ITV Digital goes broke

TV audiences have been poor for league games

ITV Digital, the crisis-hit UK broadcaster, has been put into administration following a High Court order.

Services for subscribers are expected to continue as normal, at least initially, while two partners from accountancy firm Deloitte & Touche take over running the company.

Our role is to continue negotiations with suppliers in an attempt to reduce costs

Nick Dargan, administrator

ITV Digital chief executive Stuart Prebble said the company was approaching the process "in a very positive way" and intended to emerge from administration as a much stronger business with a long-term future.

The collapse of ITV Digital is a huge blow to its owners, Carlton and Granada, which had hoped that a three-year deal to broadcast Football League games would drive business growth.

There is hardly anyone running a television company today who doesn't think they paid too much

Greg Dyke
BBC Director General

But the £315m cost of the rights became one of the principal reasons for the broadcaster's failure.

TV audiences and advertising revenues have not matched ITV Digital's expectations and the sum paid for the football has come to be seen as excessive.

BBC Director General Greg Dyke said that "there is hardly anyone running a television company today who doesn't think they paid too much".

"No one will pay that much again," he added.

Far apart

The Football League offered a last-minute compromise to stave off ITV Digital's collapse but the two sides remained far apart.

The broadcaster owes £180m to the League, which it says it cannot afford to pay.

ITV Digital

Set up in Nov 98 as OnDigital

50:50 owned by Carlton and Granada

Rebranded ITV Digital Apr 00

1.3 million subscribers

Thought to be losing about £1m a day

The Football League said it would accept a deal involving a £90m payment in August and negotiations over when the remaining £90m would be paid. ITV Digital is understood to have insisted it could pay only £50m.

Granting the administration order, Mr Justice Etherton has asked the two sides to continue talks.

The order lasts for six months, with the administrators due in court on 15 April to report progress.

Failure to resolve the issue by then might lead to liquidation or sale of the company, industry sources said.

More viable

The administrators will set about restructuring ITV Digital with a view to putting it on a more viable commercial footing.

One of the administrators, Nick Dargan, said money had been provided to enable the business to continue in the short-term, and so, for the moment, there would be no impact on subscribers or employees.

This announcement is not the end of digital terrestrial television in the UK

Tessa Jowell, Culture Secretary

"Our role is to continue negotiations with suppliers in an attempt to reduce the cost base of the business," said Mr Dargan.

"Our purpose is to establish this business as a going concern. If the process is successful the ITV Digital platform will be preserved for the future."

As well as cutting costs through renegotiating contracts with suppliers, there could, in time, be further job losses, industry sources said.

ITV Digital has already shed about 25% of its workforce in the past year in an effort to trim costs.

Coup de grace

Many smaller football clubs who rely on the TV money also face an uncertain future, unless a new television deal can be struck - either with the League itself or a rival broadcaster.

The BBC has learned that six Football League clubs are ready to put themselves into administration following ITV Digital's collapse.

On Wednesday, Swindon Town joined clubs including Queen's Park Rangers and Bury in administration.

Threat to sue

ITV Digital has swallowed £800m of investment, and required a further £300m to reach breakeven point, but was losing subscribers almost as quickly as it gained them.

The decision to put the company into administration is sure to intensify the row between the Football League and Carlton and Granada over who is now liable for the money promised to clubs in the original TV contract.

Digital TV subscribers

BSkyB 5.7 million

ITV Digital 1.26 million

NTL 1.25 million

Telewest 724,000

The Football League had threatened to sue the broadcaster and its owners Carlton and Granada for £500m if they did not meet the original terms of the deal.

ITV Digital has said that Carlton and Granada are not liable for the payments, while Football League chairman Keith Harris has insisted the firms should honour the contract.

'The clock is ticking'

The Culture Secretary Tessa Jowell said the decision to place ITV Digital into administration was a "commercial decision" and urged the Football League to continue negotiations with the company.

"This announcement is not the end of digital terrestrial television in the UK," she said.

"I reaffirm my belief in the benefits that digital television can provide to our society and the economy."

"It is now up to all sides to agree a way forward that benefits them and the viewers. The clock is ticking."