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Tuesday, 5 March, 2002, 08:24 GMT
ITV Digital's flickering future
Nick Higham
By media correspondent Nick Higham

Events at ITV Digital are coming to a crisis.

Last week the company's shareholders appointed insolvency experts from accountants Deloitte and Touche as consultants to advise on a "fundamental restructuring" of the business - big cuts, in plain English.

The shareholders, Carlton and Granada, have so far sunk more than 800 million into the venture, and it now has 1.2 million subscribers.

But it needs many more to break even - and a quarter of those subscribers it does have cancel each year.

Al and Monkey
It's a crunch time for ITV Digital
With the advertising slump hitting Carlton and Granada's revenue, they have been hard-pressed to find the money to continue.

The company has already announced 500 redundancies at its call centre.

But it is still paying out large sums in subsidy because every new subscriber qualifies for a free set-top box (a problem that may ease with the arrival soon on the market of the first 100 digital TV adapters).

Costs

Otherwise, the biggest costs it still faces are its deal to broadcast Nationwide League matches on its own subscription channel, ITV Sport - for which it is paying 315 million over three years.

Adam Murray celebrates with Chris Greenacre in Mansfield's game against Scunthorpe
ITV Digital signed a 315m, three-year deal with the Nationwide League
Payments to companies like BSkyB and Flextech - which supply it with most of the other channels it sells on to its subscribers - are also costing ITV Digital a fortune.

Not surprisingly, these suppliers have reacted frostily to suggestions they might care to renegotiate their contracts with ITV Digital to keep the company afloat.

"Why on earth are we going to lower our prices?" Adam Singer, chief executive of Flextech's parent Telewest, is reported to have asked.

Flextech half owns (with the BBC) channels like UK Gold. But as a cable company trying to attract subscribers to its own services, Telewest is also a rival to ITV Digital.

'Bring it on'

"If ITV Digital come to us and say we have to lower our prices or they die, then as a competing platform owner the death bit sounds good to me. Bring it on," Singer apparently said.

The irony is that Telewest, along with ITV Digital and the other big cable company, NTL, suspect BSkyB of precisely the same kind of thing, and get very angry about it.

Greg Dyke
Greg Dyke has warned football clubs over TV cash
A year ago they complained to the Office of Fair Trading about the way BSkyB sets the rates at which it sells channels like Sky Sports to rival platform operators.

They complained that Sky was abusing its dominant market position by over-charging them. The OFT is expected to make a final ruling in May, which may be too late for ITV Digital.

Mr Singer can say things openly about exploiting his position as both rival and supplier to force ITV Digital out of business because, unlike Sky, his company is a minority player in the market.

Adam Singer
Rival: Adam Singer will be happy to see the end of ITV Digital
Meanwhile the Nationwide League and other sports rights holders have their own reasons for not wanting to renegotiate.

Everyone from Rupert Murdoch to Greg Dyke has been going round saying television sports rights are now way too expensive.

Agreeing to cut a cheaper deal with one broadcaster which may have overpaid could open the floodgates to a spate of similar renegotiations - and then where would sport's television golden goose end up?

E-mail: nick.higham@bbc.co.uk

A version of this column appears in the BBC magazine Ariel.

See also:

28 Feb 02 | Football
Digital TV crisis puts clubs at risk
27 Feb 02 | Business
ITV Digital in crisis, owners say
12 Feb 02 | Business
Viewers desert ITV Digital
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