Channel 4 Corporation (C4C) plays a key role in British broadcasting and the wider creative industry of the UK. It commissions all of its British programmes from UK independent production companies. Its primary source of income is advertising and any surplus generated is put back into funding content.
It has a unique remit which includes championing an alternative point of view and being innovative and distinctive. C4C is a creative success, has had a positive social impact through programming including the Paralympics and initiatives such as the 360 Diversity Charter and plays an essential role in news plurality in the UK.
BBC Charter Review, Ofcom’s Third Review of Public Service Broadcasting, a review of the Terms of Trade and a consultation on retransmission fees and the electronic programme guide have made for a turbulent 12 months for the broadcasting industry. The emergence 11 months ago of the first reports that the Government was looking at options for C4C, including privatisation, have added to this sense of flux. We are concerned about the cumulative impact and uncertainty this additional appraisal is having on the wider creative industries.
The Secretary of State has told the Committee that he has maintained the position that the Government is looking at all ownership options for the broadcaster. He has made clear his view that with the media landscape changing faster than at any other time, the future for C4C is very uncertain. He is concerned that there are significant risks for a publicly owned but commercially funded broadcaster which is almost wholly dependent on advertising revenue.
Broadcasting is a fast-moving industry and the way in which content is consumed has changed in the last 10 years to include mobile devices and new distributors. This is seen most markedly amongst the younger viewers who make up C4C’s key demographic. However, C4C has demonstrated its resilience in the face of these changes, diversifying its content supply and its revenue streams in order to meet the challenge.
C4C’s Annual Report for 2015 demonstrates that the share of viewing to the main channel increased last year as did the share of viewing across its portfolio in peak-time across all individuals, including 16–34-year-olds. It received nearly £1 billion from advertising revenue and currently maintains significant reserves. The Committee believes the evidence shows that, as far as it is possible to predict the future, C4C is sustainable for at least the remaining eight years of its licence term. We believe it is well positioned to withstand possible market volatility following the result of the EU Referendum.
Ofcom renewed C4C’s licence for a further 10 year term in 2014. We consider that major change should be considered principally at the point of licence renewal and not on a constant basis between renewals.
C4C’s remit is drawn from the Communications Act 2003, the Digital Economy Act 2010 and its licence. There has been criticism of the robustness of the conditions of this remit and, whilst the Committee recognised the complications of assessing qualitative goals, we do not think that a perfect system could be created.
The Committee considers that some of the important content that C4C produces in news, current affairs and film would be at risk if the organisation was privatised and had to operate in a more commercially focussed environment. C4C’s roles in commissioning programmes from smaller production companies and from outside London would both be threatened by a privatisation deal.
We are concerned that, notwithstanding assurances given at the point of sale, a private owner may seek to dilute C4C’s public service remit in future, in order to maximise profit. We draw attention to the risk involved in a sale: once a company has passed into private ownership—particularly, as is likely, with a C4C sale, into overseas’ ownership—there is no mechanism to control or influence its fate.
We heard little evidence to suggest that C4C itself or the creative industries would benefit from full or part privatisation. The risks appear to outweigh any potential benefits.
Key questions about the future of C4C remain unanswered. If privatisation in any part is proposed by the Government we would expect to see a full, public consultation on the evidence for a change in the ownership model of C4C. However it is our clear preference that the status quo be maintained as there are many more risks than benefits involved in privatisation.