B, and two other teams were initially relegated but then restored to Serie A after appeal (see 2006 Serie A scandal).

As of the 2020s, empirical evidence increasingly pointed to the conclusion that promotion and relegation, standing alone, was insufficient to ensure adequate parity in any given game or the overall financial performance of a sport (as distinguished from individual players or teams). Most importantly, the failure of most association football leagues to adequately regulate individual player compensation (that is, by imposing salary caps) had resulted in too many games ending in predictable blowouts, and thereby reduced the financial value of such games in terms of ticket sales and media rights. This explained why in the 2020s, association football leagues were collectively bringing in annually only about two times the revenue of the National Football League (the wealthiest sports league in the world), even though association football had eight times the number of fans worldwide as American football. It was reportedly because of such evidence that the EuroLeague adopted mandatory salary bands in September 2024.