Paying Up 

1 February 2003 tbs.pm/1883

It was mid December when I heard the news. I was to be sent a letter informing me that I could either pay £39.99 or return my ITV Digital box.

At the time of writing, that was five weeks ago, and I’ve now just been told that I legally own my ITV Digital box. Not that I’ve paid any money for it of course. It has been bought by Carlton and Granada and given to me without conditions.

Not that I’ve actually received the letter that was supposed to be sent in December. I probably never will.

The announcement that ITV Digital’s former subscribers would no longer have to pay up or return their box was the latest move in the sorry story that is the demise of ITV Digital.

Its demise was brought about by its two owners buying the TV rights for Football League matches to be shown on the new ITV Sport Channel.

For some reason, these rights were purchased by ITV Digital and passed over to the ITV Sport Channel, rather than the more obvious route that would have seen the latter buy the rights. Had that happened, ITV Sport Channel may not be around, but ITV Digital may.

But it happened. Pay TV through an aerial was turned off, ITV Digital’s assets sold off to the highest bidder. Its treasured monkey mascot ended up being sold for £25 a go in the Gadget Shop.

Everything went rather quiet, as its replacement, the free-to-air service Freeview, launched a few months later. Then the final bombshell for the embattled former subscribers: in order to try and raise more money for the creditors, the set top boxes were to be reclaimed or sold to former subscribers.

After all the embattled former subscribers had been through, it was a rather welcome piece of news that they would not after all have to send their box back.

Between them Carlton and Granada paid up £2.8m for the million or so set top boxes and promptly gave them to the people with whom they had resided.

On the outset it may look like a nice gesture to make for not very much money, but goodwill hasn’t played that big a part in the ITV Digital saga and it wasn’t about to start now.

Both Carlton and Granada had good reasons for stumping up the cash and both involve the former subscribers.

After the closure of ITV Digital, over a million people were suddenly left without pay-TV. It’s estimated that at least 300,000 of those moved over to satellite or cable, although there are no exact figures.

However that left at least half a million people who didn’t bother and just stuck with the free-to-air channels that remained. However, with the launch of Freeview, many people may have taken the opportunity to assess what they watch and decide whether it would be worth the outlay for a new DTT adapter. Those that didn’t would have gone straight back to analogue.

In recent times ITV2 has made a bit of a mark for itself, building itself up to be the 6th biggest channel on DTT, behind the main five channels.

The potential decrease of tens, possibly hundreds of thousands of viewers could have dented its ratings and, more importantly, the amount of revenue it would have been able to raise by advertising and sponsorship.

Whether this risk was enough to warrant the spending of nearly £3m pounds, who knows? However, that was not the only concern.

Each ITV company pays a set amount to the Treasury each year for its license to broadcast. In recent years the government has offered the companies a reduction in these fees, depending on how many homes went digital. The so-called “digital dividend” saved Carlton and Granada £84m between them in the year to September 2002.

Any reduction in the number of digital homes would have seen the digital dividend decrease. At the time of its closure, ITV Digital accounted for around 14% of all digital homes, contributing around £11.8m to the digital dividend.

The reduction would have depended on how many homes gave up on digital. If around 250,000 households went back to analogue, it would cost the two companies £2.9m a year.

Obviously, no one knows how many people would have turned their backs on digital, but the chance to pay a few million (a small amount to both companies) to safeguard future rebates for a few years was obviously an attractive option.

And so Carlton and Granada can protect their balance sheets and former subscribers get to keep on watching digital television.

Which just leaves the liquidator Grant Thornton. As this company is charged with making money for the creditors, it’s sensible to look at the money behind the deal.

The deal which saw Carlton and Granada pay £2.8m for a million boxes puts the value of each set top box as being just £2.80 – a huge difference in value from the £39.99 former subscribers were being asked to pay.

Grant Thornton claim that the amount of money paid was roughly in line with the offers they had received for the set top boxes whilst the company was in administration.

And with only 8,000 former subscribers actually having coughed up their £39.99 (they will now be refunded), it does make it look like a good deal.

However it has to be said that many people hadn’t even received that letter in the first place – myself included.

How many people would have paid up and how much money Grant Thornton could have made, we’ll probably never know. However it would have taken just 80,000 people (around 9% of the former subscribers) to pay £39.99 to make more than £2.8m – assuming that £4.99 of that went in administration costs, although that leaves the question of what to do with the remaining boxes.

It must have all been too much of a gamble to take, but with most of the money raised through the liquidation process going to Carlton and Granada, the very companies who started this whole mess, it’s probably not worth shedding a tear for them.

With the matter of the set top box ownership finally decided, it looks like the whole sorry story of ITV Digital is finally coming to an end.

All that remains is for a tiny amount of money to be dished out to the creditors and for everyone to bury the whole saga in the back of their minds, never to be spoken of again.