TV question leaves £1b answer

One balmy September night in 1995 at the fag end of John Major's government, Virginia Bottomley his media minister, invited Britain's TV bosses to dinner in Hampton Court and seduced them with her vision of a Britain leading the world in digital television.

After yesterday's £1 billion failure of ITV Digital, a company born as a direct result of that dinner, the TV bosses concerned must wish they had thought more about the fate of someone else once seduced within the walls of the palace. Anne Boleyn lost her head when she gave birth to a girl rather than a boy.

Michael Green of Carlton and Charles Allen of Granada, the joint owners of ITV Digital did not even get that far. They gave birth to a pup which nobody wanted. Whether they should also lose their heads by being fired from their jobs, is now a matter of shareholder debate. Most people think they should.

There has not been a corporate collapse like this since ... well since the last time Britain's TV moguls tried to innovatein the mid-Eighties when several of the current suspects including Granada decided to launch British Satellite Broadcasting to go head-to-head with Rupert Murdoch who had just launched Sky.

ITV Digital is almost a carbon copy of that business. Then as now there was no one who could sell the vision of what the company was and what they were trying to sell the public. Then as now there was no one who had any idea of cost control. Eventually it collapsed into a "merger" which created B Sky B and left Murdoch dominant.

But just because history has repeated itself we still have to ask why. The initial consortium which won the digital licence from the government consisted of Carlton, Granada and B Sky B. But before they could set up the company, Murdoch was forced out by Brussels competition authorities backed by British regulators. It robbed the consortium of the only person who knew what needed to be done. Murdoch already had a pay TV business in Sky, the others did not.

The departure of Murdoch turned him from colleague to competitor. One month before the launch of OnDigital as it was then known in November 1998, Murdoch unveiled a 200 channel digital service on Sky. Murdoch decided to give away set-top decoder boxes. Matching him cost OnDigital £100 million in the first year. The signal was weak because civil servants did not want the new service to interfere with conventional television. Half the country could not get it.

Football was the final fiasco. ITV Digital's chief executive Stuart Prebble decided to pinch the Sky formula, and bid for sport which he thought people would pay to watch. They bought the rights to the Nationwide League only to find that all the real sports fans were already tuned in to the Premiership on Sky. Audiences were so low it would have been cheaper to take the viewers to the game by taxi, give them tickets and put them up overnight in a hotel.

But for David Elstein, one-time boss of Channel 5, the real reason it failedwas because launching it was "a political not a business decision." What he means is that there was never any demand for another pay TV platform over and above Sky and cable. The question the TV moguls should have asked therefore was simple. Who needs it? Failing to ask has cost a cool £1 billion pounds.