.jpg)
The privatisation of the UK’s Channel 4 is now back on the political agenda. The broadcaster has a unique status: publicly owned yet commercially funded; a statutory remit to serve diverse audiences with innovative and original content, and a publisher not producer of content. The background to the UK Government’s consultation is the need to confront the challenges posed to public service broadcasting in the light of increased competition globally, especially from the rapidly growing streaming platforms. Nevertheless, privatisation is not without its risks, and Channel 4 is too important to be sold-off in a hurry.
In July 2021, the UK Government launched a consultation on the future ownership of Channel 4.[1] Explaining the context, including the channel’s future sustainability as a public service broadcaster, the consultation was decidedly one-sided:
‘The government’s preferred option is to facilitate a change of ownership of Channel 4, which it believes will give it greater access to new strategic and investment opportunities, allowing it to compete effectively in a more agile fashion and ensuring it has the best chance of a successful and sustainable future.’
This is not the first time in recent years that the channel’s privatisation has been considered. In July 2016, reacting to press speculation that the then Conservative Government was considering its sale [2], the House of Lords Communications Committee expressed its concerns that ‘a private owner may seek to dilute C4C’s public service remit in the future, in order to maximise profit’ [3]. In a response in March 2017, the then responsible Minister accepted that the fulfillment of channel’s public service remit ‘would not be best served by privatisation’ [4].
An obvious question is, in a little over four years, what has changed?
Set-up by the Thatcher Government, the Channel Four Television Corporation (Channel 4) began broadcasting in 1982 [5]. As a publicly owned, non-profit organisation, created by statute, it invests all its income back into the commissioning of content. It receives no public money, its revenues deriving in the main from advertising on TV and online. Channel 4 does not produce its own content, rather it commissions content from over 300 independent production companies. Its statutory remit includes a distinct commitment to diverse and innovative content.
Channel 4 is one of a handful of free-to-air public service broadcasters (PSBs) in the UK - the others are BBC One and BBC Two, Channel 3 (licensed by ITV in England, STV in Scotland and UTV in Northern Ireland), Channel 5 (owned by ViacomCBS) and S4C (the Welsh language broadcaster). PSBs are subject to specific obligations over and above those of their purely commercial counterparts, including the carrying of news during prime time programming, with the consequent loss in potential audience share and advertising revenue. More recently, the launch and rapid growth of streaming platforms, such as Netflix and Amazon Prime Video (the ‘SVODs’) [6], has intensified competition for audiences, content and production facilities.
Like the other PSBs, Channel 4 also has a number of portfolio channels (E4, Film4, More4, 4Seven and several music channels) and an on-demand service, All 4, which is the largest free commercial streaming service in the UK. Channel 4 is unique in its status as a ‘publisher-broadcaster’, meaning that it is generally restricted only to the commissioning and acquisition of content, not the production of programmes [7].
In terms of its future, Channel 4 is committed to the substantial growth of its digital platform, prioritising digital growth over linear ratings [8]. Alongside strengthening its digital presence, the strategy includes a ‘Global Format Fund’, through which it aims to partner with producers to produce content having both UK and international exploitation potential.
Channel 4’s performance in recent years has been strong. According to its 2020 Annual Report, the broadcaster produced a ‘record surplus’ of £74 million, with only a 5% downturn in revenues on 2019, despite the pandemic [9]. In 2018, reviewing the content of the channel over the preceding four years, the media regulator Ofcom found that the broadcaster had met its content duties, taking creative risks, achieving record levels of investment in UK-originated content, while also maximising its reach by successfully innovating online [10]. There were risks, however, given the emerging trends in consumption patterns, in particular amongst younger viewers. As it does not produce its own content, it cannot diversify its revenue streams, being exposed to any decline in TV advertising, while a ‘marked acceleration in the pace of change in audience viewing habits could also threaten the broadcaster’s advertising revenues in the longer term’ [11].
The long term sustainability of public service broadcasting, in the light of the changing nature of consumption patterns, has been a concern for some time. In its periodic review in 2018, Ofcom predicted that the migration of viewers from scheduled TV to on-demand would require PSBs to work collectively to negotiate effectively with smart TV manufacturers and platforms [12]. A little over a year later, the regulator opined that public service broadcasting was at a ‘critical juncture’, and it was time for government, parliament and the industry to consider a new framework for public service media [13].
