He may have been one of the marketing sensations of the year but even Monkey, the woollen toy who became the face of ITV Digital, has been unable to close the yawning gap between the digital terrestrial pay TV service and Rupert Murdoch's satellite leviathan BSkyB.

While ITV Digital, launched in 1998 as ONdigital, has struggled to sign up and hold on to subscribers, BSkyB has gone from strength to strength, becoming Europe's most successful digital television service.

Despite four years of hard slog and £800m of investment, ITV Digital is still two years away from breaking even and continues to lose money hand over fist. Out of every four customers it signs up, at least one ditches the service.

Last month ITV Digital's shareholders, the television companies Carlton and Granada, conceded that an urgent restructuring was needed to save the business from closure.

Rivals blame ITV Digital's problems on a mixture of strategic errors, poor management, inferior technology, piracy and bad luck. "ITV Digital couldn't run a bath," BSkyB's chief executive, Tony Ball, quipped recently.

Analysts say that ITV Digital's biggest mistake was trying to take BSkyB on at its own game, rather than tailoring a lighter package for people who do not want 200 channels, are not prepared to pay almost £40 a month for football and films, and are reluctant to put a satellite dish on their houses.

Instead it paid £315m for exclusive rights to Nationwide League football and a further £200m each year on its own sports channel, boxing ITV Digital into a corner that it is struggling to get out of. Executives admit they cannot make the deals pay and are desperately trying to renegotiate them.

At the same time ITV Digital is trying to get the government to improve the strength of the digital signal that it depends on to broadcast programmes. Around half the country cannot receive ITV Digital signals and many who can experience poor reception.

Piracy is a growing problem but Canal Plus, the supplier of the subscription cards that have been copied by hackers, believes it has finally pinpointed the source.

Sadly for ITV Digital it may have come too late. A recession in advertising spending has led to budgets at Carlton and Granada being cut to the bone.