Study reveals privatisation of Channel 4 would have a ‘negative effect’
A new report released today suggests privatising the Channel 4 Television public service provider, which operates Channel 4, More 4, 4Music and E4, would be “overwhelmingly negative.”
“As our upcoming annual report will demonstrate, Channel 4 is in strong creative and commercial health and, critically, it is delivering well to its public service remit. It is vital that the current debate about Channel 4’s future is informed by credible and independent research. Ofcom, EY and Enders have all recently concluded that Channel 4’s current model is sustainable and as this latest report shows, privatisation could actually make Channel 4’s remit less sustainable and would have a negative impact on the UK economy and UK viewers.” – Channel 4’s Chief Executive David Abraham
The report authored by Patrick Barwise, emeritus professor of management and marketing at London Business School, and Gillian Brooks, research fellow at Oxford University’s Centre for Corporate Reputation – concludes that Channel 4’s public service remit is comfortably sustainable and that the impact of privatising it would be “overwhelmingly negative for the overall economy, the broadcasting ecology and creative industries, technology adoption and commercial innovation, C4’s consumer surplus and advertiser surplus, and wider society.”
The report, commissioned by Channel 4, analyses the likely consequences of privatisation, focusing on the investment case for a potential buyer – most likely, a large US media company. It concludes that, to achieve an acceptable return on the investment, the new owner would need to get significantly more “bang for the buck” (advertising revenue per pound) from C4’s programme investment, which accounts for 70% of its expenditure. To do this, C4 would need to shift to a more mainstream commercial mix of programmes, executions and suppliers, and more aggressive scheduling, all of which would weaken the delivery of its public service remit.
The report makes the following conclusions:
- There is no need to privatise C4 to protect its distinctive remit, which is likely to be comfortably sustainable over the next ten years with C4 continuing as a government-owned, commercially funded publisher-broadcaster. In the unlikely event that, sometime in the next ten years, the remit did appear to be at risk, decisions could be made at that point about priorities within it and/or other ways of ensuring C4’s continuing viability by boosting its business model
- Privatising C4 would almost certainly make the remit less sustainable, thereby damaging: independent producers, especially smaller ones and those in the nations and regions, the wider broadcasting ecology and creative industries, especially film, societal aspects of the remit such as C4’s commitment to long-form news, current affairs and other programmes that tackle social and cultural issues – often quite challenging – across a range of genres.
- It would also be hard to attract credible bidders for C4 without dropping or weakening the current 100% publisher-broadcaster model to enable the new owner to switch a proportion of the content budget from external UK commissions to purchases from its own production businesses, probably mainly in the US.
- Privatisation would also be likely to impact adversely: consumers, especially younger and minority viewers, advertisers, especially those targeting hard-to-reach younger viewers, the wider UK economy (GVA, employment, exports, tax revenue).
This latest report follows independent research published separately by EY and Enders Analysis last month – both of which found Channel 4’s future to be sustainable. Ofcom also stated as part of its PSB review published in 2015: “In relicensing the core C4 service for ten years in 2014, we made it clear that we believed that the current funding model for that channel was sustainable.”
Channel 4 was launched in 1982 as a commercial public service broadcaster. Its first decade saw the broadcaster operate in association with the regional ITV network, with the majority of Channel 4 programming produced by the regional companies such as Central Television and Tyne Tees TV. ITV at the time was operated by the Independent Broadcasting Authority which placed on ITV a high level of public service requirements. In the early 1990s ITV, who had also managed Channel 4’s advertising deals, were separated with Channel 4 going it alone. ITV subsequently over the following years significantly decreased its public service requirements, something that a privatised Channel 4 would ultimately see too as profit is placed before programming.