Changing Channel 4 presents ministers with major hurdles

Created by Margaret Thatcher to smash the television duopoly in 1980s Britain, Channel 4 has survived countless proposals for privatisation, first by her and then from several of her successors in Downing Street.

But as it nears its 40th birthday, with the media industry in the throes of a streaming revolution, the free-to-air broadcaster’s time in the public sector may finally be coming to an end. “Boris Johnson will be the one [who sells Channel 4],” said one government figure privy to the prime minister’s thinking.

Ministers will soon launch a public consultation on the future of the state-owned, advertising-funded broadcaster, with the aim of passing legislation as soon as next year. “This is without a doubt the most serious challenge Channel 4 has ever faced to its independence,” said Maggie Brown, the broadcaster’s official historian. “It has never been more precarious.”

One overriding issue that has thwarted ministers in the past is the question of exactly what the government hopes to achieve: raising money for the Treasury or finding a private owner to pursue Channel 4’s existing public service mission.

It is a balance so hard to strike that David Abraham, a former chief executive of Channel 4, used to call its privatisation “a solution searching for a problem”.

On the block would be Channel 4’s assets and a media brand that still commands 10 per cent of UK television viewing. But also on sale, and arguably even more important in commercial terms, would be the perks and obligations of a public service broadcaster.

Michaela Coel, left, in the C4 sitcom ‘Chewing Gum’, which she created and in which she starred © Channel 4/Everett/Alamy

Channel 4’s remit, enshrined in law, is to serve younger, more diverse audiences, champion alternative perspectives, and act as a springboard for talent such as Michaela Coel and Graham Norton or directors including Steve McQueen and Danny Boyle.

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Its public licence, which expires in 2024, translates those principles into quotas for programming that are often lossmaking. The upside is a guaranteed slot on electronic programme guides — a “prominence” regime the government is looking to reform to keep pace with digital platforms and smart televisions.

Oliver Dowden, culture secretary, will include Channel 4’s mandate in the consultation on its future, alongside the question of its ownership model. The reformed remit will effectively set the financial return for the taxpayer from privatisation, since the obligations of the licence would define the channel’s commercial potential.

If the balance of public and private interests is wrong, the government risks creating what Clive Hollick, a veteran media executive, once compared to “a pantomime horse”, with legs running in different directions to deliver an incoherent mission. The sale price may be equally as laughable.

Some within Channel 4 fear Johnson’s motivation is ultimately political. It has long been the most liberal voice in British broadcasting, with a scratchy relationship with the Conservative party.

During the 2019 general election, an absent Johnson was replaced in a Channel 4 party leaders debate by a melting ice statue; he and his ministers later boycotted its news programmes. “They want to muzzle us,” said one senior person at the channel. “The government wants to influence and interfere with our broadcast news.”

A melting ice statue standing in for Boris Johnson on Channel 4 News’ general election debate in 2019 © Kirsty O’Connor/PA

Dowden’s stated concerns are more about its business: whether Channel 4 can survive as a small public broadcaster in the global streaming wars, when its advertising revenue from traditional television will be harder to sustain.

Channel 4, which generates about £1bn of revenue a year, has never called on the taxpayer to cover operating costs. On Tuesday, when it unveils results, executives will try to show it can keep going for a long time to come, even in an era of Netflix, Amazon and Disney. Channel 4 is expected to report a record surplus, with fast-growing digital revenue from its on-demand service.

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However, Dowden’s concerns about the sustainability of Channel 4’s business could well limit the pool of potential buyers. Big US media groups are these days more focused on shedding traditional television channels than buying them.

Channel 4, meanwhile, lacks what all the big American streaming services prize most: intellectual property. Ministers could reform its constitution to allow it to retain more rights to shows and movies than currently, but it is late in the day to change its publisher-broadcaster business model.

John Turner, the head of Oliver Wyman’s media consultancy practice, compared the sale to trying to catch a “falling knife” given Channel 4’s strategic challenges. “The model of ‘packager’ of programmes purchased from others who hold the rights is dead,” he said. “The clock is ticking on all of these broadcaster players across Europe, especially those that don’t produce and own rights.” 

Graham Norton with Ulrika Jonsson on Channel 4’s ‘So Graham Norton‘ show © PA

David Elstein, the first chief executive of Channel 5, has long advocated a sell-off of Channel 4 and even led a failed bid to merge the two networks two decades ago.

“The only realistic basis for privatising Channel 4 would be to merge it with another media player and extract synergies,” said Elstein, adding that Channel 5 owner ViacomCBS would be best placed to benefit from savings that he estimated could reach £200m. But even ViacomCBS appears more concerned with streaming today than taking on more broadcasting assets.

Other trade buyers in the UK may be interested, but Channel 4 is one of only three media sales houses that dominate British television advertising. If Comcast-owned Sky or ITV made a bid, it could raise serious antitrust issues.

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A financial buyer may see more potential in Channel 4. But the aim would be to slash costs, reduce programming spend to a minimum, and reap what is left from television advertising. It is a business plan that is at odds with the Channel 4 ethos; it has won 37 Oscars to date, but had little financial return to show for any of them.

Elstein said the sale only made sense as part of a radical shake-up of broadcasting policy, which would overhaul public funding across the board, including at the BBC. “If you are not doing that, then why are you doing it at all?” he asked.


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