Will ITV Digital get viewers turned on?

The move to rebrand ONdigital as ITV Digital is a money-saving initiative for its investors, but many believe its the wrong move to make.

The ONdigital brand has been confined to the dustbin just two years after a star-studded &£40m launch campaign and is to be replaced with ITV Digital.

During its short life-span millions of pounds have been spent on marketing ONdigital, and matching BSkyB’s aggressive strategy of giving away free set-top boxes.

Joint shareholders Carlton Communications and Granada are now using their dominance of ITV – having bought three franchises from United News & Media last year – to create an integrated free-to-air, pay TV and online business under the ITV banner.

It will be headed by Stuart Prebble, former chief executive of ONdigital, with Rob Fyfe as managing director.

David Liddiment will continue as ITV director of programmes, but assume wider editorial responsibility as ITV director of channels covering ITV, ITV2 and the premium pay ITV sports channel which launches in August. An operating manager for the online business ITV.com, incorporating itv.co.uk, as well as Granada and Carlton’s ITV online properties, has still to be appointed. A centralised sales unit for the digital channels and online businesses will also be set up (MW April 26).

Carlton and Granada hope to save &£20m a year by the end of the second year of the new structure.

News of Prebble’s appointment as ITV chief executive is welcomed by some industry insiders, who value his digital TV experience, while others are more sceptical.

One says: “What’s the point in appointing Prebble who has singularly failed to make a success of ONdigital. What is he going to bring to ITV?”

When the new ITV structure was announced last Wednesday, ONdigital unveiled its latest total subscriber base of 1,087,000 for the end of March and a churn rate of 22 per cent. At first glance, this compares unfavourably with BSkyB, which had more than 5 million digital and analogue subscribers when it revealed its latest figures in February, and a churn rate of 9.8 per cent. But commentators point out that BSkyB launched years before. Cable TV also has a long way to go to match BSkyB. It has more than 3.5 million subscribers with about 900,000 homes receiving a digital service, according to the Independent Television Commission (ITC) for the year to January 2001.

Simon Baker at SG Securities, who claims that BSkyB had a similar churn rate at the same stage in its development as ITV Digital, says: “There’s room in the pay TV industry for more than just Sky.”

The break-even target for the digital terrestrial platform was also put back last week from 2 million in 2002 to 1.7 million in 2003/4, by which time Carlton and Granada will have funded the enterprise at a cost of &£1.1bn.

But the rebranding of ONdigital has immediately run into problems. Both Ulster TV and Scottish Media Group want financial compensation for use of the ITV brand. Industry insiders also believe consumers will be confused by the move.

One source close to the company says: “I think the rebranding is daft. Both the BBC and ITV names are woven into the fabric of the British public. If they call themselves ITV Digital, will people believe they can watch BBC news and Sky Sports on the platform?”

Claiming that awareness of the ONdigital brand among consumers had risen to more than 60 per cent, he adds: “Why would you throw all that away and change to a name which has connotations of free TV? It’s nuts.”

But Nick Theakstone, joint deputy managing director at MediaVest, says: “I think the rebranding is a good idea, it immediately brings some clarity to the product, as ITV is a household name and consumers have confidence in it.”

Richard Jones, a media analyst at UBS Warburg, says: “A lot of people have raised the point that ITV stands for free TV. I’m not so sure. I think it stands for an entertainment brand.”

This time around, the launch of the new digital brand is likely to be cheaper for Carlton and Granada. The Independent Television Commission is preparing a consultation paper on cross-channel promotion. At present, IT V cannot run promotions for ONdigital. ONdigital has to pay ITV to advertise its service.

ITV Digital is also to focus its strategy around integrated digital televisions as opposed to concentrating on giving away free set-top boxes at a cost of &£200 each.

Media Planning Group head of broadcast Andrew Canter believes any move to charge for set-top boxes will work in favour of integrated digital TV, especially in the case of consumers already confused by technology. But David Elstein, former chief executive of Channel 5, speaking at a Royal Television Society dinner last week, commented: “The ONdigital business plan is based on a concept of a set replacement cycle, yet consumers remove their old sets to another room.”

Although ITV Digital is to benefit from an increase signal strength and therefore availability, it remains to be seen how the digital terrestrial platform will increase subscribers once ITV and possibly ITV2 and ITV sport channel, become available on digital satellite.

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