Responding to the challenge, in June 2021 the government announced a review of public service broadcasting, which could include new rules for video on demand services, levelling the regulatory playing field so that traditional linear broadcasters could better compete with their international rivals [14]. A broadcasting White Paper was announced for the Autumn, although it has yet to materialise. Alongside these policy initiatives was the launch of the consultation on the ownership of Channel 4, the subject of this comment piece.
In the Government consultation paper, the rationale for privatisation was explained as follows:
- The significant increase in spending on original content by the major streaming platforms made it difficult for the PSBs to compete with their better resourced international rivals: ‘Third party ownership with the improved access to capital it would bring could allow Channel 4 to innovate and adapt to stay ahead.’
- Such an increase in Channel 4’s ability to invest would enable its transformation into a ‘hybrid broadcaster with both a linear and VoD offering across multiple platforms’. While noting the channel’s strong performance in attracting VOD viewers (1.25 billion views in 2020), the Government opined that: a ‘new owner with improved and sustained access to capital, an ability to take advantage of strategic partnerships, and to support expansion into international markets could help build on Channel 4’s success in this area – in particular in terms of hours of content available online’.
The key impediments to the sustainability and growth of the broadcaster, according to the consultation paper, stemmed from the restrictions on its ability to produce its own content, with a business model heavily reliant on advertising revenues. Furthermore, due to the restrictions imposed upon it by Parliament, as a publicly owned entity, it could not borrow more than £200m, leaving it without the option to raise substantial capital [15].
Alongside these considerations was channel’s role as a public service broadcaster. Currently, Channel 4’s specific contribution to public service broadcasting is defined by statute which, in addition to a ‘broad range of high quality and diverse programming’, requires it to produce innovative content, exhibiting a distinctive character [16].
The consultation paper considered that there was ‘a compelling case to consider modernisation of the remit and obligations’ placed on the broadcaster. It was, however, surprising scant on detail, beyond confirming the channel’s continuing status as a PSB:
‘The government would want to see strong commitments to these objectives from any new owner to ensure that Channel 4, with its ongoing status as a public service broadcaster and a relevant remit, delivers for its audience, and continues to contribute to the wider PSB ecology.’
The lack of discussion here is perhaps surprising given the concerns that were expressed the last time privatisation was mooted. For example, the House of Lords Communications Committee cautioned:
‘We draw attention to the risk involved in a sale: once the company has passed into private ownership—particularly, as is likely… into overseas’ ownership—there is no mechanism to control or influence its fate. [17]’
While there is some truth in this, the question of Channel 4’s ownership is distinct from the public service remit it would be bound by, governed by statute and a licence enforced by a regulator. The idea that a private owner would not have an incentive to invest in content at comparable levels has been questioned by some [18].
There are risks, however. If the PSB remit remains the same, this will affect the value of the asset, so there is a strong incentive on the Government, in receipt of the proceeds of the sale, to weaken the broadcaster’s obligations. A private owner may also be less willing to experiment in innovative content, serving audiences not otherwise catered for by the other commercial broadcasters. Another risk associated with the sale is the damage it may do to the UK’s highly successful independent production sector which the broadcaster has successfully nurtured since its creation in the 1980s [19].
Given the underlying rationale for the privatisation of Channel 4 it is perhaps surprising that some alternative solutions were not considered by the consultation paper, which had the air of a fait accompli. For example, a previous chairman of Channel 4, Lord Burns, argued for a mutualisation model, which would have the apparent advantage of removing borrowing restrictions on the broadcaster, while also enabling it to engage in joint ventures with commercial partners [20]. The Government would still receive a substantial payout, it would remove the corporation from the public sector, but it would remain a not-for-profit organisation.
There is no doubt that broadcasting in the UK is undergoing a radical transformation. While the Government remains committed to the centrality of public service values, there is no doubt that the means by they are delivered need to be reimagined. This move on the part of Government may be viewed as one contribution to that transformation. That said, one may question why the privatisation of Channel 4 has been dealt with in isolation from the series of reforms to be part of the long awaited broadcasting White Paper.
The consultation closed in mid-September 2021 after receiving some 60,000 responses. Shortly after, Nadine Dorris, the new Culture Secretary, claimed that a decision had yet to be taken on whether to privatise the channel [21]. This reticence sits in sharp contrast to the Government’s rushed announcement to freeze the BBC’s licence fee for the next two years, signalling its probable demise after the next charter renewal in 2027 [22].
