The foundation of the Premier League in English football occurred at the beginning of the early 1990s, with the first major step being taken forwards its formation in October 1990, when the managing director of London Weekend Television (LWT) Greg Dyke met with the representatives of the "big five" football clubs in England in 1990. The meeting was to pave the way for a break away from the Football League. Dyke believed that it would be more lucrative for LWT if only the larger clubs in the country were featured on national television and wanted to establish whether the clubs would be interested in a larger share of television rights money.
Talk of a super league of elite English clubs had been frequently mentioned by various footballing bodies, and by the media, since the mid 1980s.
The fundamental difference between the old Football League and the breakaway league (what became the Premier League) is that the money in the breakaway league would only be divided between the clubs active in that division whilst it was shared between all Football League clubs in the old First Division. The plan was drawn up for a Premier League of 18 clubs to be created in time for the 1992-93 season, although the recently announced plan to increase the First Division from 20 to 22 clubs for the 1991-92 season still went ahead, as the creation of the Premier League had still not been confirmed by this stage. However, 14 of the 22 clubs who would be competing in that season's First Division had agreed to form a breakaway league of their own if the Football Association's bid to create a breakaway league failed.
The five clubs decided it was a good idea and decided to press ahead with it, however the league would have no credibility without the backing of The Football Association and so David Dein of Arsenal F.C. held talks to see whether the FA were receptive to the idea. The FA did not enjoy an amicable relationship with the Football League at the time and considered it as a way to weaken the Football League's position. Football League president Bill Fox even described the FA's plans to form a breakaway league as an attempt to "hijack" the First Division.
ITV offered £205 million for the television rights and later increased their offer to £262 million but were outbid by Rupert Murdoch who saw it as an opportunity to lure new customers to their loss-making satellite service Sky Television plc who had been advised by Tottenham Hotspur Chairman Alan Sugar. Trevor East of ITV heard Sugar on the telephone speaking to Murdoch at the Royal Lancaster Hotel in London in May 1992 advising an increased bid for the television rights. Sugar is alleged to have told Murdoch to "Blow them out of the water".
On 20 February 1992, the Premier League was officially formed, and it was confirmed that the first season of the new league would begin in August that year, involving the 19th highest placed teams in that season's First Division as well as the champions, runners-up and playoff winners from the Second Division. The old Second Division would be renamed Division One, the Third Division would become Division Two and the Fourth Division would become Division Three. The three-up, three-down system of promotion and relegation, established in 1974 (although there had since been exceptions to the system on occasions when the league was being reorganised) would continue in the future.
Sugar at the time was supplying Sky with Satellite Dishes and was the only Chairperson of a big five club to vote in favour of Sky's bid. He would soon take over Tottenham Hotspur.
The other large clubs were reluctant to accept Sky's bid due to it being a non-terrestrial television service and no pledge from Sky to feature their games more regularly was made.
Following a trial in the Queen's Bench Division of the High Court by Justice Rose, it was held that the formation of the Premier League was not subject to judicial review, The Football Association being governed by private law.