Channel 4 is no stranger to privatisation talk – but this feels different
Almost since Channel 4 launched 38 years ago, with the first episode of Countdown, there has been speculation that it is facing privatisation.
In January 1983, just two months after the channel launched, Kevin Goldstein-Jackson – the executive who helped launch hits like Tales of the Unexpected and who later headed the ITV franchise operator Television South West – was calling for it to be privatised.
As Margaret Thatcher’s privatisation revolution rolled on through the 1980s, the calls kept coming, often from surprising directions.
In 1987, Michael Grade, who was then managing director of BBC television and who later went on to be dubbed Britain’s ‘pornographer in chief’ when he became Channel 4’s chief executive, said “it would be a very good thing indeed for British broadcasting if that were to happen”.
The FT reported that John Whittingdale, a firm supporter of a privatisation historically, is to lead a consultation
Somehow, though, Channel 4 managed to remain state-owned. The last serious calls for the broadcaster to be privatised came after David Cameron’s 2015 general election victory, when John Whittingdale, the then Culture Secretary and Matt Hancock, the then Cabinet Office Minister, were said to be pushing for it.
A key aspect to their proposal was that it would raise up to £1bn for the government.
Now, however, privatisation talk is again in the air.
The Financial Times reported on Friday that Channel 4 will be “steered towards privatisation” by the UK government as soon as next year. It said ministers were set to launch a formal consultation within weeks on the future of the broadcaster.
This could, according to the FT, even see an outright sale of Channel 4.
Ominously for Channel 4, which has always opposed being privatised, the FT said the consultation would be run by Mr Whittingdale himself.
There are a number of reasons why the idea has resurfaced now. The first is that, in the eyes of some in government, Channel 4’s business model is under pressure. As a free-to-air broadcaster that has few programme rights to exploit, it is unusually exposed to the vagaries of the advertising market, as has been shown during the last year.
The broadcaster reported a pre-tax loss of £26m in 2019 – Channel 4 itself has put this down to the cost of opening its new site in Leeds – but then suffered a collapse in advertising revenues when the COVID-19 pandemic erupted in March last year.
Channel 4’s historic headquarters in London (pictured) has been watered down through a new site in Leeds. Pic: AP
For its part, Channel 4 itself has said that it expects to report a surplus for the year, with advertising having bounced back strongly in the second half of the year.
The broadcaster also shored up its finances with aggressive cuts to its budget during the pandemic and by taking out loans. One indication of its recovery to financial health was that it repaid furlough money to the Treasury as long ago as last autumn.
It is also argued that the rise of streaming platforms like Amazon Prime, Disney+ and Netflix and the continued strength of multi-channel television broadcasters like Sky, the owner of Sky News, makes Channel 4 vulnerable to a loss of viewers that would eventually hit its advertising revenues.
Channel 4 has responded by arguing that, in 2020, it actually raised its share of television viewing, not only in terms of linear television, but also via digital platforms. It said at the end of last year that digital viewing now accounted for one in every eight hours of Channel 4 viewing.
Despite all this ministers fear that, as a business, Channel 4 is unusually vulnerable.
Earlier this year, Oliver Dowden, the Culture Secretary, vetoed the reappointment of two of Channel 4’s directors, Uzma Hasan and Fru Hazlitt, even though both Channel 4 itself and Ofcom, the broadcasting regulator, were supportive.
It was reported at the time that Mr Dowden wanted the two women, both of whom come from a production background, replaced with new directors boasting more financial experience.
The FT reported that John Whittingdale, a firm supporter of a privatisation historically, is to lead a consultation
Another reason why privatisation may be back on the agenda is the public finances.
Some in Whitehall believe that a significant sum of money could still be made from a sale of Channel 4 – although most analysts who have run the numbers believe any sale proceeds would fall well short of the £1bn mooted six years ago.
It is also argued that a new owner for Channel 4, with deep pockets, might help ensure the quality of its output. The problem is that there are few obvious buyers out there for the channel.