Media policy and politics have always been unfortunate bedfellows. The future of public service broadcasting in the UK raises important questions which need to be confronted. We should, however, be suspicious of rushed decisions, especially by politicians who may be in a hurry, for whatever reason.
[1] Department for Digital,Culture, Media and Sport, Consultation on a change of ownership of Channel 4 Television Corporation (6 July 2021) https://www.gov.uk/government/consultations/consultation-on-a-change-of-ownership-of-channel-4-television-corporation.
[2] Jane Martinson ‘Government may privatise Channel 4, document reveals’ (The Guardian,24 September 2015) https://www.theguardian.com/media/2015/sep/24/government-considering-channel-4-privatisation-document-slip-up-reveals
[3] House of Lords Communications Committee, A privatised future for Channel 4? (HL Paper 17, 11 July 2016) https://publications.parliament.uk/pa/ld201617/ldselect/ldcomuni/17/17.pdf
[4] https://www.parliament.uk/globalassets/documents/lords-committees/communications/susainabilityofC4/KarenBradleyMP290317.pdf?shiftFileName=KarenBradleyMP290317.pdf&shiftSavePath=/documents/lords-committees/communications/susainabilityofC4
[5] Channel 4 is operated by the Channel Four Television Corporation, a public corporation of the Department for Digital, Culture, Media and Sport.
[6] ie, subscription video-on-demand.
[7] Communications Act 2003, s 295.
[8] Channel 4 ‘Channel4 sets out path to digital future with new strategy: Future4’, (Press Release,26 November 2020) https://www.channel4.com/press/news/channel-4-sets-out-path-digital-future-new-strategy-future4
[9] John Woodhouse, Channel 4 - a change of ownership? (House of Commons Research Paper, 15 September 2021) p.6 https://researchbriefings.files.parliament.uk/documents/CBP-9280/CBP-9280.pdf
[10] Ofcom, Channel 4 Corporation’s performance in delivering its media content duties 2014-2018 (27 February 2020) https://www.ofcom.org.uk/__data/assets/pdf_file/0030/192099/channel-4-review-2014-18.pdf
[11] ibid, p.3.
[12] Ofcom, Public service broadcasting in the digital age (8March 2018) p.9 https://www.ofcom.org.uk/__data/assets/pdf_file/0026/111896/Public-service-broadcasting-in-the-digital-age.pdf
[13] Ofcom, The Future of Public Service Media (4 July 2019) https://www.ofcom.org.uk/__data/assets/pdf_file/0022/155155/future-public-service-media.pdf
[14] Department for Digital, Culture, Media & Sport ‘New plans toboost Britain’s broadcasters and protect viewers on video-on-demand channels’(Press Release, 23 June 2021) https://www.gov.uk/government/news/new-plans-to-boost-britains-broadcasters-and-protect-viewers-on-video-on-demand-channels
[15] The Channel Four Television Corporation (Borrowing Limit) Order 2003 (SI 2003/3176),article 2 https://www.legislation.gov.uk/uksi/2003/3176/article/2/made
[16] Communications Act 2003, s 265 https://www.legislation.gov.uk/ukpga/2003/21/section/265
[17] n 3 above, para 12. On the potential buyers see Julian Clover ‘Delay to Channel 4 privatisation’ (BroadbandTVNews,8 November 2021) https://www.broadbandtvnews.com/2021/11/08/delay-to-channel-4-privatisation/
[18] See for example David Elstein, ‘Channel 4: Is there value inprivatisation?’ (openDemocracy, 1 July 2021) https://www.opendemocracy.net/en/opendemocracyuk/channel-4-there-value-privatisation/
[19] Mark Sweeny, ‘Channel 4 privatisation ‘could shut up to 60 productioncompanies’ (The Guardian, 14 September 2021) https://www.theguardian.com/media/2021/sep/14/channel-4-privatisation-60-production-companies-indie-producers
[20] n 3 above, paras 276-279.
[21] https://committees.parliament.uk/oralevidence/3054/pdf/
[22] Jim Waterson ‘BBC funding ‘up for discussion’, says Nadine Dorries, as licence feefrozen’ (The Guardian, 17 January 2022) https://www.theguardian.com/media/2022/jan/17/no-final-decision-made-on-bbc-licence-fee-says-nadine-dorries
