The future of Channel 4 Contents

Summary of conclusions and recommendations

1.The Government should not have consulted on the future of C4C—and stated that privatisation was its preferred option—before explaining its proposals for the future of public service broadcasting. Although we welcome the Government’s commitment to set out its position on these issues in a White Paper, it is difficult to reach a conclusive view on the ownership of C4C without understanding the future public service broadcasting landscape of which it would be a part. Instead, this report analyses challenges and opportunities which must be central to any final decision. (Paragraph 9)

2.When asked about the potential benefits of privatisation, C4C’s response listed only potential disadvantages. We would have been more reassured to see C4C, as a publicly owned corporation, openly demonstrate that the potential benefits of privatisation had been considered by its board, and judged to be outweighed by the risks. (Paragraph 32)

3.If C4C remains in public ownership, we recommend that its board be required periodically to publish analysis of the sustainability of C4C’s business model. As part of this process, C4C would be expected to notify the Government of potentially significant threats to its sustainability, at which point the Government might choose to launch a review of C4C’s ownership. If the Government wishes to launch such a review without this notification from C4C, it should first be required reasonably to demonstrate the scale of the threat to C4C’s business model. The Government should remain circumspect about reviewing C4C’s ownership, mindful of the disruption this may cause the Corporation in fulfilling its remit and purpose. (Paragraph 33)

4.Enhanced measurement and transparency of All 4 viewing would lead to greater confidence in the sustainability of C4C’s business model and enable a more detailed assessment of the competitiveness of the UK broadcasting sector. Ofcom should be able to compare the performance of publicly owned public service broadcasters’ video-demand services. (Paragraph 34)

5.Improved monitoring and assessment of viewing data is a priority and we recommend C4C and Ofcom resolve the lack of standardised data as quickly as possible. (Paragraph 35)

6.The Terms of Trade and the publisher-broadcaster model restrict C4C’s ability to derive long-term profit from commissions or from international content partnerships, outside of the rights it will retain from commissions launched through the Global Format Fund. (Paragraph 46)

7.Given the degree of consolidation in the market, in order to uphold their original purpose of protecting small and medium-sized independent production companies, the Terms of Trade should be modified for larger companies and the publisher-broadcaster model should be relaxed. Alongside enabling C4C to retain a greater share of intellectual property rights to the content it commissions, this would also make it possible for C4C to develop its in-house production capacity. We discuss this further in Chapter 3. (Paragraph 46)

8.The potential benefits of privatisation to C4C’s sustainability are increased access to investment in programming, content partnerships and technology through access to capital. This would enable C4C to diversify its revenues, enhance its sustainability and be more ambitious internationally. (Paragraph 54)

9.However, privatisation is not the only way in which C4C could access capital. The discussion of C4C’s future threatens to become a binary debate between privatisation or the status quo. (Paragraph 55)

10.The Government should produce an analysis of alternatives to a change of ownership before proceeding with any sale, including a full and transparent account of projected revenues. The Government should investigate the possibility of raising C4C’s borrowing limit to give the Corporation more access to capital while still being publicly owned, and how this could be achieved. (Paragraph 55)

11.Regardless of the question of ownership, the Government should implement in full Ofcom’s recommendations for PSB prominence. The Government should also review licence obligations and how to ensure fair terms of access to online platforms. (Paragraph 56)

12.Regardless of the question of ownership, we recommend that changes be made to the Terms of Trade for all PSBs, and the publisher–broadcaster model relaxed for C4C. Enabling C4C to invest in IP ownership would substantially enhance its financial resilience and market power in the face of global competition. The interests of large, established production companies should not take precedence over C4C’s long-term sustainability. We also recommend that C4C’s role in stimulating small, medium, diverse and regional production companies be strengthened, and that the Terms of Trade should be revised to apply to producers with a turnover under a certain cap. (Paragraph 67)

13.The quota on commissioning programmes from independent production companies should be refocused on smaller independent production companies in order to strengthen broadcasters’ role in stimulating start-ups and smaller producers. (Paragraph 71)

14.C4C should consider investing more of the existing capital it has highlighted to us, up to its borrowing limit, in the Indie Growth Fund in order to partner with and grow more small, diverse and regional production companies. This would help foster new talent in the independent production sector, alongside helping C4C diversify its revenues. (Paragraph 73)

15.We recommend that regardless of ownership C4C’s voluntary higher quota for production in the nations and regions be codified in legislation and enforced by Ofcom. (Paragraph 88)

16.We welcome C4C’s historical commitment to skills and training (Paragraph 93)

17.If C4C is privatised, the Government should consider how to mitigate any impact on skills and training, such as a fund to support the development of skills in the TV production industry, including through apprenticeships. (Paragraph 93)

18.As it does not own intellectual property, Channel 4’s commercial value is in its brand. It would not be attractive for a new owner to undermine the brand by moving significantly away from the types of programmes it currently broadcasts. However, a private owner might avoid commissioning some programmes which have clear public service value but would not attract a large audience. (Paragraph 113)

19.Regardless of ownership, the quantitative obligations on Channel 4—such as in relation to original production and news—should be retained. The Government should consider introducing quotas related to content expenditure to guard against cost-cutting in this area. (Paragraph 114)

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