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Friday, April 06, 2007

Rebranding failures: ONdigital to ITV Digital

How the ‘beautiful dream’ went sour

In 1998, a new UK digital TV channel was introduced which aimed to take on Rupert Murdoch’s BSkyB and convert millions of middle-England viewers to pay-television with a new platform accessible via set-top boxes – digital terrestrial television. In 2002, however, it went out of business.

‘We thought we could take on Sky, through its Achilles heel: it was the least trusted by the audience,’ says Marc Sands, the first director of brand marketing for ONdigital. ‘We would differentiate ourselves by our behaviour, clarity, and transparency of prices. That was the beautiful dream. Plug and play.’

However, it soon became clear that it would be difficult to deliver the special software and set-top boxes, and cope with patchy coverage across the country. ‘By summer 1999, I saw that the problems were terminal,’ says Sands. ‘For those for whom it didn’t work, when the pictures froze, the promise was shattered. We never got past first base.’

Then the company’s chief rival, BSkyB, raised the pressure by paying retailers money to recommend its system. BSkyB’s decision to give away free set-top boxes meant ONdigital had little choice but to follow suit, a move that cost an extra £100 million a year. ‘I think the decision by ONdigital to go head-to-head with BSkyB was probably a mistake,’ said Chris Smith, former secretary of state for Culture, Media and Sport (who oversaw the government’s digital plans until June 2001), in an interview with the Guardian. ‘They should have aimed for a different part of the market.’ In 2001, ONdigital was rebranded ITV Digital, linking it to an established and trusted brand name (ITV remains the most popular terrestrial channel in the UK). However, the same problem remained. Viewers needed to buy completely new equipment, which didn’t require a dish. In other words, it was a completely new platform.

The technical problems were also an issue. The software used in the settop boxes didn’t have enough memory and crashed frequently. As former customer Bridget Furst explains:

I signed up for ONdigital in November 1999 as we live in a conservation area and were told we couldn’t have a dish. But all the technical breakdowns drove us dotty. The picture would freeze without warning, three or four times a week. You had to phone for advice, give your security password, queue for technical assistance, and then you needed 15 fingers to put things right. I was told that their software couldn’t cope with the BBC channels on the platform.

Graham Simcocks, the company’s director until 2001, realizes that the technological issues hindered development. ‘The business failed to take seriously enough the whole range of technological issues: why the picture kept disappearing, the need to boost its power. That was the biggest reason for customers being put off. Then there were homes that were supposed to be within a reception area but still had problems,’ he says.

Another factor was the lack of incentive to buy ITV Digital. Although ITV’s major networks Carlton and Granada were behind the company, they didn’t provide exclusive access to their major programmes. ‘I think Carlton and Granada didn’t support it enough,’ says former ITV Digital sales director Matthew Seaman. ‘They should have given it more exclusive programmes.

First runs of Coronation Street. Why not? Pay-television isn’t something that just happens. It needed a huge, bold move, equivalent to Sky’s Premier League. But the shareholders never felt they could risk the ITV crown jewels.’

Few could understand exactly the point of the network. At first, it had clearly tried to differentiate itself from BSkyB. Stephen Grabiner, ITV Digital’s first chief executive, once referred to Murdoch’s multi-channel vision for digital television as of interest only to ‘sad people who live in lofts.’

However, ITV Digital later mimicked BSkyB’s football-centric strategy, bypaying £315 million for the rights to televise matches from the Nationwide Football League. They also ended up buying movies from the satellite firm.

‘The inherent contradictions from the top down confused viewers,’ reckoned The Observer newspaper. The Observer also pointed the finger at Charles Allen and Michael Green, the chairmen of the platform’s two shareholders, Granada and Carlton, and the other management figures:

Many in the City expect that, even if Allen and Green manage to hang on to their positions, allowing them to make a more leisurely exit later in the year, some of their lieutenants will soon have to fall on their swords. Question marks hang over the head of Granada chief executive Steve Morrison, who, at the height of negotiations with the Football League, opted to take a holiday in New Zealand. And it is hard to see how Stuart Prebble, a former journalist who, despite having no experience in the pay TV arena, rose to become chief executive of ITV and ITV Digital, can stay in the ITV fold.
But alongside managerial failings, some things were beyond the company’s control. For instance, despite assurances from the Independent Television Commission (ITC) that the power of ITV Digital’s broadcasting signal would be increased, nothing happened. Coverage was reduced to include only about half of the UK. Also, the ITC’s decision to force Sky out of the original consortium – over ‘fears of a Murdoch dominated media’ according to The Observer – meant that none of the companies behind the platform had solid expertise within the pay-TV arena.

‘The ITC kept Sky out. If Sky had been allowed to stay in, ITV Digital would have got to three million subscribers by now,’ said Dermont Nolan of media consultancy TBS in April 2002. That some month ITV Digital met its demise and called in the administrators from Deloitte and Touche.

Although there were over 100 expressions of interest in the platform’s assets most of the interest was to do with the brand’s mascot, the ITV Digital monkey which became something of a celebrity in a series of adverts featuring comedian Johnny Vegas. Unfortunately, the monkey’s popularity didn’t rub off on the platform it was promoting.

Lessons from ONdigital/ITV Digital

  • Be available. Technological problems meant that the platform wasn’t available in many parts of the UK.
  • Be reliable. These same problems led to a reputation for unreliability.
  • Have a strong incentive. ITV Digital didn’t simply require people to switch channels. They needed to go out and get completely new technology to place on top of their TVs. To do that, they needed a very strong incentive – the ability to watch something they loved, which they couldn’t find elsewhere.
  • Deliver on your promises. ‘ITV Digital’s promises ran ahead of its ability to deliver, it was a totally new system,’ says Marc Sands, the platform’s first director of brand marketing.
  • Don’t tarnish related brands. ‘The greatest mistake was to rebrand it ITV Digital, dragging ITV, one of the strongest consumer brands, into disrepute,’ says Sands.
  • Be realistic. ‘I know what it costs to set up digital transmitters,’ says Gerald H David, chairman of Aerial Facilities, experts in digital radio engineering.
  • ‘ITV Digital’s demise is all part of a pretty unrealistic plan. The ITC put the cart before the horse when it licensed it.’
  • Understand the competition. ‘Carlton and Granada didn’t anticipate such a competitive environment,’ says John Egan, director of operations and strategy for the platform until 1999.

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