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OnDigital has announced subscriber levels of 1.02m for the end of year 2000.

OnDigital has announced subscriber levels of 1.02m for the end of year 2000. This figure, up 83% from 1999, meets company predictions for growth (the next target being for 2m customers by the end of this year).

Whilst OnDigital staff congratulated themselves with a party, investors in OnDigital parents Carlton Communications and Granada Media remained sceptical. The firms' share prices fell 1% and 2% respectively as prospects of an IPO this year decrease. OnDigital spokesman Andrew Marr has stressed that the firm is not alone, "We have always said the 1m mark was not a target, but an indicator - Stocks have fallen across the media sector as a whole over the period."

The OnDigital business model is seen to be up for discussion as evidence grows of a 'nursery slope' from Ondigital to BSkyB. OnDigital have reported subscriber growth in the last quarter of 134,000, the same figure reached by electrical retail research group GFK for unit sales.

Given the trend for GFK figures to undervalue performance, the real unit total could be as much as 170,000, implying churn of over 20% as last christmas' pre-pay contracts expire. OnDigital figures from Q3 results place churn at 15-20% against typical rates for BSkyB at 9.8% or ntl (cable) at 1-2%.

In response Andrew Marr commented, "Our churn is higher, as you would expect it to be given the maturity of our competitors' subscriber bases. Many people have been with Sky for four or five years."

Investors, prompted by a 40% slip in the Bloomberg European Media Index since March, are questioning the potential for growth of OnDigital above its stated 2m breakeven subscriber level. Credit Suisse First Boston issued a cold response to the figures to clients, "The numbers from Ondigital are not impressive- we are reducing our estimates for the value of Ondigital by 10%."

Issues include the competitiveness of DTT technology given its inherent limit on channel availability, the delay in rolling out e-services and quality of customer service.

Many subscribers have been forced to pay to upgrade antennae, whilst OnDigital employees have detailed SCM software shortcomings via newsgroups. In December the failing OnOffer commerce channel moved to become part of the OnView EPG.

The growing sentiment is that DTT cannot compete on the same level as Cable and Satellite operators whilst analogue free to air broadcasts continue. Less than 1% of the 4m televisions sold last year were integrated digital sets, with no firm announcement yet on an analogue switch-off date past 2006.

It is no surprise to discover, then, that OnDigital has decided to run a series of 'public information announcements' about the subject on ITVs traditionally late night public information slots in order to 'get the message through'.


Published 8 February, 2001 by NMA Staff

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