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Wednesday, July 14, 1999 Published at 15:51 GMT 16:51 UK

Business: The Company File

Digital giants do battle

A digital control room: all viewers will have digital TV eventually

If business recruitment was run on a first-come-first-served basis, Rupert Murdoch's empire would be missing some of its top people.

But in reality, that's not how things work, and digital television group ONdigital has just lost its chief executive - to arch-rival Murdoch's new Internet venture.

[ image: Rupert Murdoch: not all is rosy for BSkyB, but his Internet venture could be a success]
Rupert Murdoch: not all is rosy for BSkyB, but his Internet venture could be a success
Stephen Grabiner is set to be appointed chief executive of Web investment firm, eVentures, which Murdoch launched with Japanese Net firm Softbank earlier this month.

Other ONdigital executives are also said to be considering their positions - a move which could potentially undermine confidence in the company.

The Murdoch empire, meanwhile, appears to be going from strength to strength - provided the Internet, still an untested investment vehicle, proves lucrative.

At ONdigital, Mr Grabiner oversaw the launch in November of the company's 30-channel digital terrestrial service, a direct competitor of BSkyB's 140 SkyDigital satellite channels. BSkyB is 40% owned by Mr Murdoch's News Corporation; ONdigital is co-owned by UK media companies Carlton and Granada.

Competition between the two groups has heated up in recent months, with both giving away digital TV equipment to encourage consumers to sign up.

Latest figures show ONdigital has 247,000 subscribers, well behind first-comer BSkyB which has nearly 900,000.

Digital turn-off

But not all is rosy for BSkyB. The fact that UK viewers are watching less televison overall than six years ago serves to intensify competition with ONdigital.

And analysts say the identity of ONdigital's chief executive matters little, now that the company is up and running.

Both companies have been aiming to steal as much of the market as possible before the introduction of digital cable television in the autumn. Cable & Wireless Communications has already unveiled its digital package, costing £9.98 a month, including telephone line rental - undercutting the big two players.

[ image: Not everyone likes satellite dishes, even though set-top boxes are free]
Not everyone likes satellite dishes, even though set-top boxes are free
BSkyB's former chief executive Mark Booth used to say that digital would succeed on the "wow factor" - but a new survey shows only 7% of households with some form of pay television now have digital - despite the free set-top boxes.

In fact, there is a distinct lack of interest: some 58% of UK households say they are not interested because of the cost and believe they simply do not need digital TV.

BSkyB subscribers cannot receive ITV, due to the involvement of Granada and Carlton in ONdigital.

And profits at Murdoch's broadcasting company are under pressure, since giving away set-top boxes has proved costly.

In addition, BSkyB's bid to take over Manchester United was blocked by UK competition authorities, whereas Granada has just taken a 9.9% stake in Liverpool football club.

Net business booms

However, Mr Murdoch's latest hi-tech venture could overshadow all the bad news.

His empire already embraces the 20th Century Fox film studio, US network Fox television, satellite broadcasters in Asia and the UK, newspapers, cable channels and publisher HarperCollins.

[ image: The SkyDigital control room: competition is heating up]
The SkyDigital control room: competition is heating up
Now he is a late, but totally committed, Internet convert. The man who once famously dismissed the World Wide Web as destroying more companies than it created, sees the Net dominating his other media interests.

Sky will soon provide Internet access through the television screen with its new digital service and has already signed up a number of household names as advertisers.

Last month, Murdoch tightened his grip on BSkyB by taking over as chairman.

In Australia, News Corp. is launching career and auction Internet sites, while the UK's Sun newspaper has become an Internet Service Provider, under the name, based on Cockney rhyming slang for The Sun.

In the US, News Corp. has also taken a large stake in a company providing on-screen cable television guides, which enable viewers to perform tasks as they would on the Internet, such as sending e-mails or ordering goods.

Just like the Web, it seems there is no country outside Mr Murdoch's reach.

At eVentures, Mr Grabiner and Mr Booth will invest in bringing a range of small but promising electronic commerce companies to new markets in the UK, India, Australia and New Zealand.

Whoever wins the race for digital, it seems clear Mr Murdoch will be glad that the profits from Internet business are not allocated on a first-come-first-served basis.

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