A cold climate for digital TV

By media correspondent Nick Higham

It really is chilly out there in the world of commercial broadcasting: a 12.7% fall in advertising revenue, a pre-tax loss of £409m and 400 jobs cut at Carlton; ad revenue down 12% at Granada, pre-tax losses of £186m - and 1,000 jobs to go.

Things are made worse for Carlton and Granada by the massive amounts of money draining away into ITV Digital.

ITV Digital is currently the straggler in the digital race

Both groups actually made operating profits - £118m at Carlton, £175m at Granada - less than last year, perhaps, but still in the black.

It was largely the continued costs of subsidising their jointly-owned digital platform, and especially the subscription channel ITV Sport, which sent them lurching deep into the red.

The good news is that there is at last a deal putting ITV (and ITV2) onto Sky Digital.

Financial burden

The bad news is that there is still no deal to put ITV Sport on Sky.

Without such a deal (which would give it access to more than five million Sky subscribers) the channel is struggling to get above 200,000 paying-customers, or to justify its £150m a year cost.

There is talk of a 'digital coalition'

Any number of ideas are now being tossed around to ease the financial burden on Carlton and Granada and make ITV Digital viable: it's currently the straggler in the digital race, with just 12% of digital subscribers.

There is talk of giving the ITV companies a rebate on the £300m they pay for their licences each year, in recognition of their contribution to developing the new digital technology.

Marketing

And there is talk of a "digital coalition", involving the BBC and Channel 4 and possibly Sky as well.

If all else failed, the coalition could take over the digital terrestrial network, were ITV Digital to go bust.

But assuming that doesn't happen, ITV Digital is reportedly considering a scheme for a more coherent approach to promoting and marketing across both ITV Digital and Sky Digital.

Viewers of either platform could opt just for a package of free channels like the five terrestrials plus BBC Three and Four, News 24, ITV 2, Sky One and Sky News.

Or they could opt for a cheapo package of pay channels including Sky Sports 1 (which carries the Premiership) and ITV Sport (which would thus be available on Sky as well).

Set-top boxes

Sky viewers alone would be able to opt for the most extensive (and expensive) package of all, including Sky's other sports channels and assorted film services.

In this scenario ITV Digital viewers would have to buy their set-top boxes, rather than getting them free as at present, thus saving Carlton and Granada a fortune.

You can see what's in all this for Carlton and Granada.

Convincing Sky, the BBC, Channel 4 and Channel 5 that it's a good idea may be more difficult - then there are the competition authorities to square as well.

The ITV pair may have to bite the bullet and carry on shelling out for a while yet.

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This column also appears in the BBC magazine Ariel