On 27th March 2002 ITV Digital went bust. Despite the best efforts of Johnny Vegas and his monkey the first ever TV service to air on a digital terrestrial television network went under, with the owners blaming the cost of football league rights as one of the principal reasons for the broadcaster’s failure.
The fallout of the collapse had wide-reaching ramifications. ITV Digital had 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. From the outset it seemed like an absurd amount of money to pay, but for football clubs it was seen as a new level of security and a welcomed injection of cash to allow them to pay players more to tempt them away from rival teams.
The first murmurings that there might be trouble occurred early on in the deal. Expectations that they could attract similar numbers of viewers as Sky appeared instantaneously flawed. 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. By 2002 it was in an untenable position and went into administration, with Sky picking up the pieces at a cost of £95 million, a reduction in income of over £75 million a season for the next three years.
According to a Guardian report at the time the collapse of ITV Digital left 30 of the Football League’s 72 clubs at risk of going under. Players had been signed and offered lucrative deals which had to be honoured, but without the security blanket of promised TV money the financials no longer balanced. It was a grave mistake on the behalf of Carlton and Granada TV companies, and one that almost cost football very dearly. As BBC Director General Greg Dyke said, “there is hardly anyone running a television company today who doesn’t think they paid too much”.
“No one will pay that much again.”
Roll on 2016 and there’s a whiff of financial instability in the air again, but this time it’s on a much, much larger scale. At the start of this season Sky and BT signed rights to air Premier League games for the princely sum of £5.14 billion between them. BT also shelled out almost £1 billion on top of that for rights to the Champions League, with the EPL now financed to the tune of £8.3 billion in new broadcast contracts.
Cue a transfer market gold-rush. Paul Pogba helped nudge Jose Mourinho to the £1 billion transfer spend mark with a £89.3 million transfer from Juventus, who had paid diddly squat for the reverse honours four years previously. Granit Xhaka signed for Arsenal for £30 million and a £120,000 a week contract despite making just five appearances this season (in one of which he was red carded) and striker Vincent Janssen arrived at their North London rivals for £17 million, scoring just one goal so far from his twelve appearances, and that was from the spot!
There is also a clear expectation from players around weekly wages. Alexis Sánchez is about to sign a new contract for Arsenal but he wouldn’t dream of putting pen to paper for less than £200,000 a week.
If we act on the assumption that Sky and BT are good for their money then there shouldn’t be any cause for concern that EPL clubs are spending like rich Russian oligarchs. But if we take what we know about ITV Digital and apply it to some worrying underlying trends in the subscription market then there is cause for concern.
With the ink yet to dry on the newly inflated BT and Sky contracts early season figures reveal that ratings for live Premier League matches on Sky Sports are down by a fifth and that on one particular Tuesday BT Sport’s Champions League figures were down by 40 per cent. Worryingly, it’s a trend being seen elsewhere, which is namely being attributed to the increasing prominence of streaming services and a shift in viewing habits towards more flexible, on-demand viewing, rather than costly TV subscriptions.
In the short-term, these losses are likely to absorbed by companies of the size and structure of BT and Sky, but there is growing evidence that the initial stages of an ITV Digital-esque collapse could be on the cards. There is certainly the economic precedence to support that theory. The American real estate collapse in 2007 was caused largely because traders had become so absorbed by the big numbers at the top that they forgot to look at what was happening underneath. People had stopped paying their mortgages, and if viewing habits continue to shift in the way they are, Sky and BT could soon find people will stop paying their TV subscriptions.
