ITV Digital Reduces Costs And Grows Subs 36% In Q3

Churn – the proportion of customers leaving the service – came in at 23.1%. This is much higher than Sky Digital’s 10% and, whilst the ITV groups claim it is below forecasts, it is nevertheless at the same rate as in the previous trading statement in June (see ITV Digital Places Breakeven At 2004). Carlton and Granada say that churn is set to fall in 2002.

Average revenue per user (ARPU) is rising, whilst customer acquisition costs are falling, according to the statement.

Stuart Prebble, ITV’s chief executive, said: “These figures demonstrate the strength that the ITV brand has added to ITV Digital, with rises in both subscriber numbers and ARPU. Almost 140,000 of our customers have signed up for ITV Sport Channel in only seven weeks and we are strengthening the channel line up and the quality of our customer base.

“We will continue to build on these encouraging figures as the business moves towards break even. We have delivered on the plans outlined in April – we have rebranded the business, launched ITV Sport Channel, exceeded subscriber targets, improved on our churn target and achieved all this at a lower than projected cost.”

ITV Digital says that next year will see a significant reduction in funding requirements from Carlton and Granada shareholders as a result of increasing revenues, falling acquisition costs, lower customer management costs and reduced staff costs. This includes a pay freeze for ITV Digital staff and management this year.

Comment According to recent press, ITV Digital might be lucky to make it far into 2002 in its current form. The Financial Times dramatically reported earlier this week that ‘the endgame for ITV Digital has begun’. The paper claimed that ITV Digital’s days as a standalone company are numbered and that, in private if not on record, executives at Carlton and Granada are now resigned to some substantial restructuring of the business. An outside investor could be involved, as could an effective closure, with customers being ‘sold off’ to rival digital operators, BSkyB, NTL and Telewest.

A reduction in financial pressure on Carlton and Granada shareholders will do the companies no harm. Reports earlier in the year claimed that some key shareholders were in favour of Carlton and Granada exiting from the digital business altogether (see Granada Faces Investor Pressure Over ONdigital, Reports FT). Despite today’s statement, the negative newsflow surrounding ITV Digital suggests that this may well still be the case.