The Football TV Bubble Crash: ITV Digital
Before the 1980’s the only domestic Football that would be found on television screens would be the FA Cup Final, which had been broadcast nationally since 1953. But with a growing television and entertainment market, that changed in 1983, with ITV broadcasting games primarily on a Friday evening as more of a ‘test the waters’ broadcast. Despite rising viewers, the FA remained sceptical and kept broadcasted games to a minimum as it feared this would lead to a lack of attendances at games.
Though the FA remained worried about the games over-exposure’s affect on attendance’s the price of televised football began to rise, ITV’s first two-year contract was acquired for £5.2 million and then within the next 5 years, that price had risen to £11 million per season.
One thing to keep in mind is just how those rates are calculated, firstly the size and of the viewing market being offered has to be taken into consideration, secondly the popularity of the sport among general audience has to be looked at and finally the level of competition between broadcasters will also drive the price up.
Televised football in the 1980’s boomed with football hugely benefiting from increased exposure, creating more and more commercial opportunities and television had organic entertainment that didn’t really cost much in terms of production costs.
Football on our screens remained solely on the BBC and ITV until 1992 despite competition from a satellite company called BSB who helped drive the cost of ITV’s 4-year deal in 1988 to £44 million. In 1990 BSB joined with SKY to become BSKYB and in tern bought the exclusive rights the newly formed Premier League for £191 million with the BBC outbidding ITV for the rights to show Highlights by £49 million.
The Football and Television market boomed with SKY’s second deal in 1997 costing them £670 million, 3 and half times more than their previous deal. To put that into contrast SKY’s most recent deal cost them a staggering £5.1 billion.
In 1998 a pay-tv service named ON digital was launched by Carlton Communications and Granada, two ITV franchises, with the goal of being the primary competitor the SKY. They hoped to have 2 million subscribers by 2003. The plan did not start well with SKY gaining 350,000 subscribers by April 1999 and ON digital only managing a lowly 110,000 subscribers.
ON digital began a hard-fought marketing campaign with SKY but unlike SKY, it did not have the finances to take the losses it would need to win, ON digital was fighting a losing battle. ON digital, running out of ideas, became ITV Digital in order to become more known and hopefully gain the trust of non-SKY subscribers. And with this move, came a deal for ITV to get back into football.
ITV Digital’s last role of the dice came in a deal to exclusively show English Football League games in 2000 for £315 million, grossly overestimating the power of England’s gritter lower league game against the more glamorous top-flight. By October 2001 ITV Digital had just 1.3 million subscribers compared to SKY’s 5.7 million. By 2002 there were rumours that ITV Digital was losing over £1 million per day and so the downfall began.
During that season ITV Digital attempted to negotiate a deal with the EFL to half the cost of their broadcasting deal to around £130 million, but the EFL wouldn’t budge, stating that clubs had already negotiated deals with players on expected income at the end of the season, clubs were expected to receive a windfall of over £105 million per season.
In March 2002, ITV Digital went into administration and by October, the company was liquidated. SKY in turn picked up the broadcasting rights for the EFL for just £95 million, a third of what ITV Digital originally paid for that deal. £178.5 million was owed to EFL clubs. The knock-on effects of that deal are still felt today.
Between 1992 and 2014, 58 clubs went through insolvency proceedings, that is 2.63 per year and between 2002 and 2003, the year after the deal collapsed, 16 clubs went into administration.
The EFL attempted to sue the owners of ITV Digital for ‘Failing the guarantee the contracted income’ but the High Court ruled that there was no legal obligation to honour their collapsed subsidiary’s debts. The EFL, now in a panic, filed a £150 million negligence claim against its own legal firm for ‘Failing in its duty to protect the league’s commercial interests by seeking unrealistic guarantees’. The High Court found only two breaches of duty, which he awarded a total of £4 in compensation, stating that the league knew about the risks. The legal battle went on for 4 years and cos the EFL £5 million in legal fees.
It could be said that ITV Digital’s business plan was completely careless but still the EFL’s was negligent beyond belief. The brunt of this botched deal is still felt today with many clubs gone or still trying to recover from the financial turmoil of that period. What’s more is the EFL’ paranoia when it comes to negotiating broadcast deals today, the EFL’s current deal with SKY is £565 million, less than a quarter of the Premier League’s, leading teams of the Football League to get a minor income from broadcasting compared to the top flight, with many club’s stating ‘How do we compete with Premiership teams when our budget is half the size?’.
