“Reading the tea leaves on the state of the proposed media bill it looks like it could be dead,” said a senior TV executive likely to attend the soiree. “If that’s the case, then Channel 4 survives again.” The broadcaster has been the subject of several attempts to partially privatise, sell off or merge with a competitor since it was set up by Margaret Thatcher’s government in 1982 to offer a culturally challenging alternative to the BBC and ITV. There has been a common argument behind the sporadic attempts over the decades: Channel 4’s model, with its almost total reliance on advertising revenue, leaves it vulnerable as a potential underdog when the ad market falls or appears bigger rivals. In its first decade, the fledgling channel relied on a regulated annual subscription levied on a percentage of the then-monopoly ITV’s total advertising revenue which sold commercial breaks, while building audiences with early hits such as Countdown, Brookside and Anneka Rice. Treasure hunt. When I arrived at Channel 4 there was nothing – no computers, no people, no systems, no story, there was nothing Former Channel 4 head of sales Andy Barnes By late 1986, Edmund Dell, its first chairman, felt confident enough to say that the Channel 4 experiment had already worked and “there may be no net cost to the independent television industry or the taxpayer”. In 1993, it began selling its own commercial airtime in the face of aggressive tactics by former partner ITV, which launched a campaign to discourage advertisers from committing spending to the new sales house. “When I arrived at Channel 4 there was nothing – no computers, no people, no systems, no history, nothing,” says Andy Barnes, Channel 4’s former head of sales who worked there from 1991 to 2011. When we were We had to fight ITV – the more we got, the less they had. they saw it all as “their money”. However, since then the broadcaster has proved a self-funded success story and last year made a record £1.2bn in revenue, the first time it has topped £1bn and up 18% on pre-pandemic levels. However, as the fortunes of television advertising have waxed and waned, Channel 4 has from time to time entered into talks with various potential partners, including the commercial arm of the BBC. the American pay-TV company Discovery; several times with Channel 5, which it tried to buy in 2010. and discussions on several occasions to explore a tie-up with Sky’s TV ad sales operation to create a competitor to ITV. A scene from Channel 4 drama It’s a Sin. Photo: Ross Ferguson/Channel 4 “Throughout its history, in a self-serving way, people have said that Channel 4 can’t survive,” says David Abraham, chief executive of the broadcaster between 2010 and 2017, who fended off the latest privatization attempt at the end of his tenure. “It has been deleted repeatedly. There were three big shocks: the dotcom crash, well [the global ad recession] in 2008 and more recently Covid. And in any case, the channel comes back.” It staved off privatization in 2017 with a deal to move large parts of its operations out of London, positioning itself as a “horizontal broadcaster”. But last summer the then Culture Secretary, Oliver Dowden, announced a consultation on another attempt to sell it off. Despite 96% of responses opposing the idea, his successor, Nadine Dorries, continued the plan. He has repeatedly denied that the privatization move was motivated by the perception of Channel 4’s left-wing bias. The government said the channel could not compete in the streaming era as a public company. Streamers are set to further encroach on brick-and-mortar territory, with Netflix launching an ad-supported subscription package for UK fans on Thursday, and Disney+ likely to follow suit by the end of the year. “The concern internally was always that Channel 4 wouldn’t be big enough against the huge conglomerates that would come and go,” says Barnes. “The concern that it will be big enough to maintain the mandate has always been there and it is valid.” But in September culture secretary Michelle Donnellan, who replaced Dorris after Boris Johnson resigned, hinted at a U-turn, saying she would “re-examine the business case” for privatisation. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. If Channel 4 can overcome the threat, then targets have been set to grasp the digital future amid declining traditional linear viewing of its hit shows, from The Great British Bake Off and Gogglebox to demanding dramas such as It’s A Sin . Gogglebox is one of Channel 4’s hit shows. Photo: Channel 4 By 2025, Channel 4 aims to double viewing on its All 4 streaming service and grow digital advertising to account for at least 30% of total revenue. However, the core of Channel 4’s business model is still very much rooted in 1982. Three years from now, the broadcaster admits advertising revenue will still make up 90% of its total revenue. In addition, Channel 4’s unique business model, which prevents it from owning the shows it commissions so that independent TV production companies can thrive by selling the rights after they air, prevents the development of a significant new revenue stream. Channel 4’s management is once again considering how it can take control of its own destiny But analysts estimate that up to 60 UK TV production companies could face disruption if Channel 4 is privatised. As the prospect of privatization appears to recede, Channel 4’s management is once again looking at how it can take control of its own destiny away from being a wholly state-owned enterprise. Former Channel 4 chairman Terry Burns had previously mooted the idea of some form of mutualisation, possibly based on the successful model used by Welsh Water, to prevent any future plans for a sale and secure the broadcaster’s remit in perpetuity. Versions of this idea, which could include a trust as a legal entity that would buy Channel 4 through private funding, are understood to have been rekindled in recent discussions. The model would also mean that stakeholders such as independent producers, and possibly viewers, were represented. It would reduce, or even potentially remove altogether, government control either during the creation of the new model or through “earnings” over a number of years. “Channel 4 is 40 and we believe that life doesn’t just start at 40. It starts again,” says the broadcaster’s chief executive, Alex Mahon. “Just like these different generations that have grown up with us over four decades, we must constantly adapt and change.”
