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League One

The Effect of the ITV Digital Collapse on Lower League Football

Wednesday 12th March 2014
Last week, I examined the real reason why cash, even at the lower professional levels, is an absolute fundamental in the game (you can find that article here). The success of a team at this level has never depended more so upon how much money they have in the bank and how solvent a club is.

While there are owners willing to risk short term spending and a fall into debt in the hope of achieving promotion to the more lucrative climate of the Championship and beyond, the Premier League, for many clubs still struggling, there is one notable watershed moment when the financial rug was unceremoniously pulled from under their feet.

And the effects of that fiasco, are still being keenly felt right to this day.

1. The ITV Digital Deal

While Premier League clubs were enjoying a vast growth in TV rights and the assorted benefits that came from that, newly rebranded subscription TV channel ITV Digital bid a staggering £315 million for three years exclusive rights of Championship, League One and League Two games, plus Worthington Cup (now the Capital One Cup) fixtures.

The newly formed company, which had been rebranded from ONDigital, had decided to follow Sky's example by tapping into the nation's seemingly insatiable desire for football on their television.

Yet even when the deal was announced, many experts felt that the demand for lower league football was incomparable to that of Premier League and Champions League games and that at £315m, ITV Digital had paid a vastly inflated price to secure those rights.

Undaunted, the company, now owned by Carlton and Granada TV companies in a 50/50 deal, pressed on with its belief that it's football coverage would drive sales of their digital platform and lead to sustainable growth from 2001 to 2002 and beyond.

It was a deal which promised a new level of security for lower league clubs who were sorely in need of a healthy injection of TV cash to help address spiralling wage budgets as well as allowing them to pay players more to tempt them away from rival teams.

The only problem was, the broadcaster's plan was flawed from the start.

2. The Collapse of ITV Digital

The first murmurings of problems occurred in the autumn of 2001, when there were rumours that ITV Digital were in trouble and losing, a reported £1m a day. There was also muted talk that the company was desperately seeking to renegotiate the terms of the £315m deal, which the Football League flatly refused to consider.

Those rumours, at first spurious, soon gained credence when it was revealed that ITV Digital were not just in financial trouble but on the brink of total financial collapse.

Their hope to attract similar levels of customers to Sky was a failure, by October 2001, the company had just 1.3 million subscribers, compared to Sky's 5.7 million and hundreds of customers were leaving the company on a daily basis.

As a last resort, ITV Digital tried to negotiate a £130m cut in the original agreed, a move which the Football League unsurprisingly rejected, especially given that so many clubs had already offered contracts to players based on an expected three years with TV income of £105m per season.

By March 2002, the company was in an untenable position and was placed into administration. With the league now able to negotiate a new TV Deal, Sky TV stepped in during July 2002 and paid just £95m to show Football League matches over the next four years, a reduction in income of over £75m a season for the next three years.

ITV Digital may have gone under, but the true effects of its collapse on the football world, were only starting to be felt.

3. The Effects of The Collapse on Lower League Teams

In a 2012 interview, former Barnsley chairman, John Dennis, revealed that the salutary lessons he learned while chairman of the club during the ill-fated ITV Digital crisis.

The club, which had run at a profit in the dozen years before the ITV Digital deal was signed, was forced into administration in October 2002, just a few months after the ITV Digital collapse left the company reneging on £178m of the £315m deal they had agreed with the football league.

Dennis neatly summed up the position many football league clubs were in at the time, stating:

“We were accused of being profligate for committing money we hadn't yet received, but I have no sympathy for that point of view,

It was perfectly reasonable to assume the terms of a properly negotiated contract with a properly constituted company would be honoured.”

Dennis rightly pointed out that the collapse of ITV Digital had effectively caused the collapse of the transfer market at lower league levels.

Yet in the aftermath, clubs were facing a real crisis. Players had been signed and offered lucrative (for lower league level) terms for 2 or 3 years, with many clubs believing this money would come from the massive increase in TV money.

Withdrawing this money effectively left, according to one Guardian report at the time, 30 of the Football League's 72 clubs at risk of going under.

ITV Digital's mistake was to assume fans of lower league club would pay Sky high prices for the service. They couldn't, so they didn't.

As current FA Chairman and BBC TV Chairman at the time Greg Dyke pointed out “There is hardly anyone running a television company today who doesn't think they paid too much.”

Yet for clubs at a lower level, they would keep on paying for many seasons.

4. The Legacy of the ITV Digital Collapse

For many lower league clubs, the legacy of the ITV deal was a relatively simple one to understand. They had far less money coming into the club, yet they had budgeted for that money in the next three years and in many cases, had signed players or put ambitious building projects in place to help sustain the future of the club.

In order to make ends meet clubs immediately had to either face falling into debt, relying on their owner to bail them out, or make drastic cuts in order to offset the loss in income from the failed TV deal.

Players the clubs wanted to keep when they reached the end of their contract, clubs could not afford to, which led to huge numbers of players hitting the free transfer market at the end of each season, a trend which continues to the current day.

Clubs were forced to slash staff from all areas of their infrastructure, it was not just the relatively well-paid footballer bearing the brunt, but cleaners, programme sellers, commercial staff, admin staff, everyone at a club in threat had the threat of the axe hanging over them.

As clubs cut costs, they were also required to raise more funds, so ticket prices increased to help offset the loss.

The legacy of the ITV Digital collapse is still keenly felt today, with many clubs current situations directly attributable to the dark period on 2000/2001 when the company went bust. This is why so many clubs exist on youth players, loanees and players signed on free transfers.

Sadly, there is a twist in the tail as despite this tail of utter corporate incompetence, mismanagement and lack of foresight, as hundreds of players were freed at the end of their contract, thousands of staff lost their jobs and clubs wondered if they'd be in existence the next week, let alone the next season, the men who ran ITV Digital into the ground, received a bonus for his work, each receiving just short of £1m.
Thomas Richardson
Big Newcastle United fan but even bigger fan of anything about the beautiful game. Englishman living in Scotland and currently taking plenty of stick for it. Best football moment Gaza celebration Euro 96, worst Kevin Keegan rant 95/96 season and eventual outcome.

Total articles: 9

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