Financial Crisis Looms For League Clubs

By: The Guardian
Date: 01/03/2002

FOOTBALL League clubs face a cash crisis after the collapse of the current deal with ITV Digital for TV coverage of the Nationwide League.

The two companies that own ITV Digital made it clear last night that they intended to renegotiate the £315m television deal between the league and Digital as they cannot make it pay.

The renegotiation of the three-year Nationwide League contract, due to run until summer 2004, will form a central part of a "fundamental restructuring" of ITV Digital which was announced yesterday by Carlton and Granada. It is part of an urgent rescue plan that, if it fails, could see the closure of ITV Digital and the complete scrapping of the TV deal.

Latest estimates suggest that there are between 14 and 16 clubs in the Nationwide League on the brink of bankruptcy and there are fears that any reduction in TV revenues would push them over the edge.

"The club chairmen are going to have to accept that a renegotiation is in their best interests," said an ITV source. "Unless they accept a lower price the whole deal could be scrapped and, when it comes to the next round of bidding, BSkyB will be the only people at the table. Murdoch will be able to name his price - and it won't be high.

"We're living in a different economy now and the clubs have to understand that."

Gillingham's chairman Paul Scally, a former Football League Board member, said: "Football's future is hanging by a thread and we are facing a very serious situation. We are very concerned that the money from the television contract may now not come in.

"If ITV Digital fails to make any payment, then there is nothing we can do. Everyone is trying to keep a brave face on it and hoping that the worst does not happen."

Money from the Football League's television deal is divided between its 72 clubs depending on which division they are in. A First Division club receives £2m per season, a Second Division club £200,000 and a Third Division club £150,000 per season.

ITV Digital in its contract has to pay the money in three stages. The first payment of £89m was made at the start of this football season and £44m was paid up front when the contract was signed in June 2000. The next payment of £89m has to be made this August with the remainder of the money being paid the following August.

Scally said: "It is quite a precarious contract because there are no cross-company guarantees from either Granada or Carlton. They could easily liquidate ITV Digital and we would not receive any money.

Carlton's and Granada's decision has been prompted by ITV's failure to agree on a price that would see ITV Sport beamed into the 5.7m homes that take BSkyB's digital TV service. This has prevented BSkyB subscribers from watching Nationwide League and Champions League football.

It also underlines a growing feeling among broadcasters that the amount they are prepared to pay for sports rights has peaked and, unless there is a radical reassessment of football's financial relationship with television, the bubble of success hovering over the game could burst.

Viewing figures for Nationwide League games on ITV Sport have been abysmal. Some matches have attracted as few as 1,000 viewers, even though each one costs ITV £1.2m to broadcast.

In those instances it would have been cheaper for the channel to drive each of its viewers to the ground, put them up in a five-star hotel and give them all £500 spending money.

John Nagle, spokesman for the Football League, said last night that they had a legally binding agreement with ITV Digital which they expect the channel to honour. Nagle said that football officials would be willing to meet television executives from Granada and Carlton to discuss the situation.

He said: "We have an agreement and we expect them to honour that. If they approach us and want to come and see us, then of course we would be happy to talk to them because they are a valued commercial partner.

John Cassy and Vivek Chaudhary
Thursday February 28, 2002

Reproduced by permission of The Guardian

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