From day one, everything about ITV Digital was a turn-off (except for the monkey)

David Lister
Thursday 28 March 2002 19:00

"This is not the end of digital terrestrial television in the UK," vowed Tessa Jowell last night.

But, tellingly, the Secretary of State for Culture, Media, and Sport did not elaborate on how it could be saved ­ nor did she reflect on how Rupert Murdoch's position as supreme gatekeeper of the world of digital television would inevitably tighten his grip on Britain's broadcasting culture.

Rarely, perhaps never, have all three aspects of Ms Jowell's portfolio overlapped so emphatically as in yesterday's collapse of ITV Digital. A key player in Britain's media went into administration; culture ­ in as much as broadcasting is synonymous with the word ­ came more firmly under the grip of Mr Murdoch, and sport received a body blow, with the ending of ITV Digital cash threatening the existence of up to 30 Football League clubs.

Yet the crisis has been signposted right from ITV Digital's untidy birth. Technical niggles and bizarre programming inconsistencies quickly made it something of a joke in media circles.

Indeed, an ITV Digital subscriber trying to follow the service's demise yesterday would have been unable to access the story via the ITN News Channel. That is only available to ITV Digital for a couple of hours around dawn each day. ITV1 and ITV2 would have been available, although the picture might well have frozen from time to time.

When Ulrika Jonsson gave the service, then called ONdigital, its celebrity launch in 1998, it carried the hopes of viewers keen to avoid having a dish on their roofs and just as keen to avoid inviting Mr Murdoch into their homes.

Tempting fate, the company was based in the same building that once housed the doomed satellite service, BSB.

More seriously, its then chief executive, Stephen Grabiner, confessed as soon as he launched the service in November 1998 that there were not enough set-top boxes for the Christmas shopping rush. He didn't have to worry about things for too long. By July 1999, Mr Grabiner had resigned, and later sued ITV.

Then, under the new chief executive, Stuart Prebble, there was a rush of blood to the head ­ and of cash to the Football League. The now infamous sum of £315m was paid to the Nationwide League for rights to show its games. It was never going to be economical, and, of course, in recent weeks the ITV companies have tried to renegotiate the deal.

For viewers, Nationwide games were never going to compare with Sky's Premier League offerings and, despite holding the rights to Champions League games, the ITV Sports Channel was never going to have the allure of the Sky Sports service.

The service was hit by a massive "churn" rate ­ subscribers cancelling, with offers of free (and technologically superior) set-top boxes and dishes from Sky helping the exodus. For all the social embarrassment of having a Sky dish, it would bring 300 channels, compared to ITV Digital's 40. And ITV Digital still only reached 60 per cent of the country.

Muddle-headed programming decisions were made. The subscribers who had taken an anti-Murdoch or anti-dish stance may well have wanted some upmarket programming. But while they got niche channels such as Granada Men & Motors or Carlton Food Network, it was Sky's viewers who were able to tune into ArtsWorld. ITV Digital also turned down Disney and Discovery, the latter given a slot just a few weeks ago.

Last year, in an optimistic corporate rebranding exercise, the service dropped its original name, ONdigital, to become ITV Digital. But even this, and a clever advertising campaign featuring the comedian Johnny Vegas and a talking monkey, could not stem the tide. Most tellingly, while the replica monkeys that came free with every subscription fetched hundreds of pounds in internet auctions, the set-top boxes could barely be given away.

In three-and-a-half years, ITV Digital consumed £750m of the ITV companies' cash to attract 1.2 million subscribers. The break-even figure was 1.7 million. Sky has 5.5 million.

Unfortunately for the two biggest ITV companies pulling the strings, Carlton and Granada, the writing wasn't just on the wall. It was in an embarrassingly leaked letter from the Granada chairman, Charles Allen, to the Prime Minister.

Mr Allen warned Mr Blair that unless the Government intervened, the digital service could collapse. Gerry Murphy, the chief executive of Carlton Communications, accused Mr Allen of "hysterical scaremongering" as the confusion in ITV rang alarm bells in the City.

