Clubs threaten £500m TV claim

THE Football League is threatening to sue ITV Digital and its owners, Carlton and Granada, for £500m if the digital broadcaster fails to honour its television rights contract.

The sum is almost three times the £180m still owed by ITV Digital to the League for the broadcast of games over the remaining two years of the contract.

Keith Harris, the league's chairman, reckons that on top of the £180m, the television companies would be liable to compensate the 72 clubs in the league for loss of sponsorship income as a result of the games not being televised. 'It is clear we would be looking at a very high figure indeed,' he said. The league is putting a price of about £320m on lost sponsorship.

ITV Digital says it must cut the cost of the rights to televise football if it is to avoid further huge losses. The venture has already cost Granada and Carlton £800m. On current projections, they would have to sink at least a further £300m into ITV Digital before it has any prospect of making a profit.

If the football contract cannot be renegotiated, ITV Digital's owners have indicated that they would be prepared to shut down the ITV Digital operation to stop it haemorrhaging cash.

ITV Digital's contract to televise Football League games was negotiated in 2000 and is worth £315m. It came into effect last year and runs until 2004. The company has offered the league £50m for the remaining two years. ITV Digital says it has already paid an additional £30m in advance payment to take it to the end of the contract.

The possibility that ITV Digital will close boosted the combined stock market values of Carlton and Granada last week by nearly £600m. Closure of the service would mean that digital television would be available only by satellite or cable. Meanwhile, ITV Digital has come up with an idea to resolve the wrangle. Sources suggest it could offer the league a share of future profits at the station - as long as it doesn't have to pay the full amount under its existing contract.

But television sources suggest ITV Digital might push for a deal with the league's First Division clubs alone. These clubs already receive 80% of the television revenue. Harris insisted this weekend that there was no possibility of a breakaway group forming at the league over this issue. Only a short-form of the three-year contract has been signed by the two sides.

League sources claimed this would be to its benefit, since it could base any legal action on the 'spirit' of the contract. ITV Digital sources say it is 'absolutely confident there are no shareholder guarantees attached to the contract'. In other words, Carlton and Granada could not be forced to pick up the league's bill if ITV Digital defaults.

The two sides have been in dispute since ITV Digital announced three weeks ago that it was undertaking a fundamental restructuring of the business to ensure its longterm-survival. ITV Digital is also understood to be on the brink of signing a deal with BSkyB for the satellite channel to carry its subscription channel, ITV Sport.

It will sign a 'conditional access' deal and will rely on ITV to promote the channel rather than jointly marketing it with BSkyB.