Channel Four privatisation – picking though the arguments

Yesterday’s FT [£] had a useful reminder of the objections to Channel Four privatisation, or more accurately, a critique of the reasons for privatising the channel.

The sale has a number of objectives:

Making the broadcaster more sustainable. John Whittingdale has said it would become “very difficult to sustain” Channel 4 in public hands as more viewers switch to streaming services such as Netflix, putting its advertising-dependent business model under “greater and greater pressure”. It’s not clear that Channel 4’s business model is under much pressure though. It seems to be doing well at the moment…

Raising money for HM Treasury. Why this is a priority at the moment, when interests rates are so low is a mystery, and the price depends on the value, in a very deep sense. For example, the sale price could be increased from the lower estimate of £600m to the upper end of the scale – £1.5bn by removing some of the public-service obligations – news provision, cultural diversity, broad geographic representation. So every reassurance the government gives about the Public Service remit reduces the price, and therefore, the reason to do it.

To give this some context, Enders Analysis estimate that a sale of C4 could generate £600m-£1.5bn, depending on the buyer and the requirements attached. A non-broadcaster buyer would (according to Enders) value the business at £600m with its existing remit, including terms of trade attached, but if it were being sold to an international broadcaster (e.g. Comcast, Discovery or Viacom/CBS) it could fetch up to £1.5bn if the terms of trade were relaxed.

Enders are saying that this higher purchase price would be based on their ability to deliver cost savings of up to £100m. A domestic broadcaster, namely ITV, would value C4 at £700-800m and find cost savings of around £20m.

The question of ‘cultural diversity may seem a fairly nebulous one to the untrained eye, but in broadcasting regulations, it is a very big deal – it contains a lot of economic and cultural baggage and is the key to the future of good work in the industry. The ‘good work‘ issue is one that any union responses to the consultation will need to emphasise.

The big concern is that it will damage the UK’s ability to invest in risky, edgy, inventive productions. This argument is often recast as ‘it will damage the UK’s independent production sector’ (which we could argue is not quite the same thing). Meanwhile, Broadcast is hammering this particular issue:

This entry was posted in Factual & Entertainment sector data, Film & TV industry data, High End TV data, Public Service Broadcasting, Regulation, SVoD and tagged , , . Bookmark the permalink.

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