What you need to know about the privatisation of Channel 4 | Channel 4


Who would buy a privatised Channel 4?

The industry player most likely to buy Channel 4, with the least regulatory hurdles, is Discovery. The big US pay-TV company, which is merging with WarnerMedia, the parent company of CNN, HBO and the Hollywood studio behind the Batman and Harry Potter franchises, expressed interest the last time the broadcaster faced privatisation in 2016.

The company, which has a mix of free and pay-TV operations, continues to be highly active in the UK market, striking a deal with BT in February to launch a pay-TV sports joint venture including BT Sport, which has rights to sports including football’s Premier League and Champions League.

However, ITV has been lobbying Whitehall about the possibility of a “national champion” takeover, designed to take the political fallout of yet another buyout of a UK “crown jewel” by a foreign owner. The issue for ITV, which said in the 00s that it would bid for Channel 4 if it was combined with another broadcaster as was mooted with Channel 5, is that it would create what amounts to a TV advertising monopoly resulting in significant competition issues.

There will also be significant interest from private equity buyers, although Channel 4’s remit would have to be changed to allow a non-trade buyer to make profits from the business.

What is likely to happen to a privatised Channel 4?

Channel 4’s remit has never been to make a profit – the money it makes is reinvested in commissioning and buying programmes from mostly British TV production companies, helping to support a key national industry.

Analysts believe that a privatised Channel 4 would face 40% to 50% cuts to its £660m programming budget – spent on content such as news and current affairs, Gogglebox and It’s a Sin – to force its model into that of a commercially-focused broadcaster.

This is likely to mean cuts to content that does not bring in much income from advertising, which Channel 4 relies on for more than 90% of its £1bn annual revenues, such as news.

Channel 4 is a key commissioner of TV content from production companies based around the UK and sees itself as a key part of the government’s levelling up ambitions outside London. Analysts believe that as many 60 TV production companies around the UK could be forced to shut if Channel 4 moved to private ownership.

Who owns Channel 4?

Channel 4 was established by Margaret Thatcher’s government in 1982 to provide a culturally challenging alternative to BBC One, BBC Two and ITV. It is publicly owned but commercially funded. Unlike the BBC, which is funded through the £159-a-year licence fee its viewers must pay, Channel 4 has no financial support from the taxpayer.

What is Channel 4 worth?

While a price tag of £1bn was attached to the broadcaster at the last privatisation push, it is very difficult to provide a current estimate. Unlike rivals such as ITV and the BBC, Channel 4’s remit means it does not have its own in-house production arm. While it has rights to show programmes on linear TV and on its streaming services in the UK, the broadcaster does not own the rights to commercialise those shows around the world. The ownership of must-watch, “crown jewel” content has been the driver of the wave of media mergers and takeovers seen in recent years. Any potential buyer would need Channel 4’s model to be allowed to be drastically changed to increase margins and commercial opportunities.

Has privatisation been tried before?

Privatisation in some form has been mooted about half a dozen times since Channel 4’s launch, with the most serious push coming under David Cameron’s government in 2016. That was led by the then culture secretary John Whittingdale, who is also overseeing the government’s latest push towards privatisation. Ultimately, it was decided that the benefits of a cash windfall to the government were outweighed by the scale of the detrimental impact on the independent TV sector. In 2017, the culture secretary Karen Bradley formally ruled privatisation out, saying Channel 4 was a “precious public asset” that would “continue to be owned by the country”. Instead, the government pushed for Channel 4 to relocate significant parts of its operations and staff out of London. About 300 of its 800 staff have now moved to new “national” headquarters in Leeds, as well as “creative hubs” in Bristol and Glasgow.

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