The Boards of Carlton Communications and Granada last night said that a “fundamental restructuring of ITV Digital’s cost base must be concluded as a matter of urgency in order to secure the long term future of the business.”
The financial viability of the troubled digital terrestrial business has been the subject of speculation for some time now, with shareholders in Granada reportedly wanting out of the project altogether.
The admission, from the 50:50 owners of ITV Digital, that the business is in dire straits rather vindicates a damning report on the company’s prospects released by Zenith Media in September last year (see Forecasts).
Deloitte & Touche has been appointed to assist in the implementation of the restructuring of the company.
Comment ITV Digital now faces seemingly insurmountable competition from BSkyB: ITV has around 1.3 million customers, Sky has 5.7 million; ITV’s churn is 24.9%, Sky’s is 10.4%; Sky has a long-standing business in the subscription TV arena, ITV does not. Even the rebranding to ITV Digital of ONdigital was instigated precisely because the business was ailing under its previous guise. It was hoped that the strength of the ITV brand would help boost customer take-up.
BSkyB now faces more competition for the pay-TV market from the cable companies than it does from ITV. This is well-illustrated in the Merrill Lynch forecasts graphed below. Even cable, which started out almost two years behind ITV, is expected to reach Sky’s customer levels by 2010, whilst ITV Digital is left languishing below the three million mark.
