ITV Digital faces football row

Viewing figures have been unexpectedly poor

ITV Digital is facing a half-billion pound law suit from the Football League if the troubled broadcaster pulls out of its contract to televise matches.

"There's not been a breach of contract so far," said John Nagle, a spokesman for the Football League.

"Were there a breach, the League would do all in its powers to receive all that is in the value of the contract, and also money for damages induced by the breaching of the contract."

ITV Digital last week asked the League to waive some of the £178.5m it still owes on the contract to screen matches from England and Wales's first, second and third divisions.

Granada are under pressure. People are worried about the digital bill if they were to pull out of this agreement

London share trader

But League chiefs rejected the plea, saying football clubs could go bust if the fees were not paid.

The next step came with rumours on on Friday that ITV Digital's owners were considering closing down the broadcaster altogether unless the Football League agreed to renegotiate the contract.

And now, in the wake of a Monday board meeting at ITV Digital that did not - as many in the financial markets had predicted - result in a closure announcement, the League says it is ready to sue.

Raising the stakes

The Football League says it believes revenue from advertising at grounds and other commercial sources would be lost, justifying the additional damages it is demanding.

Most reports say neither of ITV Digital's two owners, TV companies Carlton and Granada, are responsible for ITV Digital's liabilities should a law suit go against it.

But the UK's Sun newspaper - owned by Rupert Murdoch, who controls ITV Digital's vastly more successful rival BSkyB - is claiming it has seen documents suggesting the two companies will indeed have to carry the can.

Shares in both TV groups tumbled on Monday.

"Granada are under pressure. People are worried about the digital bill if they were to pull out of this agreement," said one dealer.

Granada's shares closed down 5.8% at 138 pence, while Carlton shed 8.2% to end at 262.5p.

The League has reportedly written to Granada and Carlton outlining its case and urging them to honour the three-year contract.

The League argues many of the 72 clubs in the first, second and third divisions would face collapse without the fee income owed by ITV Digital.

ITV Digital has said that Carlton and Granada are not liable for the payments, although some observers have warned the firms stand to suffer negative publicity if cash-starved clubs go to the wall.

Battle for viewers

ITV Digital snapped up the TV rights in an effort to win market share from BSkyB, which claims 5.7 million viewers in the UK and Ireland.

But audiences have been disappointing, meaning ITV Digital could not reap the advertising revenues hoped for.

ITV Digital has so far swallowed £800m of investment, and requires a further £300m to reach breakeven point.

The service has shed one quarter of its staff in the past year in an effort to cut costs.

Some club chiefs had urged the Football League to consider a compromise deal, rather than risk forcing the end of ITV Digital and hopes of receiving any cash from the contract.