Granada’s investors are calling for the company to shut its ONdigital pay TV business.
A poll conducted by the Financial Times has shown that at least four of UK media group Granada’s largest shareholders think the company should close its ONdigital pay TV business, a joint venture with Carlton Communications. Another two shareholders say the business is worthless but shouldn’t be closed just yet.
The terrestrial digital service is losing out to satellite TV group BSkyB in attracting pay TV customers, with just over a million subscribers compared to BSkyB’s 5.3 million. As a result, ONdigital is losing money. Granada and Carlton expect breakeven in 2003, with 1.7 million customers. However, they may be being overoptimistic.
Because the technical limitations on terrestrial digital reduce the number of channels available, ONdigital’s services seem less attractive than BSkyB or cable. Using the same equipment as free-to-air digital services would be a point in ONdigital’s favor if free-to-air had a significant number of users, but few people will see the need to upgrade until analog broadcasting is turned off. This isn’t likely to happen before 2010, wiping out this potential advantage in the medium term.
If it is to succeed, ONdigital must act fast. It needs a personal video recorder (PVR) strategy, allowing people to record TV content without the limitations of VHS – otherwise BSkyB, which has partnered with PVR market leaders TiVo and NDS, will storm ahead.
ONdigital could have a competitive advantage in its ONnet TV Internet service, which – if promoted better – should be more appealing than BSkyB’s ‘walled garden’ Open… platform. The company needs to take further steps in this direction, ensuring it has the best Internet solution available to capitalize on BSkyB’s weakness.
Despite BSkyB’s strong movie offering and huge advantage in sports content, the dominant player is also comparatively weak in other areas of TV programming. Granada and Carlton, as major TV production firms, could provide a major boost for ONdigital here. Rather than selling the company or closing it, they should ensure that it actually shows compelling original programs.
