The BBC is believed to have beaten Granada, the leisure and television broadcasting group, which had been considered favourite to land the contract, in the race to sign up Manchester United.
A spokeswoman for BBC Worldwide, the commercial arm of the BBC, said yesterday: "The talks we have had so far [with Manchester United] are encouraging. It is looking good. However, the deal has not been finalised and nothing is definite."
Fans who pay a subscription every month for the channel will be able to tune into the latest club news and see interviews with players, as well as a host of other magazine-style features based around the club. Manchester United will also show friendly and second team matches, and repeats of league games as well as advertising club merchandise such as replica kits.
Analysts speculate that the club may eventually seek to introduce other sports on to the channel such as local basketball and rugby matches, and may even seek to run more than one channel if the initial scheme is successful.
However, the club will not be able to show any of its own live league games. BSkyB, Rupert Murdoch's satellite television giant, has recently signed a four year deal with the Premier League giving it exclusive rights to show the Premier League's games until 2001.
Manchester United's initiative raises the prospect that the club could decide to show its own matches on its own channels when the BSkyB contract lapses. United's Premiership rival, Leeds United, is also likely to seek a breakaway from BSkyB. The club recently confirmed plans to form its own pay-TV channel.
Chris Akers, the chairman of Leeds' owners Caspian, has said the group was in negotiations with Cable and Wireless Communications and General Cable about screening the channel. Leeds is also in talks with large media groups, including Granada, to produce the channel's programmes.
If Manchester United decides to team up with the BBC it will seen as a huge snub to Granada, which produces Coronation Street and broadcasts across the North-west region. Some observers believe that Granada may eventually be forced to launch a takeover bid for Manchester United if its new channel turns out to be a success and the club becomes a significant competitive threat to the group in its home territory.
The introduction of digital television will herald an explosion in the number of TV channels, with eventually more than 200 likely to be on offer. However, viewers will only be able to receive the new service on their existing televisions by buying a set-top box which will probably cost around pounds 200.
The BBC signed a pounds 200m deal with Flextech, the cable and satellite television company, earlier this year to create eight pay-per-view digital television channels. One of these channels is likely to be devoted to sport, which would incorporate Manchester United's programmes.
Manchester United, the current holders of the Premier League title, is already the most profitable club in the world thanks to a strong brand name which has spawned the rapid growth of its lucrative merchandising operation.
According to industry sources the club is now looking for acquisitions in the Far East, having recently appointed the bankers HSBC to advise on its expansion strategy.
David Gill, Manchester United's finance director said yesterday: "We announced at our last results that we were in talks with broadcasters about setting up our own channel and we have nothing to add at this time."