ONdigital OFFmessage?

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The Independent Online
A stone's throw from the Thames and Battersea power station sits Marco Polo House, the neo-Classical edifice that contains the head office of ONdigital, Britain's fledgling digital terrestrial television operator. Here, in the shadow of a bygone industrial age, Stuart Prebble is manoeuvring for the digital future as he settles into what must surely be the toughest job in British television.

It is just two months since he took over the ONdigital hot seat when his predecessor as chief executive, Stephen Grabiner, stunned the industry by suddenly quitting. It has not been an easy period since. The past three weeks have seen departures by other top ONdigital executives, including the programming director and the commercial director. For a company to lose one senior executive may be regarded as a misfortune; to lose more begins to look like something other than carelessness - although yesterday saw the appointment of Rob Fyfe to the new post of chief operating officer.

Mr Prebble is understandably anxious to focus on the future. Over the past week, Britain's digital revolution received an uncertain, hesitant, but irreversibly forward push from the Government, which might just prove to be the impetus that makes ONdigital a long-term winner in pay-TV. Chris Smith, the Secretary of State for Culture, promised to switch television transmission from analogue to digital within a decade, so long as broadcasters convert 95 per cent of Britain's 24 million households to digital, whether cable, satellite or terrestrial. In Cambridge last week for the Royal Television Society's biannual conference, Mr Prebble said: "ONdigital regards the Government's move as a uniquely important event. It's very important he set a time frame, and it's very important that the Government and broadcasters work together. The key is to realise we have an evolutionary process."

The battle lines - highly confusing to consumers - are drawn. Rupert Murdoch's BSkyB is in one corner with its 200-channel satellite technology backed by the media mogul's billions and infused with his ruthless determination. ONdigital is in another, jointly owned by Granada and Carlton Communications, and is promoting a 30-channel terrestrial alternative with reception through conventional television aerials. And next year, cable will introduce its own 200-channel service, including fast Internet access. Billions of pounds, and not a few careers, notably Mr Prebble's, hinge on the outcome. The fact that Mr Grabiner quit ONdigital after being seduced away by bountiful share options from e-ventures, Mr Murdoch's Internet startup, adds a certain twist - although he then changed his mind and instead joined Apax Partners, a venture capital firm.

Consumers confused by which football match is on which service are becoming increasingly sceptical, and in some instances downright hostile, to the hype surrounding digital television. In a recent survey more than one-third of the population said they would never switch to digital. And that is despite digital's better sound and video reception, a vastly greater number of channels, not to mention the lure of free set-top boxes, (needed to unscramble the signals) for anyone willing to subscribe to packages that cost from pounds 6.99 per month. It is going to get even more complicated over the next year. ONdigital hopes a further incentive to viewers will come from its television screen e-mail. BSkyB, too, plans online shopping and some Web access.

Yet, Mr Prebble responds with an emphatic "No!" to the suggestion that leading ONdigital is the toughest brief he's handled during a 25-year career in television that began when he joined the BBC as a graduate trainee after attending university in Newcastle upon Tyne. "When I started as chief executive of Granada Sky Broadcasting [a joint venture satellite television service] I had to develop a whole range of skills that I didn't have as a programme maker," he says. "I had run pretty big programme departments but actually running a business, leasing the premises, hiring the staff and working out the health and safety regulations - those were things that I had to learn. I think [at ONdigital] we have big hurdles to climb but I feel totally confident that it will be successful and that's a big stimulus."

He makes his promotion from managing director of channels and interactive media at Granada Media to the top job at ONdigital sound evolutionary, almost inevitable. "It really, absolutely, should not be seen as Granada to the rescue," he says, even though the City has high respect for the company's management and Granada is due to take over the chairmanship of the venture next year. "I was asked to do the job because I have been on the board of ONdigital since well before it launched. I was on the board long before Stephen Grabiner was hired and so I knew about it and they decided I was the obvious choice."

