Another fine mess
1 Apr 2002 0 comments. tbs.pm/1808
On Wednesday March 27th, ITV Digital was formally placed into administration by the High Court by its shareholders Granada and Carlton.
The move follows the continued wrangling between the company and the Football League over payments for the right to show live matches from the Nationwide League Divisions One, Two and Three.
ITV Digital launched back in November 1998 as ONdigital, changing its name to ITV Digital in April 2001. The major trouble for ITV Digital has always been subscriber problems. They’ve only managed to attract 1.26 million subscribers to this point, while estimates for break-even put required subscriber numbers between 1.7 and 2.1 million.
The company has already had over £800 million of funding from Carlton and Granada, and there are estimates that ITV Digital needs a further £300 million to break even. Currently the company is losing £1 million a day.
At the moment, ITV Digital will continue to transmit channels and take on new subscribers. Additional funding from parent companies Carlton and Granada has been secured to enable the service to continue trading.
But the appointed administrators will now be searching for ways to cut costs at the troubled company, and the current contract with the Football League will undoubtedly be a target.
Business analysts are estimating that the cost of shutting down ITV Digital could be as much as £400 million pounds, which includes £200 million for closing the ITV Sport Channel.
That cost may rise to £900 million if the Football League goes ahead with plans to Carlton and Granada for the money its owed from the contract with ITV Digital, £178 million, plus damages that would bring the total cost up to £500 million.
Its widely agreed that ITV Digital overpaid for the rights to Nationwide League football, and alongside the troubles of the German media group founded by Leo Kirch, who own rights to Formula 1 and the FIFA World Cup 2002 and 2006, its now believed that sports rights will never earn quite so much again as they did during the heyday of the 1990s.
Media analysts will be following developments very closely until April 15th, when ITV Digital and the administrators are next due to report progress with the company.
Some believe that if the situation between the Football League and ITV Digital hasn’t been resolved by that date, then ITV Digital will possibly be forced into putting itself up for sale or close altogether.
This crisis has other implications. First, it leaves the Government’s plan to switch off analogue transmissions in 2010 in jeopardy. The idea was already a long shot after it was revealed that only about 40% of UK homes had switched to digital, and this event will do nothing to improve the image of digital TV.
Second, it leaves the future of the Digital Terrestrial platform wide open. The launch of a new free-to-air only digital decoder for just £99 was hoped to persuade some of the digital doubters to change their minds but the ITV Digital problems may further put off digital doubters.
If ITV Digital were to close, it would leave British Sky Broadcasting as the only nationwide pay TV supplier. NTL and Telewest cannot effectively compete with the satellite company.
There is another sign that Sky may become a monopoly, with NTL’s announcement that it might not have enough capital to keep its business running, admitting it was in talks with strategic investors but wasn’t expecting a re-structuring package to be completed until after June.
Sky would lose some revenue from the closure of ITV Digital, and subscribers from some of its channels, so even they would not be untouched by this development.
Additionally, there are many jobs now in jeopardy at ITV Digital’s headquarters and in call centres all around the country. ITV Digital’s future may be just hanging by a wire.
[Since this article was written, ITV Digital has closed and has been replaced, after a prolonged wait, by a free service called Freeview and a small pay service called Top Up TV]