Teams stand to lose if channel fails

March 28, 2002 Posted: 12:24 PM EST

By CNN's Jim Boulden

Without first-tier teams such as Manchester United and Chelsea, ITV Digital has struggled to find viewers

LONDON, England (CNN) - The biggest losers from the decision to place ITV Digital into administration could be the second-tier football clubs that have used rights money from the channel to upgrade their teams.

The administrators and the football clubs have only weeks to try and settle on a new contract. If they don't, then ITV Digital would join other failed channels built around football dreams.

The football clubs continue to tell the channel that it must fulfil its $400 million contract agreed in June 2000. Many of the struggling clubs have already used the money for new players.

"We are likely to see a round of players come out of contract at the end of the season, which is in May," says David Davies, CEO of the Queens Park Rangers Club.

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"I would think there will be about a thousand players who will not be given contracts, and certainly the level of re-employment will be driven by whatever comes out of the renegotiations."

One of the world's first over-the-air digital platforms, ITV Digital was launched with huge hype. But it's been a big headache for its two publicly traded media co-founders, Granada and Carlton Communications.

While Britain's Sky Television has rights to the likes of Arsenal, Chelsea and Manchester United, ITV Digital has names like Barnet, Brentford and Gillingham.

And that's the problem: As few as a thousand people would watch a second-tier football match on ITV Digital, which only had a million subscribers.

Granada and Carlton had warned they would close ITV Digital unless they could cut costs.

They tried to renegotiate their contract with the Football League, but the clubs refused to accept ITV Digital's proposed cash cut of almost £130 million ($184 million) over two years.

Now its up to administrators Deloitte & Touche to try and save the channel.

"If the process is successful, then ITV Digital will be preserved for the future," says Nick Dargan of Deloitte & Touche.

"We have a short period of time in which to achieve supplier agreements and we will be working closely with the existing management team who has put in a tremendous amount of effort over the past two weeks."

But if ITV Digital goes under, it's Granada and Carlton whom the football clubs will go after.

"Clearly we have a legal case," says Football League chairman Keith Harris. "And we will pursue that through the best legal advice we have. And that will be to recover what is lost on the contract."

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