Big Blow and Bonanza for British Digital Biz

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London -- The surprise defection of a top gun at one of the
United Kingdom's digital platforms put somewhat of a damper on word of the stellar results
that are beginning to emerge from the market's digital-set-top-box giveaway.

Stephen Grabiner, who was CEO of digital-terrestrial-TV
platform ONdigital, exited the company last Tuesday to join the enemy camp --
specifically, Rupert Murdoch's new Internet company, e-Ventures.

Grabiner's new title has not been revealed, but this is by
any measure a major blow to ONdigital, which competes head-on with News Corp.'s British
Sky Broadcasting Group plc direct-to-home platform.

His replacement is longtime Granada staffer Stuart Prebble,
currently managing director of channels at Granada Media Group, 50 percent owner of
ONdigital.

But the platform may need to do more replacing than that:
It's widely speculated that other executives are considering their positions, including
commercial director Jim Ratcliffe.

Grabiner's loss was described by Merrill Lynch & Co.
media analyst Neil Blackley as "a blow, because I thought he was very good. He was an
excellent marketing man. Having said that, the momentum in ONdigital is such that I don't
expect a consumer reaction to it."

Mathew Horsman, a media analyst at brokers Investec
Henderson Crosthwaite, said Grabiner had done a very good job under difficult
circumstances getting from zero to 250,000 subscribers in less than one year.

Another analyst who requested anonymity said, "If
ONdigital is the wonderful business that it's said to be, you'd have to ask yourself: Why
is he leaving? … It's turmoil time for ONdigital. It's good news for Rupert Murdoch.
There's nothing like putting the boot into a competitor and leaving him without a chief
executive."

Word of Grabiner's defection came on the heels of
ONdigital's announcement that it has garnered 247,000 subscribers since its November
launch, with 137,000 signing up in the three-month period ending June 30.

Grabiner reported that 8,000 subscribers took up its
free-box offer on the first day of the scheme. And in June -- normally not the most
buoyant of months in the U.K. television market -- ONdigital netted almost 68,000
connections. It was in early May that ONdigital matched BSkyB's offer of giving new
subscribers free digital boxes.

Grabiner said ONdigital's progress meant that it was on
track to hit its self-imposed target of 2 million connected homes within three years of
its launch.

Meanwhile, BSkyB has achieved 1 million digital subscribers
in the past nine months, Horsman said, adding that the direct-to-home platform has 970,000
digital subscribers. Of that number, 270,000 are new subscribers, and the rest are former
analog subscribers, with around another 170,000 contracts signed and awaiting
installation.

BSkyB had promised 1 million subscribers by October, and it
is now clearly well ahead of its own forecast. It is so sufficiently buoyed by its results
that the company is contemplating switching off its analog DTH service by the end of 2000.

If these numbers are correct, they suggest that Sky and
ONdigital between them are shifting around 175,000 boxes per month. Sky is expected to
declare its official numbers Aug. 10.

Cable companies aren't taking the digital challenge lying
down -- although they have been a little slow at getting up.

Cable & Wireless Communications plc launched the first
phase of its nationwide digital rollout in its Manchester region three weeks ago. Telewest
Communications plc promised a wide-scale fourth-quarter introduction, with all franchises
having service by mid-2000. And NTL Inc. is already offering digital TV.

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