Some investors worry about the inherent tension of the company's dual ownership structure and the unyielding, even obsessive, demands of Michael Green, the Carlton chairman and ONdigital's current chairman, but not Mr Prebble. "Actually it's a very easy thing to manage as, unlike most joint ventures, both Carlton and Granada have absolutely identical interests," he says.

That may be, but the relative significance of the pounds 375m that is committed by the joint owners to fund ONdigital through to break-even early in the next century weighs much more heavily on Carlton than Granada. Indeed, the fallout from the management exodus at Marco Polo House was probably the main factor that saw Carlton nearly slide out of the FTSE 100 index earlier this month as its shares dropped precipitously. Granada, in contrast, ranks among Britain's biggest 30 public companies by market capitalisation, reflecting its broader and deeper profit base that extends to hotels, motorway services as well as its ITV franchises and Europe's biggest television programme production house.

In Cambridge, Mr Prebble and his PR minders were exhilarated by the 88,000 viewers who called ONdigital's customer service line last Tuesday. The motivation? It was the debut night of the Champions League, Europe's most prestigious club football tournament, and ONdigital had exclusive rights to international fixtures featuring Arsenal and Manchester United. How many of those calls will result in new subscribers is uncertain, but a growing number of City analysts expect the company to have signed up 400,000 customers by next month - moderately ahead of earlier predictions. Even BSkyB's chief executive, Tony Ball, conceded in one Cambridge session that the Champions League, available only on ITV and ONdigital, makes "compelling viewing".

If the Champions League is the ultimate in "appointment television", something viewers will plan to watch, less edifying is the current dog fight for subscribers between BSkyB, cable and ONdigital. Though Mr Prebble and others promise that those who switch early to digital will not end up with ultimately worthless kit, many consumers still remember Betamax, the technically superior but now extinct video cassette format. Certainly one broad theme of Mr Smith's Cambridge lecture to the broadcast establishment was that cable, BSkyB and ONdigital must work together to communicate coherently the digital proposition to consumers. On this point, Mr Prebble is conciliatory . Reminded of the confusion among consumers over which football games are on which network and whether this is likely to encourage digital take-up he verges on the apologetic. "I think it's not fair that the viewer who buys multi-channel television in order to be able to view the best football can't receive it," Mr Prebble says. "I would like to move towards the situation where the most attractive content is available on all platforms." But, for now, he intends to deprive BSkyB of any access to ONdigital and ITV's exclusive football broadcasts. "The other thing to say is that Sky is a dominant player in this market and we are an emerging player. To be saying to somebody who is just trying to get established that you've got to give away the only two or three cards in your hand at this very early stage seems to me to be very difficult," he says.

Facing the media industry reporters ransacking the Cambridge conference for stories, Mr Prebble is patient and measured. No question is too technical, none too mundane. Consider the different ways rival executives present the digital battle. Sky executives triumphantly boast about digital satellite's greater capacity, and Sky's "proven leadership" in pay-TV. Cable executives talk of their industry's strategic invincibility and its inevitable triumph in the brave new broadband world. This is not Mr Prebble's style. Instead, he describes the digital platform disarray and the war over programme content as the equivalent of the north of England not being able to phone the south of England. How could any network business prosper in that condition? Mr Prebble waits until the chuckles subside, and then adds: "And there's not been a great history of people reaching programming agreements with Sky."

Despite the essential veracity of that charge, Mr Prebble still seems willing to try, perhaps realising from meetings with Mr Smith last week that the Government wants an outbreak of relative peace between BSkyB and ONdigital. "I would like to solve all our issues with Sky," he says. "I think if we could stop arguing across a range of different issues and focus just on putting forward the digital project generally that would make life easier for all of us." Does that mean a British television version of the Yalta conference with Michael Green, Gerry Robinson, the Granada Group chairman, and Rupert Murdoch sidling up to the same table? Mr Prebble will only say: "I have offered Sky a possible solution to all of the outstanding issues between us. And I'm waiting to hear whether that's acceptable to them." Pressing him on the contents of the peace offering is futile. He declines to spill the beans, citing the very wide range of quite complicated issues at stake. "All their difficulties with us and all our difficulties with them are solvable if we both wish to do so," he insists.

