Q&A - Gary Harwood
Further to the news that ITV Digital has gone into administration, and the subsequent speculation that lack of TV money could drive several clubs out of existence, Chairman Gary Harwood addresses some frequently asked questions about the situation.
Q. How much money does Cambridge United receive from the ITV Digital deal?
A. A major part of this football club's annual income is the share of funds it receives from the Football League. The Football League generates the funds that are distributed to the 72 member clubs from a variety of sources including television rights. As a second division club our share of the television rights works out to be approximately £180,000 per annum. For third division clubs that share drops to a little under £120,000 per annum.
Q. Will the Football League be able to collect the outstanding monies from ITV Digital?
A. This football club produces detailed operating budgets each year for the following 12 months and high level income and expenditure plans for the following 3 years. Based on these budgets and plans we sign contracts with players and make other financial commitments to staff, suppliers and lenders. Our budgets and plans assumed that our share of the television rights were secured for three years as the Football League entered into a binding contract with ITV Digital for that period.
It is now clear to me that Carlton and Granada (ITV Digital's shareholders) produced a business plan for ITV Digital that was ambitious to say the least and, against that business plan, they entered into a contract with the Football League. Whether the shareholders and directors of ITV Digital should have entered into that contract is debatable but clearly that was not the Football League's decision - it merely accepted an offer for television rights that both Carlton and Granada were guaranteeing on behalf of ITV Digital. In doing so the Football League rejected offers from other broadcasters. Had the Football League had any inklings that ITV Digital and its shareholders would not be prepared to honour the contract then the contract would not have been entered into.
Q. What will it mean for football in general and United in particular if ITV Digital don't pay?
In my business, as in all others, we do not enter into long contract periods lightly. We make absolutely sure we can honour those contracts throughout their term before entering into them. I believe ITV Digital and its shareholders have the same duty (both legally and morally) to honour their contract with the Football League. Carlton and Granada can afford to do so. If they don't, for any reason, the impact on English football could be catastrophic generally and it could force the closure of a number of Football League clubs specifically.
Football clubs are not able (and would not do so) to walk away from contracts they have with their players on the basis of unplanned business circumstances. Many clubs would, therefore, be left holding contracts they could not afford to pay (the same position as ITV Digital claims it is in with the Football League contract) and would be forced into administration or receivership. Without a guaranteed television rights income stream, a number of those clubs would be wound up.
Cambridge United FC was already facing enormous financial difficulties. Relegation from the second to third division compounds those difficulties. Losing some or all of the television rights income might turn out to be the straw that breaks the camel's back.
I fully support the action the Football League is taking and I quote from a Football League statement - "Whilst placing ITV Digital into administration gives the company and its shareholders a statutory breathing space to restructure ITV Digital, this does not affect the obligations of ITV Digital and its shareholders to honour the terms of their contract with the League. If ITV Digital defaults, the League has made it perfectly clear that it will use all available channels to pursue ITV Digital, Carlton Communications plc and Granada plc for the remaining rights fees, damages and costs".
We clearly face an uncertain few weeks while, hopefully, the situation is resolved satisfactorily. During that time some of our planning for next season will undoubtedly be affected.
Gary Harwood
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Previous Q&As:
22Mar02 - John Taylor
17Mar02 - John Howard - Redevelopment
10Mar02 - Andrew Pincher
03Mar02 - Tom Youngs
24Feb02 - John Taylor
17Feb02 - Gary Harwood - Chairman
10Feb02 - Richard Summerfield - Finance Director
03Feb02 - Lionel Perez
27Jan02 - Stuart Ayles - First Team Physio
20Jan02 - Paul Wanless
13Jan02 - Dale Brooks - New Assistant Manager
06Jan02 - Mark Johnson - Match Programme
27Nov01 - John Taylor and Dale Brooks - The New Management Team
17Nov01 - Gary Harwood and Colin Davies - Redevelopment
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