ITV Digital football contract 'binding'

Nationwide football television audiences have been poor

Football League clubs have been told ITV Digital must honour its £315m, three-year deal which is vital to the future of dozens of clubs, it is reported.

Lawyers have advised Football League chairmen they can force Granada and Carlton, who run ITV Digital, to stand by their commitment, according to the Financial Times.

The deal has become an unsustainable loss for the new pay-TV channel.

But David Burns, chief executive of the Football League, has written to the 72 club chairmen to inform them there was no way it could be ditched.

High-profile advertising, but poor take-up

He reportedly said the League had a "legally binding contract with ITV Digital which is backed by its parents, Carlton and Granada."

The television money is seen as vital to the survival of dozens of football clubs.

But viewing figures have been poor and it is believed that the two media giants wanted to renegotiate the contract to ease the financial crisis.

Carlton and Granada have so far put more than £800m into the venture, and it now has 1.2m subscribers.

No recourse

But it needs many more to break even - and a quarter of those subscribers it does have cancel each year.

With the advertising slump hitting Carlton and Granada's revenue, they have been hard-pressed to find the money to continue.

The company has already announced 500 redundancies at its call centre.

Privately, Carlton and Granada reportedly disagree with the League's legal advice and claim there is no recourse to them as ITV Digital's shareholders.

I think the football clubs are worried that should they renegotiate the contracts, 10 or 15 football clubs could well go under

Stephen Ford
Brewin Dolphin

"ITV Digital is confident that there are no parent guarantees," one executive is quoted as saying.

Accountants Deloitte & Touche have been called in to restructure all deals between ITV Digital and its suppliers of content.

Stephen Ford from the stockbroker Brewin Dolphin told the BBC: "Here we've got one struggling business model paying lots of money to football clubs, who are also a struggling business model.

"ITV Digital has not really worked and I know that the company, which is backed by Carlton and Granada, is looking at all its costs, trying to cut them.

"And I think the football clubs are worried that should they renegotiate the contracts, 10 or 15 football clubs could well go under."

Paying in the long-term

Tom Cannon told the BBC's World Business Report he believes some football clubs are now concerned about the long-term effects of the large sums of money they were paid for television rights.

"There are a couple who have realised that their first... bite was a big bite, and are now concerned about the long-term viability, particularly of ITV Digital," he said

The future of ITV Digital is important to the football clubs as it competes with Sky for television rights, according to Mr Cannon.

But not all football clubs are so forward-thinking, he said.

"There are a number of football clubs who are so desperate for money in the short-term, that they are willing to risk the long-term."