Is ITV Digital proving too big a distraction for ITV?(the high cost of digital television for UK's Independent Television)(Brief Article)

The future of ITV Digital is on me agenda again. As we contemplate a recession is it becoming a dangerous diversion?

Ouch. Zenith Media gave ITV Digital a good doing over last week -- there's really no other way of putting it. Arguably, managers at the digital television platform formerly known as ONdigital have learned to take a bit of knockabout abuse as a matter of weekly routine -- but a handful of paragraphs in the latest edition of Zenith's TV market report must really have hurt.

Zenith is one of ITV's biggest customers, its clout in the media marketplace is such that City investors tend to listen to what it says and the Carlton and Granada share prices are fragile enough as it is.

The Zenith piece is, to say the least, scathing. It begins: "The elephant in the room is ITV Digital." That's undoubtedly the front room we're talking about, the one with the orange sofa that's seen better days and the ludicrously expensive widescreen TV in the corner. The elephant is presumably sort of whitish in colour. The article proceeds to dismiss ITV Digital's breakeven targets as "fantasy". Following a recent revision, ITV now believes it can make money on a household penetration figure of 1.7 million. No chance, the report says.

ITV Digital is already scheduled to cost twice as much as originally planned. But in reality the bill could be much larger than anyone has even begun to imagine. "Failing divine intervention, ITV Digital should be sold or dismantled with all despatch, because this money's not likely to come back," Zenith says.

The document's author is Adam Smith, Zenith's head of publications. He admits he was surprised about the reaction he's stirred up. But he says that ITV's arithmetic is very clearly the business of advertisers, especially now that a recession looms. He adds: "ITV has already sunk 800 million [pounds sterling] into ITV Digital and is ready to send in another 300 million [pounds sterling] to secure breakeven in a couple of years or so -- a figure that presumably covers any losses expected at ITV Sport. Zenith forecasts ITV revenue to fall by 176 million [pounds sterling] this year. The ITV Network Centre is spending 747 million [pounds sterling] on peaktime programming in 2001, but it will be much harder to do the same in 2002, when BBC1's budget will, amazingly, be touching 1 billion [pounds sterling]."

In other words, the danger is that ITV is about to take its eye off the ball where its core business is concerned. Surely it has had its chance with digital and consequently now it has to cut its cloth far more modestly. Is it time, yet again, for ITV to reassess?