ONdigital fall guy?

ONdigital has had to become a fast moving business to survive in the fiercely competitive pay-TV sector, but its chief executive Stephen Grabiner could not have foreseen the speed of events which took place the week after news of his departure was published in the national press.

When The Independent on Sunday ran a story last week saying that Grabiner was leaving ONdigital to take a senior role in another, as yet unnamed, media operation, Grabiner denied the story, despite it being true.

However, two days later, ONdigital issued a statement saying that its chief executive had been replaced by Granada Media Group’s managing director of channels and interactive media, Stuart Prebble.

Those close to Grabiner said that he was moving to e-ventures, the joint venture new media investments company backed by Rupert Murdoch’s News Corp and Softbank, and headed by Mark Booth, who previously ran BSkyB.

But by the end of the week events turned yet again as it emerged that Grabiner had accepted a job with venture capital group Apax Partners as a director in its international media team.

The report in The Independent on Sunday had its roots in months of struggle between Grabiner and Michael Green, the chairman of Carlton Communications and ONdigital (which along with Granada owns the company), for control over ONdigital.

Ostensibly Green and Grabiner clashed over the number of set-top boxes going into UK homes. But in reality, their arguments were over the control of the company.

A friend of Grabiner says: “Stephen had his hands tied. ONdigital is a fast-moving business and it has to move quickly against any offers BSkyB and other players make. Yet small decisions have to be referred to the joint board. Any cheque over £500,000 has to be signed by a board member. Stephen could not sign it.”

Another source close to the company adds: “Carlton is essentially a business-to-business operation. And Granada knows how to sweat assets. There is no real understanding of multichannel TV, but both arrogantly think they know the business.”

ONdigital, which launched last November, has 250,000 subscribers. This compares with SkyDigital, launched last October, which has 850,000. Sources inside ONdigital say that the company and the joint board recognise Sky has a ten-year head start in multichannel TV, and ONdigital has no medium-term plans to outsell its rival. However, there was a perception at board level that the widening gap was making ONdigital seem second rate.

Grabiner and Green clashed over how these figures reflected on the parent companies. A friend of Grabiner says: “Stephen felt that he was being lined up as the scapegoat for the company’s subscriber numbers. He thought he had to go before he was pushed.”

Some weeks ago Grabiner opened informal talks with former BSkyB chief executive Mark Booth, now boss of e-partners. Grabiner was being lined up as its UK chief executive, while Booth would be based in the US. However, talks were at a delicate stage when the story hit the press.

A friend who phoned Grabiner just after his departure from ONdigital says: “He was gutted. He had given a lot to that company and didn’t want to leave in that way. He felt he had been outmanoeuvred. He felt his talks had been leaked by either the board which was looking to get rid of him, or from Murdoch’s camp which was confident he would accept but wanted to speed up his decision.”

Another colleague who worked with him at The Daily Telegraph offers a third option: “He has no sense of discretion. If you tell him something you might as well put it in the News of the World.”

However, if Grabiner believed his discussions were leaked by his prospective employer, it would go some way to explaining why he began to look at other options. Grabiner hints at this by describing his talks with e-ventures as “well-flagged.”

Spokesmen for ONdigital and e-ventures deny that anyone from their camps leaked news of Grabiner’s talks.

By the middle of the week Apax had stepped in. The investment group has gained the reputation as an aggressive company which set up the deal that allowed Chris Evans’ Ginger Media Group to buy national commercial station Virgin Radio for £87m. It also brokered the Kelvin MacKenzie-led consortium which bought Talk Radio for £25m last year.

The company claims it made no approach while Grabiner was at ONdigital, but when he left, two men were instrumental in bringing him to the venture capitalists. Peter Englander, director of Apax’s information technology team, has known Grabiner for a number of years, and company chairman Ronald Cohen has met him socially. Together they put together a package that would not offer him equity in the company – which he would have received at e-ventures – but substantial bonuses that could prove just as lucrative if the business performs well.

ONdigital says it will lose £100m this year, but analysts say this is in line with expectations until subscription revenues begin to build over the next three to four years. However, a source close to the company says Prebble has the same remit as Grabiner, and so will face the same problems trying to keep a hands-on board off his back.

As for Grabiner, he has returned to consultancy, albeit at a sophisticated level. In 1983 he joined Coopers & Lybrand as a management consultant. After three years he moved to The Daily Telegraph where, within ten years, he moved from marketing director to managing director. In 1996 he joined United News & Media as chief executive of its UK consumer publishing. During his turbulent 18-month period there he clashed with chief executive Clive Hollick over how to revive the ailing Express titles, before joining ONdigital last April.

His time at the pay-TV operation is generally rated as a success. As one colleague says: “He started up a new company, fought with Sky, convinced retailers to stock the system, dealt with regulators, relaunched the company when Sky gave away free boxes in June, and all the while battled a hostile board. That shows immense character.”

Yet the character of the married father of three remains something of a mystery. As one friend puts it: “He is a bright, arrogant man who nevertheless likes to lead through discussion. He handles pressure well and has one personality for investors and a very informal style for his staff.”

However, when he worked for more autocratic men like Hollick and Green, Grabiner stayed less than 18 months in each case. And as one observer puts it: “There are a lot of difficult men at the level he is at now.”

The media industry will eye Grabiner in his new role to see if the one thing he can’t handle is men as difficult as himself.

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