Channel 4 pushes back against privatisation after record results

Channel 4 executives have warned against harming the network’s public mission with an “irreversible” privatisation as ministers start the process to potentially sell the UK broadcaster as soon as next year.

Oliver Dowden, culture secretary, will on Wednesday launch a consultation to explore the sale of the commercially funded but state-owned broadcaster to shore up the business and “unleash its potential” in the age of digital streaming.

The moves to potentially privatise the 38-year-old public service broadcaster came as Channel 4 on Tuesday argued it had proved its viability by returning its best-ever financial results during 2020, despite the pandemic.

Alex Mahon, chief executive, warned that the shift to a for-profit model would potentially endanger the broadcaster’s spending outside London, its support for independent producers and its reach with younger audiences.

“We have always got to be careful about doing something that might be irreversible and possibly damage things we do for the sector and the UK,” she said after listing the potential downsides of private ownership.

Channel 4 generates more than 90 per cent of its revenue from advertising, which supports spending on its remit to commission shows that appeal to younger, diverse audiences and champion alternative views.

The so-called publisher-broadcaster model has enabled Channel 4 to deliver its public service remit without having to turn to taxpayer support since it was founded in 1982.

But it is facing severe challenges as global streaming services such as Netflix, Amazon and Disney take an ever-greater share of audiences and production spending within the UK. The reach of Channel 4’s traditional television channels, which account for about 10 per cent of audience share, fell 3.7 per cent last year.

Dowden sees Channel 4’s business model as particularly vulnerable to the decline of traditional television. His consultation will look at whether changing Channel 4’s remit and ownership will help it raise capital and build partnerships to “keep its place at the heart of British broadcasting”.

The consultation will be alongside a broader review of the regulatory framework for broadcasting, which will aim to update rules to guarantee the prominence of public service media and “level the playing field” with global streaming services.

While raising questions about the purpose of privatisation, Channel 4’s leadership team on Tuesday argued that the “stellar” performance through the pandemic showed it was still able to succeed in the most difficult market conditions.

With advertising hit hard in the first half of last year and production at a standstill, Channel 4 cut costs and deferred programmes to keep its operations afloat, with content spending slashed from £660m to £522m.

Annual revenues fell 5 per cent to £934m, a better than expected performance after advertising rebounded for shows such as The Great British Bake Off and Gogglebox. Cost-cutting helped the broadcaster to report a record £74m pre-tax surplus.

Mahon has sought to accelerate Channel 4’s transition to becoming a “digital-first” broadcaster, with more emphasis on its ad-funded, video-on-demand service All 4. Total views on the platform rose 25 per cent to 1.25bn last year.

Channel 4 has played down the potential advantages of private ownership. “As a board and executive team we have not been pushing for greater financial liberation in order to pursue opportunities,” Mahon said.

Channel 4’s chair Charles Gurassa said that if capital was needed, the broadcaster, which owns its headquarters and has a strong balance sheet, has “got the firepower to [invest] and we would release it”.

Tom Harrington of Enders Analysis said on Tuesday that it would be difficult to maintain its existing public service remit “with a new buyer paying any more than a meagre sum”.

“There are certainly areas where Channel 4 could benefit from the greater scale that privatisation could offer. However concentrating on this distracts from potential costs to its delivery of the remit,” he said.

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