Kingsley Wilson, an analyst at stockbrokers, Investec Henderson Crosthwaite, said: "ITV Digital's first and biggest mistake was to compete with BSkyB with an inferior product at only a marginal discount to Sky prices."

There is now a small window of opportunity ­ just a few weeks ­ while ITV Digital is run as a going concern by administrators, the accountants Deloitte & Touche. An 11th-hour rescue package could be put together. Carlton and Granada said they would continue to fund the service in the short term, which will continue to broadcast for the time being.

The key would be to agree a new deal with the Football League, which is owed £180m by ITV Digital to cover this year and next ­ they have offered the league just £50m for the remainder of the contract.

ITV Digital has applied for administration, not closure, so if it manages to restructure in the near future, it could come out of administration and continue as before.

Mike Jervis, of accountants Grant Thornton, said: "One purpose of administration is to ensure the survival of a company. If the Football League and other suppliers accepted less money, ITV Digital could come back out of administration. That would be a good use of tactics by the ITV companies."

ITV insiders confirmed they saw yesterday's move as "constructive administration" and, if it worked out, the digital service would emerge with a much lower cost base. It would then offer a much "lighter" service, with fewer, cheaper channels and make new customers buy the set-top box.

If that fails, ITV's digital licence could be offered to other companies by the regulator.

Although the closure of ITV Digital would mean a loss of about £60m a year for Sky ­ it sells its channels to the service ­ Sky is likely to mount an aggressive marketing campaign to woo ITV's remaining viewers. Sky may try to buy the subscriber base if its rival closes but that could be a problem with the competition watchdogs.

Tessa Jowell said last night: "Over the past few weeks, I have been kept closely in touch by all sides involved in the ITV Digital negotiations. Today, I have been told by ITV Digital of its decision to place the company into administration, with funds to keep services going for the time being. This was a commercial decision for them, and them alone, to take.

"Viewers will continue to receive all the free-to-air and pay services they are used to while a long-term solution is being sought. The administrator will negotiate with suppliers including, of course, the Football League. It is in the interests of football to play a full part in these negotiations if they are to achieve the best outcome for the game and the clubs.

"This is a testing time for football. I urge the Football League to keep the negotiations going. While everyone is still talking, there is hope this can be settled.

"This announcement is not the end of digital terrestrial television in the UK. I reaffirm my strong belief in the benefits that digital television can provide to our society and the economy. I am not going to keep a running commentary on the talks. It is now up to all sides to agree a way forward that benefits them and the viewers. The clock is ticking."


What do ITV Digital subscribers currently get for their money?

Subscribers have paid at least £100 for the basic package of programmes, which they receive via a set-top box. The most expensive package is £14 per month, and extra for some film and sport channels. The main attraction is Champions League football, which is not available on Sky.

Will they lose their service straight away?

The ITV Digital signal is guaranteed for three months. But the company will now be run by the administrators, Deloitte & Touche, who will be looking to find a buyer. If they do, the service may be unaffected or – given its chequered signal record – even improved. A recent survey found ITV Digital viewers were much more likely to complain about picture quality, programming and technical difficulties, and only 67 per cent said they would choose ITV Digital again.

Will viewers still be able to see Nationwide League football?

Although football is at the root of the broadcaster's problems, matches will continue to be shown at least in the short term. The contract may then be acquired by another company but, again, ITV Digital subscribers will still be able to follow their team.

What will happen if the administrators fail to find a buyer and ITV Digital ceases to broadcast?

If ITV Digital closes down, customers will no longer be able to get any channels apart from the five terrestrial services. If they want to continue receiving digital services, such as BBC Choice, BBC4, ITV2 and E4, they will have to subscribe to either Sky or cable.

Will they be compensated in that event?

Questions remained yesterday as to whether subscribers would be reimbursed by the company if it ceases to broadcast. Allan Williams, senior policy adviser for the Consumers' Association, said: "We want to see the administrators and the ITC [Independent Television Commission] working together to reassure customers about service levels."

Matthew Beard

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