The government is hoping to cash-in on a £1bn-plus bidding battle by offering the chance to own a British broadcasting crown jewel – but Channel 4’s existing business model make it an unattractive prospect for many potential buyers.
Channel 4 was founded by Margaret Thatcher’s government 40 years ago to provide a culturally challenging alternative to the BBC and ITV. It is publicly-owned but commercially-funded.
Its existing public service broadcasting-led remit requires it to reinvest profits into new commissions and buying commercially unattractive – but culturally important – content such as news, current affairs, films and documentaries. This is the antithesis of a golden ticket for private equity investors, who want to cut costs and boost profit margins.
Channel 4 executives had instead presented an alternative plan to government called “The Next Episode” to avoid privatisation, based on the potential for a rapid increase in revenues from the broadcaster’s digital operations. This would have seen increased programme investment, a strategy to further boost the government’s regional “levelling up” agenda, and leverage more financial flexibility. Government sources insist Channel 4’s counter-proposals to privatisation were a non-starter and were not “serious”.
Instead, ministers insist a privatised Channel 4 can make a profit even while being required to retain many of its public service requirements, including a commitment to prime time news.
Analysts believe that a profit-hunting new owner would still be able to make hefty cuts to Channel 4’s programming budget, which would ultimately affect the quality of on-screen content, while fulfilling the letter of the law on public service broadcasting requirements. Any changes
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