Would you “happily” pay £9.99 for your box? I believe that the liquidators should have priced the boxes at this level and my argument for this is set out below.
Grant Thornton is legally obliged to recover as much money as possible for creditors. However I think that it is possible that in pricing the offer at £39.99 they have made a serious error of judgement. I understand that of the 1 million boxes “lent” to customers by ITV Digital around half are thought to be in use. I would very much doubt that more than 10% of existing users, i.e. 50,000 people, can be persuaded to pay £40 for an obsolete and unsupported box. If they achieve this they would recover £2m.
They would also be faced with the costs of collecting and storing around 950,000 boxes from a largely disgruntled and un-cooperative set of users. An optimistic figure for the costs of doing this would be £4m i.e. around £4 per box. If they are very lucky and persistent they may physically recover around 750,000 boxes. They will then be able to “sell the debt” on the un-recovered 200,000 boxes to debt collection companies for around £5 per user recovering around £1m
The unknown factor in all of this is what they can obtain for their stated intention of selling the recovered boxes wholesale to companies such as Dixons to re-furbish and resell to the general public. Probably around one third of the boxes will be in such poor condition that they can not economically be re-furbished. They will probably hope to sell the remaining 500,000 to Dixons etc for around £10 for them to re-furbish and sell to the public for around £40. If successful this would raise around £5m for the liquidators.
Thus, on a highly optimistic view, the total net sum recovered by the administrators would be £8m less £4 recovery costs = £4m, less their own considerable expenses and fees for managing and carrying our the work of, say £0.5m, a final net sum of £3.5m. As the ONdigital debt is £1.24bn this will raise 0.28 pence in the pound for the ONdigital creditors. Not a great return, particularly for Carlton and Granada considering the additional loss of goodwill that this move is causing them. This will only get a lot worse when the debt collection agencies swing into action.
In practice the situation is likely to be a lot worse for the liquidators. It is true that used ex ITV digital boxes are still selling, in very small numbers, on eBay for £40-£70. However if large numbers are brought onto the market next year, selling against a good supply of new boxes the price will drop like a stone and they will probably become uneconomic to refurbish after the first 100,000 or so have been sold. This would take £4 out of the figures above and leave the liquidators with a net £0.5m loss on the exercise. They could however avoid this loss by abandoning the collection of boxes when it becomes uneconomic and this is what will probably happen.
A much better and less risky strategy would have been to offer the users the boxes at £9.99. The users would still not have been thrilled by this but it would probably have achieved an 80% plus take-up from active users, say 400,000, raising £4m. A token effort to collect boxes from cooperative users who want to return them and to threaten the others with debt collectors would probably break even at least, and there would not be too much sympathy with those who would not pay £10.
This situation would be better all round for all concerned including, crucially, the Freeview service, which is unconnected with this but still could suffer some short term damage.
My argument only holds up if 80%+ would pay the £9.99. I would, would you?