The future of ITV Digital has been increasingly in doubt as its backers faced mounting pressure to salvage the network, which has haemorrhaged £800m ($1.2m/B1.3m) since it's launch in August. ITV Sport Channel was particularly costly for the network because of the expensive rights costs attached to it.
The “digital coalition”, involving the BBC, ITV, Channel Four, ITV Digital and possibly Channel 5, is rumoured to be only weeks away from completion. Under the plan, UK free-to-air broadcasters would pool digital terrestrial broadcast and transmission operations and develop a set-top box to deliver free, multi-channel digital television.
The set-top boxes would cost £100 ($146/B163), contrasting sharply with ITV Digital’s current system of providing them free-of-charge and charging users monthly fees.
The new venture is expected to need an investment of £150m ($220m/B244m) – about half of the costs expected to bring ITV Digital out of debt. Greg Dyke, the BBC's director general, is particularly interested in the new project because of fears that if ITV Digital is shut down, the only digital TV distribution systems in the UK will be Rupert Murdoch’s BSkyB and cable networks Telewest and NTL.
Investment bank Merrill Lynch said the price of the set-top boxes would have to be cut to £60 ($88/B98) for “mass market acceptance”. Analyst Neil Blackley also said that the new venture would not resolve all of ITV Digital’s problems. “We view a digital coalition as positive for driving digital TV conversion in the UK, but it does not directly address the key problems and viability of ITV Digital.”
Blackley also warned investors not to change their bearish attitude towards Granada and Carlton on the back of today’s news. “Carlton and Granada, even removing all losses from ITV Digital and ITV Sport Channel, and looking into a sharp 2003 advertising recovery, are currently the most expensive free-to-air broadcasters in Europe."
