Football clubs threatened by collapse of ITV Digital

ITV Digital was put into administration yesterday in a move that threatens the existence of up to 30 football clubs that rely on the digital television company's money.

The broadcaster, which has 1.2 million subscribers, has until 15 April to put together a rescue package or it will be closed. Struggling to compete with Rupert Murdoch's BSkyB, ITV Digital has been pushed over the edge by the burden of its ?315m contract to show Nationwide League matches. Last-ditch talks between the company and the Football League failed to come to an agreement about renegotiating the contract.

Nottingham Forest, former winners of the European Cup, are among the clubs now fighting for their lives. The administration procedure was seen within the industry partly as a tactic to cajole the football clubs into accepting a lower price.

ITV insiders suggested that, if the league agreed to take its offer of ?50m ? instead of the ?180m still owed ? and if other suppliers also lowered their prices, the venture could be brought out of administration. The clubs say that if they accepted this, about half of them would go to the wall.

With ITV Digital on the verge of bankruptcy, Sky's position in digital television looks dominant. And as the Government is committed to turning off the analogue signal in the next few years, Britain may find itself dependent on Mr Murdoch's digital platform to watch television. This is a nightmare scenario for the Government, which is anxious to ensure that viewers switching to digital services have a choice of provider rather than confronting a Murdoch monopoly.

If ITV Digital goes under, Sky's only competition would be the cable companies, NTL and Telewest, but they are labouring under massive debts and close to collapse themselves. NTL is locked in talks with banks and warned yesterday that it was running out of time to put together a rescue package as it reported a ?11bn loss for the year. City experts have predicted a merger with Telewest.

Carlton and Granada, the two main ITV companies and the joint owners of ITV Digital, pulled the plug after deciding they could no longer fund the service. The problem was twofold: although they had spent ?800m on ITV Digital, the service was still years off becoming profitable; and advertising revenues had collapsed. The ITV Digital business plan required another ?300m, money that Carlton and Granada didn't have.

The Government put pressure on the Football League to return to the negotiating table and drop the ?500m lawsuit it is threatening to launch against ITV for breach of contract.

Tessa Jowell, the Secretary of State for Culture, Media and Sport, said: "I urge the Football League to keep the negotiations going. While everyone is still talking, there is hope this dispute can be settled." She added that this was "not the end of digital terrestrial television in the United Kingdom".

Tony Banks, a former sports minister, warned that league football was now facing the "greatest crisis" in its history. "Football clubs, from the Premier League right the way down, have become so reliant on television money for their financing that any failure of any contract will have profound consequences for the financial future of the clubs," he said.

The Football League has threatened to sue the broadcaster and Granada and Carlton, its two owners, for ?500m if they do not agree to meet the original terms of the deal.

For the time being, ITV Digital will continue to transmit programmes, and no job losses have yet been announced.