That would be quite a coup for the former World in Action producer. Born in Victoria, central London, but raised in Beckenham, Kent, his best known television feat was perhaps inviting Matthew Parris, the former Conservative MP, to spend a week living on supplementary benefit. Mr Parris, installed in a terraced house in Newcastle upon Tyne, notoriously failed to survive on the weekly benefit of pounds 26.80. An embarrassment for Thatcherism, then at its most triumphal, the episode entered the folklore of the late 1980s political landscape. "That wasn't a difficult programme to make but it was a memorable one," Mr Prebble says. "I've made much harder programmes, but it was a while ago, so they tend to fall by the wayside or not be remembered by people."

If saving ONdigital and playing a leading role in converting the country to digital doesn't make Mr Prebble a household name, it will probably make him rich, not to mention a hero in the City. Expert analysis from the Square Mile has blown hot and cold on ONdigital, but currently seems to have settled for lukewarm. "ONdigital was always going to be a niche business deploying between 3 million and 4 million subscribers," says Mathew Horsman, media analyst with Investec Henderson Crosthwaite. "But on that basis it's a modest but robust success." He notes that the company needs 1.8 million subscribers to break even. "On our estimates they'll be at 600,000 subscribers by year-end, so they're one-third of the way to break even within a year of launch." He and others also allow that ONdigital's conventional antennae reception is vital for speeding the transition to digital.

Others see ONdigital revolutionising British television and succeeding in taking pay-TV into the 17 million homes that have yet to sign up. "The big bet with ONdigital is whether it can change the paradigm and move the centre of gravity from free-to-air to pay-TV," says Ihab Makar, the head of global media practice at Gemini Consulting. He points out that more than two-thirds of UK households have resisted the blandishments of cable and satellite. "You can imagine an end game in which virtually 100 per cent of UK households subscribe to pay-TV," he says. "If you imagine Coronation Street or Inspector Morse available only on pay-TV, then free- to-air programming will get thinner and thinner, and people will gravitate toward pay-TV."

Though all television and cable executives talk the talk that programming will determine digital's winners and losers, Mr Prebble's equivalents in the cable sector and at BSkyB are marketers, deal makers and managers. Coupled with ITV's commercial success in retaining the biggest audience share, Mr Prebble and his team may have a keener appreciation of programming for viewer tastes, something that could be a bigger advantage than is generally appreciated. "I don't know why anybody would think it was odd that someone that knew about making programmes would be running a television business," he says. "In the end it's a content proposition. People don't buy a box, they buy content. What people are expecting to see when they buy our technology is going to be a very high priority for me."

If Mr Prebble and the television establishment were encouraged by Mr Smith's unforeseen willingness to set out the terms for switching off analogue, they have still to convince the secretary of state not to adopt Gavyn Davies' proposal to raise funding for the BBC with a pounds 23.88 digital licence fee surcharge. "It would be absolutely contradictory to have tax incentives in one area and disincentives in another," Mr Prebble argues, noting that Stephen Byers, the Secretary of State for Trade and Industry, has spoken of offering financial incentives for companies and individuals to file taxes online. Instead, Mr Prebble favours a lower, but across- the-board licence fee increase, if indeed the BBC needs more funds at all. "Digital technology is cheaper than analogue and there are still savings to be made at the BBC," he says.

The task of convincing the British public to sign up to digital remains Mr Prebble's most difficult challenge, but one that will be met, he insists. "It is about getting people to understand the proposition and something like the Champions League is a way of drawing attention to your platform. People say: `What does this involve? Do I just have to go into Dixons, take it home and switch in on?' When people are talking about this in the supermarket, that's when it really takes off."