Promotion and Relegation

In many sports leagues around the world, promotion and relegation is a process that takes place at the end of each season. Through it, teams are transferred between two divisions based on their performance that season. The best-ranked teams in the lower division are promoted to the division above, and, at the same time, the worst-ranked teams in the higher division are relegated to the division below (in some countries play-offs are also used). This process can continue through several levels, with teams being exchanged between levels 1 and 2, levels 2 and 3, levels 3 and 4, and so on. Sometimes, qualifying rounds are used to promote and relegate. During the season, teams that are high enough in the 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 (or, colloquially, the drop zone).

The number of teams exchanged between the divisions is normally identical. Exceptions occur when the higher division wishes to change the size of its membership, or has lost one or more of its clubs (to financial insolvency, for example) and wishes to restore its previous membership size, in which case fewer teams may be relegated from that division, or more accepted for promotion from the division below. Such variations will almost inevitably 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.

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/or 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, a low-ranked U.S./Canadian team's final games serve little purpose, and in fact losing may be beneficial to such teams, yielding 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 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't 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.

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.

In sports such as bandy, ice hockey and floorball, the concept of promotion and relegation is used also for the World Championships, as well as the Athletics European Cup.

An alternate system of league organisation which is used in the U.S., Canada and Australia is a closed model which always has the same teams playing, with occasional admission of expansion teams.