ITV Digital 'will close' rather than pay in full

The ITV Sport channel will be closed down before August unless the Football League accepts a drastically reduced offer for the remaining two years of its television contract, senior sources at ITV Digital said yesterday.

The ITV Digital platform may continue to exist, it was claimed, although the ITV Sport channel would not. Significantly, sources at ITV Digital said that liability for the £315m three-year contract does not lie with ITV Digital's co-owners, Carlton and Granada.

If the ITV Sport channel is scrapped and ITV Digital defaults on its agreement, the League has said that between 30 and 50 Nationwide League clubs face ruin. "Nobody should be in any doubt that if this contract is not honoured there will be widespread bankruptcies," Keith Harris, the League's chairman, said. He added that part-time football could be the only choice for many clubs.

ITV Digital sources said that many clubs' problems were long-standing and could not be blamed on the broadcaster. They also sought to distance ITV Digital's parent companies from any potential fall-out from the situation.

"Carlton and Granada have no liability whatsoever," said one source. "The deal was signed by ITV Digital employees, and not Carlton and Granada. The contract states that the football content would be provided on a sport channel. There were no shareholder guarantees in the contract. None were given and none were sought. The Football League knows the devil lies in the detail and knows where the bodies are buried on this one. Do you seriously think ITV Digital would be asking for a renegotiated deal and saying ITV Sport could close if they weren't prepared to follow through?"

ITV Digital has spent some £800m in development costs, with the £315m agreed with the League the single biggest outlay. The share prices of Carlton and Granada have risen in recent days, indicating that the City would welcome a termination of the League football contract.

The League maintains that Carlton and Granada are legally liable to underwrite the contract. The League believes it would win a court case on the issue if things progressed that far. "And ITV Digital is certain it would win," said the ITV Digital source. Such brinkmanship is reminiscent of last year's dispute between the Premier League and the Professional Footballers' Association over television money. Doomsday scenarios abounded during that affair, which was eventually settled by negotiation.

ITV Digital is scheduled to pay £89.25m in August to the League and the same next year to complete its payments. The company has offered instead to pay £25m in August and a similar amount next year. ITV Digital sources say the company is prepared to continue talks with the League, but that the cash offer will not be increased. The League announced on Thursday evening that it would hold out for the full amount owed.

The loss of the expected television revenue would be felt differently throughout the three Nationwide divisions. A general picture can be gleaned by looking at expected average turnovers next season with and without TV money. In the First Division, the average would drop from an estimated £11m with TV money to £8m without (a fall of 27 per cent). In the Second Division, the average would drop from around £4m to £3.5m (a fall of 12.5 per cent), and in the Third, from £2m to about £1.7m (a fall of 15 per cent).

Clubs with pre-existing financial problems ­ Nottingham Forest, Bury, Sheffield Wednesday and Swansea to name but a few ­ could be hit hardest. Dozens of others could also be pushed to the brink.

Potential effects of lost television deal

First Division

Norwich City

Turnover: £12.1m (includes £2.3m television income).

Deficit without TV money: 19 per cent.

Effect of potential loss: "We're already committed to player contracts based on projected income," says chief executive, Neil Doncaster. "There are no savings we could make apart from selling players. People should not underestimate the catastrophic effect if the TV deal is cut adrift. It will kill clubs across the country."

Second Division

Port Vale

Turnover: £3m (includes £350,000 television income).

Deficit without TV money: 11.7 per cent.

Effect of potential loss: "The loss of television income would work out at around £7,000 a week," Bill Lodey, the secretary of the Potteries club, says. "Perversely, it might be slightly easier than for some First Division clubs because we receive less in the first place. But without doubt we'd need to cut our cloth."

Third Division

Macclesfield Town

Turnover: £1.25m (includes c.£300,000 television income).

Deficit without TV money: 24 per cent.

Effect of potential loss: "It could make the difference between staying in business and not," Colin Garlick, the club secretary, says. "You also have to look at the knock-on effects, like player contracts, which would need renegotiating. They may be faced with accepting 75 per cent of what they have now, or no job.'