Channel 4 is no stranger to privatization talks – but it looks different | Economic news

Almost since Channel 4 launched 38 years ago, with the first episode of Countdown, there has been speculation that it is threatened with privatization.

In January 1983, just two months after the channel launched, Kevin Goldstein-Jackson – the executive who helped launch hits like Tales of the Unexpected and who went on to run franchise operator ITV Television South West – asked its privatization.

As Margaret Thatcher’s privatization revolution unfolded in the 1980s, calls kept coming, often from surprising directions.

In 1987 Michael Grade, then managing director of BBC television and later dubbed Britain’s “chief pornographer” when he became managing director of Channel 4, said “that would be a really good thing. for UK broadcasting if that were to happen “.

The FT reported that John Whittingdale, a strong proponent of privatization historically, will conduct a consultation

One way or another, however, Channel 4 has managed to remain state-owned. The last serious calls for the broadcaster’s privatization came after David Cameron’s victory in the 2015 general election, when John Whittingdale, then Culture Secretary and Matt Hancock, then Cabinet Minister, reportedly lobbied for it. A key aspect of their proposal was that it would raise up to £ 1 billion for the government.

Today, however, talks about privatization are back in the air.

The Financial Times reported on Friday that Channel 4 will be “geared towards privatization” by the UK government as early as next year. He said ministers are due to launch a formal consultation in a few weeks on the broadcaster’s future.

This could, according to the FT, even see an outright sale of Channel 4.

Worryingly for Channel 4, which has always opposed privatization, the FT said the consultation would be led by Mr Whittingdale himself.

There are a number of reasons the idea has resurfaced now. The first is that, in the eyes of some in government, Channel 4’s business model is under pressure. As a free-to-air broadcaster with few program rights to operate, it is exceptionally exposed to the vagaries of the advertising market, as has been demonstrated over the past year.

The broadcaster reported a pre-tax loss of £ 26million in 2019 – Channel 4 itself blamed this on the cost of opening its new site in Leeds – but then suffered a slump in advertising revenue when the COVID-19[female[feminine pandemic broke out in March of last year.

The London HQ of Channel 4. Photo: AP
The historic Channel 4 headquarters in London (pictured) has been watered down with a new location in Leeds. Photo: AP

For its part, Channel 4 itself said it expects a surplus for the year, with advertising rebounding strongly in the second half of the year. The broadcaster also consolidated its finances with aggressive cuts to its budget during the pandemic and by taking out loans. One indication of his recovery to financial health was that he paid the leave money back to the treasury as early as last fall.

It is also argued that the rise of streaming platforms like Amazon Prime, Disney +, and Netflix, and the continued strength of multi-channel TV broadcasters like Sky, the owner of Sky News, makes Channel 4 vulnerable to a loss of viewers that would ultimately end up being. earn advertising revenue.

Channel 4 responded by saying that by 2020 it had actually increased its TV viewing share, not only in terms of linear TV, but also through digital platforms. He said late last year that digital viewing now accounts for one in eight hours of Channel 4 viewing.

Despite all this, ministers fear that as a company, Channel 4 is exceptionally vulnerable.

Earlier this year Oliver Dowden, the Culture Secretary, vetoed the reappointment of two of Channel 4’s directors, Uzma Hasan and Fru Hazlitt, even though Channel 4 itself and Ofcom, the broadcasting regulator , were favorable. It was reported at the time that Mr Dowden wanted the two women, both from the production background, with new directors with more financial background.

Culture Secretary John Whittingdale arrives in Downing Street, London, for the final Cabinet meeting with David Cameron as Prime Minister.
The FT reported that John Whittingdale, a historically strong proponent of privatization, will conduct a consultation

Another reason why privatization could be back on the agenda is public finances.

Some in Whitehall believe a significant amount of money could still be taken out of a Channel 4 sale – although most analysts who analyzed the numbers believe the sale’s proceeds would be well below £ billion mentioned six years ago. It is also argued that a new owner for Channel 4, with deep pockets, could help ensure the quality of its output. The problem is, there are few obvious buyers for Channel 4.

Most of the big U.S. buyers who might be interested focus on other things, while Channel 4’s relative lack of intellectual property rights – in stark contrast to, say, ITV – means there would be little gains to be made by a large media buyer.

Channel 5 owner Viacom-CBS is seen as the most likely buyer, but it’s also currently focusing more on building its streaming service, Paramount +, as well as trying to build trust among its customers. investors after a catastrophic drop in its share price earlier this year linked to the collapse of the hedge fund Capital Archegos. Investors also suspect that Viacom-CBS will look to save capital to invest more in content as it battles rivals like Netflix and Disney, whose streaming service Disney + has far exceeded Wall Street expectations, instead. than using it to buy an asset like Channel 4.

Channel 4 prides itself on alternative programming.  Photo: AP
Channel 4 has boasted of having alternative and original programming throughout its history. Photo: AP

Additionally, if any of the major US broadcasters were interested in acquiring a UK free-to-air broadcaster, they are much more likely to land on ITV which, unlike Channel 4, has its own industry in the UK. ITV studios and much more intellectual property. assets to be exploited.

This could result in an IPO, which would give Channel 4 better access to capital, as a more likely outcome – although it has been speculated in some quarters that ITV itself could be a buyer.

Expect Channel 4 to firmly resist any attempt to privatize it.

In the past, the broadcaster has been able to mount a significant lobbying campaign, drawing on members of the artistic establishment, to argue that its mandate to produce distinctive programming would be compromised by a change in ownership.

He’s also likely to point out that he’s a major investor in UK content and spends a lot with independent production companies. This is, however, a more difficult argument to make when Sky and Netflix invest record amounts in UK programming, when BBC drama production continues to be successful, and when ITV’s production line is in such good shape. .

In short, many of the arguments used by Channel 4 to resist privatization in the past may not be as relevant as they used to be.

This may represent the best opportunity for Mr Whittingdale to lobby for a policy he has been pursuing for 25 years.

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