What is privatisation?
Privatisation is the transfer of ownership of a government or publicly owned organisation to private companies or individuals. For example, in 2013 Royal Mail was privatised through a flotation on the London Stock Exchange, the handling of which resulted in the government being heavily criticised.
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.
How does it make money?
More than 90% of Channel 4’s income comes from selling TV advertising in the shows it broadcasts. Last year, Channel 4 made £934m in total revenues, with digital advertising growing to £161m, thanks to a surge in streaming of shows and box sets during the pandemics. The remaining 9% of income comes from operations including 4Studios, which creates digital content for advertisers, and new non-advertising partnership deals.
Is it profitable?
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. Last year, it made what it refers to as a pre-tax “surplus” of £74m, the largest in the broadcaster’s 38-year history, thanks to the huge bounce back in the TV ad market in the second half of last year and the cutting of £150m from its £660m programming budget as the pandemic stopped productions.
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.
Who could buy it?
In 2016, a report commissioned by Channel 4’s board identified BT as the “most likely” UK company to bid for a privatised Channel 4. However, the broadcasting and technology landscape has changed dramatically since then, with BT now looking for a buyer or strategic partner for its own pay-TV business to defray costs as it focuses on full-fibre broadband and 5G mobile rollout. The report identified the most likely buyer overall as the US group Discovery – which is in the process of merging with WarnerMedia, the parent company of CNN, HBO and the Hollywood studio behind Batman and Harry Potter – or Channel 5 owner ViacomCBS. Foreign ownership of a key UK broadcaster may be seen as politically difficult.
What is Channel 4 worth?
While a price tag of £1bn was attached to Channel 4 at the last privatisation push it is very difficult to provide a current estimate. Unlike other broadcasters 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.
What are the government’s options for privatisation?
Options include finding an outright private buyer, selling a strategic stake, floating Channel 4 on the London Stock Exchange, where it would sit alongside ITV, or move it to some form of mutual ownership model. The latter would mean Channel 4 pays the government some form of dividend, which some analysts believe would ultimately make the government more money than any form of sale.
What are Channel 4’s biggest shows?
Given Channel 4’s mission to provide a creative challenger it is ironic that its biggest show, The Great British Bake Off, is actually a BBC creation. In 2016, Channel 4 paid £75m for an initial three-year deal for the show, and it has become a ratings winner for the broadcaster. Other shows that perform solidly for Channel 4 include Gogglebox, while recent drama It’s a Sin proved popular with audiences and critics.
