ITV2 takes on Sky One in digital battle

Carlton and Granada are planning to build ITV2 into a new force in UK broadcasting that will enable it to take on Sky One for the position of Britain's fourth commercial TV station.

Carlton and Granada are planning to build ITV2 into a new force in UK broadcasting that will enable it to take on Sky One for the position of Britain's fourth commercial TV station.

The battle heats up this week with the re-launch of digital terrestrial television, which includes ITV2 on its platform but not Sky One. The re-launch takes ITV2 into a million new homes overnight.

Analysts and industry experts believe there is room for another mainstream commercial channel, after ITV, Channel 4 and Channel 5, as more and more homes in Britain go multi-channel.

The battle comes down to a straight fight between BSkyBs entertainment channel, Sky One, and ITV2, which was created two years ago and shows repeats and spin-offs from the main ITV channel, now rebranded as ITV1.

Carlton and Granada, the two main ITV companies that are now in merger talks, are planning to ramp up investment and promotion of ITV2, as the station starts to register significant audience figures.

A spokesman for Granada said: "We have a growth strategy for ITV2. We'll increase the spin-offs from ITV1, continue use of Champions League [football] and use it as a second chance to see popular soaps. From next year, ITV2 will show more movies."

Freeview, the successor to ITV Digital, will add 1 million multichannel homes when it resurrects digital terrestrial television this week, providing more than 20 free extra stations, including ITV2 but not Sky One, to anyone willing to buy a £99 decoder box. The aim of the BBC, which now runs digital terrestrial, is to have 5 million homes in the next five years. In addition, ITV2 and Sky One are available to Sky's 6.3 million subscribers and all homes with cable.

A recent research report from Neil Blackley, a Merrill Lynch analyst, said: "There is room for a fourth commercial network, which could be done by Sky forging closer links with Channel 5, or ITV2. The benefits to ITV from cross marketing are considerable, and if ITV doesn't do it, then their single channel could be a lot more vulnerable in the future."

ITV2 has a programming budget of just £30m a year. This will be increased for next year, though, as the channel does not show original programming, the figures will not be large. The station instead depends on repeats. It also has Champions League until the end of 2006.