ITV
Digital is given six-month switch-off
deadline
Clayton
Hirst and Colin Brown
14
October 2001
Shareholders
in Carlton have given the troubled media group just six months to turn
around
its ailing digital channel, before they demand its
closure.
Top
institutional investors have held meetings with Carlton executives during
the
past two months to express concern over ITV
Digital.
The
joint venture with Granada is haemorrhaging money – £121m in the
first
half of this year – and is not expected to break even before 2003 at
the
earliest. However, to get to that point, analysts predict that Carlton and
Granada
will have to spend another £250m.
But
Carlton's investors are worried that there now appears to be little chance
of
making ITV Digital work, against competition from BSkyB and falling
advertising
revenues.
Today
ITV Digital, formerly known as ONdigital, has 1.1 million subscribers; its
backers predict that it needs 1.7 million to break
even.
One
major shareholder, who asked not to be named, said: "We think
Carlton's
investment is too aggressive. It is funding they can ill afford. We are
biased
towards Carlton significantly reducing its investment. If there are no
signs of
improvement in six months, then I don't think our patience will
last."
Shares
in both Carlton and Granada have fallen sharply in the past six months,
partly
due to unease over the loss-making venture.
There
are, however, two potential rays of light for ITV
Digital.
The
first is a possible tie-up with BSkyB over network sharing. Over the past
month
both parties – once bitter enemies – are believed to have held
informal talks about co-operation.
The
second opportunity is that the Government accelerates the timetable to
switch
off the analogue signal.
While
the Government has not budged from its original switch-off year between
2006
and 2010, the Department for Culture, Media & Sport (DCMS) has warmed
to
digital television rollout.
The
department is now preparing to increase the digital signal range in the UK,
to
cover over a million extra viewers.
The
plan, which will increase coverage by 20 per cent, will be followed by a
pre-Christmas digital television publicity
drive.
DCMS
Broadcasting minister Kim Howells said: "These plans should help
increase
the momentum in digital TV development for both the broadcasting industry
and
the viewers at home."