Europe's digital pay-TV dilemma

Televised football has proved a gamble and Premiere is not the only one to suffer

LONDON (CNN) -- Hundreds of Britons woke up on Wednesday morning to find their digital terrestrial pay-TV screening an apology for the lack of service.

ITVDigital, which was in administration, was forced to pull the plug after failing to find a buyer or money to pay its bills. Only free channels, many funded publicly through the BBC, stay on air.

The drawn-out collapse of Britain's experiment to introduce a third broadcasting platform to compete against satellite and cable will give its European partners a lot to think about. France, Italy and the Republic of Ireland have all been considering sending digital signals through conventional antennae.

Spain's Quiero followed ITV Digital into the market then closed its doors last week, while Sweden began a service in 1999 but only won over 100,000 subscribers. And Kirch, which owns German pay-TV platform Premiere, is at the mercy of its creditors.

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"There was no way ITVDigital could compete against (satellite broadcaster) Sky," David Brown, director of pay-TV consultancy European Media Strategies, told CNN.

Rupert Murdoch's British Sky Broadcasting "had more content and was one of the most powerful companies in the market place. It was never going to be a good idea."

ITV Digital "vastly" overpaid for second-tier sports rights, Brown said. "These people entrusted to run ITV Digital had little or no experience running a pay-TV service and they were not very good a driving down cost like Sky has."

MORE STORIES • Murdoch winning pay-TV battle  • ITV Digital in administration  • ITV Digital's pay service closed

Its collapse was accelerated by its inability to reach an agreement with the English Football League to cut the amount the 72 clubs would receive over the final two years of its contract.

ITV Digital's 1.26 million customers are now up for grabs, which is expected to play into the hands BSkyB, Europe's second-largest pay-TV company.

Its demise could drag down dozens of small football clubs, owed millions of pounds for broadcast rights, and around 1,500 jobs at ITV Digital have been lost.

"This is not a disaster for digital pay-TV services," said Brown. "The future in the long term belongs to the likes of Sky and cable operators. Digital Terrestrial Television should be based on free-to-air television principles.

"I expect the broadcasters, Sky and BBC, will be discussing ways to pool their free services and BSkyB would like its Sky One channel to compete alongside the BBC and ITV (Independent Television) network."

More than 50 percent of Britons do not want to pay money for additional channels, analysts have said.

Spain's Quiero faced many similar problems to ITVDigital. The spectrum offered to the broadcasters was "not big enough" which meant not enough information and pictures could be transmitted. Quiero had its own nemesis in the form of Vivendi Universal's Spanish Canal Plus satellite service.

Kirch's problems in Germany existed because 90 percent of homes were connected to cable, operated by telecom operator Deutsche Telekom. France has two satellite pay-TV broadcasters, the biggest of which, Canal Plus, is loss making.

With telecom operators, like BT Group, considering broadcasting films and television down telephone lines, the pay-TV market is about to get more crowded. Cable operators, like NTL and United Pan-Europe Communications, have gone cap in hand to investors to raise funds to pay off billions of dollars in debt.

According to Brown, unless the cable operators can get their houses in order there are only likely to be two winners. "Sky is impressive in the way it goes about delivering growing market share with little cost. They will always be a major competitor. Canal Plus could be a player if Vivendi is prepared to stay with it for the long term."