Carlton and Granada’s UK pay-TV venture ITV Digital has gone into administration.
UK media groups Carlton and Granada have decided to put their digital terrestrial pay-TV joint venture, ITV Digital, into administration. If it can come to arrangements to pay its heavy debts, it may still survive. Otherwise, it will be liquidated.
The parent companies invested a total of GBP800 million in ITV Digital, which they hoped would challenge pay-TV giant BSkyB. But the service failed to attract customers: its market share of UK digital TV subscribers is just 12%.
Although Carlton and Granada have attempted to renegotiate content deals to keep ITV Digital afloat without extra subsidy, the Football League refused to cut its GBP178 million deal to the GBP50 million that ITV Digital could afford. Amid an advertising recession, the parents’ refusal to put more money in is understandable.
However, content providers such as Flextech (and Carlton and Granada) want their customer to stay afloat, even if it means cutting prices. The UK government also needs a digital terrestrial broadcaster to exist, because it wants to cut off analog signals by 2010. It has already said it will not let the BBC run terrestrial digital, and it is hard to think of a plausible commercial operator to take over if ITV Digital folds.
BSkyB is ITV Digital’s archrival and one of its biggest creditors – and it may be particularly keen for ITV Digital to survive. If ITV Digital goes to the wall, BSkyB will become the monopoly digital supplier for people living outside cable coverage – attracting uncomfortable regulatory attention. It might be better off in a position where it is in nominally competitive market, but none of its competitors are in a position to put up a serious fight.
In short, the troubled broadcaster’s importance to its creditors gives it a reasonable chance of surviving this close shave. Whether it will be a success in the long term, however, is another question. Differentiating further from BSkyB could be one way of improving its chances.
