Channel 4 cleared to merge with Five
Jan 30 2009 by Alun Thorne, Birmingham Post
TV chiefs have welcomed an Ofcom report that recommended Channel 4 become part of a larger organisation through a merger or partnerships.
The channel could merge with Five or BBC Worldwide to create a strong provider of public service broadcasting (PSB) outside the BBC, the study said.
The media regulator’s long-awaited review of the future of PSB rejected the idea of “top-slicing” BBC programme funding, using some of it to support services on channels outside the BBC.
But it said unspent money from the licence fee set aside to help the digital switchover could be used to bridge the PSB funding gap.
This could include a “one-off allocation of funding” to help Channel 4 with any proposed merger, Ofcom said.
In Putting Viewers First, Ofcom said the key was not to prop up Channel 4 for its own sake but to ensure there was a viable institution apart from the BBC that would provide public service content the market would not.
Structural changes to Channel 4 would need to be economically sustainable, competitive, provide an alternative to the BBC and complement the market, Ofcom said.
The alternative would be to give Channel 4 public funding, relieve it of its pubic service remit and make it a fully commercial network, or mothball it.
Andy Duncan, Channel 4’s chief executive, said he was “extremely pleased” with the report.
“They (audiences) want the BBC but they don’t only want the BBC, and quite clearly Channel 4, in some form, needs to be at the heart or the centre of providing plurality,” he said. “And that we are delighted about.”
Mr Duncan said he strongly favoured a tie-up with BBC Worldwide.
“Where you have got an alignment of interests in two companies – BBC Worldwide and Channel 4 – both generate income commercially to put back into content for the public,” he said. “The strategic logic of brands, channels and distribution outlets Channel 4 has is very strong, you end up with something fit for purpose for the digital world.”
Ofcom chief executive Ed Richards said audiences wanted a strong alternative public broadcaster to the BBC.
He said: “Our preference is to try and secure that through partnerships, joint ventures or even a merger.
“And if we can achieve that, then what we will have is a sustainable economic model, a robust footing, but also be able to protect that public service purpose at the heart of a second institution.”
Ofcom’s report comes amid profound structural changes in the commercial broadcasting sector, including the digital switchover and pressures on television advertising.
The regulator estimates this will leave a shortfall in funding of up to £235million a year by 2012.
The report suggested that leftover BBC funds earmarked to help the digital switchover could be used to help bridge this gap.
About £800million has been set aside to pay for the costs of the switchover.
It has already been suggested that there might be an under-spend of the licence fee money ring-fenced, although the BBC has said it would have a better idea at the end of the year, when big conurbations such as the Granada region have switched.
The BBC has said there would be a debate on what happened to any surplus and it was not up to the Corporation to spend the money.
The report also proposed significant changes for ITV and Five.
Ofcom said it wanted to free up ITV and Five as “strong commercial networks making entertaining, engaging UK content including national and international news, but with limited public service commitments”.
ITV’s networking system was probably unsustainable, the report found, and as a result, regional news broadcasts were coming under threat.
The BBC has offered to share some news-gathering resources with ITV, but Ofcom said the government needed to create an alternative plan to secure the long-term future of local news in Scotland, Wales, Northern Ireland and the English regions.
Ofcom suggested the establishment of independently-funded bodies to provide regional news, at a cost of £30million to £50million.
A number of news organisations have already expressed an interest in bidding for these contracts, Ofcom said.
The government should also consider how to deliver local non-BBC broadcasting beyond news, particularly in Scotland, Wales and Northern Ireland, Ofcom said.
In Wales, S4C should continue to play a role in Welsh-language broadcasting, while there was growing interest in a competitive funding system in Northern Ireland. The Scottish Broadcasting Commission has recommended a dedicated channel for north of the border.