Most of the big US buyers who might be interested are focused on other things while Channel 4’s relative lack of intellectual property rights – a big contrast with, for example, ITV – means there would be few gains to be made by a big media buyer.
Viacom-CBS, the owner of Channel 5, is seen as the likeliest buyer but it, too, is more focused currently on building its streaming service, Paramount+, as well as trying to shore up confidence among its investors after a calamitous drop in its share price earlier this year related to the collapse of the hedge fund Archegos Capital.
Investors also suspect Viacom-CBS will be looking to conserve capital to invest more in content as it battles it out with rivals like Netflix and Disney, whose Disney+ streaming service has strongly outperformed Wall Street’s expectations, rather than use it buying an asset like Channel 4.
Channel 4 has prided itself on alternative, original programming throughout its history. Pic: AP
Moreover, if any of the big US broadcasters were interested in acquiring a UK free-to-air broadcaster, they are far more likely to alight on ITV which, unlike Channel 4, has its own production arm in ITV Studios and far more intellectual property assets to exploit.
That might make a flotation on the stock market, which would provide Channel 4 with more access to capital, as a likelier outcome – although it has been speculated in some quarters that ITV itself might be a buyer.
Expect Channel 4 to strongly resist any attempt to privatise it.
In the past the broadcaster has been able to muster a substantial lobbying campaign, relying on members of the arts establishment, to argue that its remit to produce distinctive programming would be jeopardised by a change of ownership.
It is also likely to point to the fact that it is a major investor in British content and spends heavily with independent production companies.
That, however, is a harder argument to make when the likes of Sky and Netflix are investing record sums in British programming, when the BBC’s drama output is still scoring hits and when ITV’s production arm is in such fine fettle.
In short, a lot of the arguments Channel 4 has used to resist privatisation in the past may not be as pertinent as was once the case.
This may represent Mr Whittingdale’s best opportunity yet to push for a policy he has sought for 25 years.
Sir Alan Bates has told Sky News that the government’s new Capture Redress Scheme is “half-baked”.
The Post Office scandal campaigner, who may also be a victim of Capture, accused officials of not learning lessons from previous compensation failures.
Capture was a piece of faulty computer software used in about 2,500 branches between 1992 and 1999 before the infamous Horizon scandal.
Many sub-postmasters made up potentially false accounting shortfalls from their own pocket, with dozens, at least, convicted of stealing.
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Sir Alan Bates reaches settlement with govt
Sir Alan welcomed the launch of the first ever Capture Redress Scheme last week “in general”.
However, he added: “It does seem to have gone off half-baked with almost none of the lessons that should have been learnt from the failures of the other Postmaster Schemes having been applied when compiling it.”
Sir Alan Bates, who has settled his redress claim with the government in connection with Horizon, also confirmed he may have been a victim of Capture.
He said: “I have documentation which shows that a PC running Capture was part of the inventory when we purchased our sub-post office and I know it was used until it was replaced by the infamous Horizon system toward the end of 2000.”
Despite this, Sir Alan said that – with the information he has about the scheme and making a claim – “it does seem I may not be able submit one”.
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Will Post Office victims be cleared?
Under the current rules, it appears claimants must submit a fully itemised claim before the Department for Business and Trade (DBT) will decide if they qualify – a process Sir Alan described as “mad”.
“We could spend a year compiling a claim only for the DBT to say we weren’t eligible in the first place.”
He called for a two-stage process: first to confirm eligibility, then to allow victims to build their case with legal support – a model he says would save time, money and avoid unnecessary legal costs.
The revelation that Sir Alan may have been a Capture victim – and didn’t realise until later on – raises fresh concerns about how many others remain unaware.
In a statement to Sky News, a government spokesperson said: “After over two decades of fighting for justice, victims will finally receive redress for being impacted by the Capture software and we pay tribute to all of those who have worked to expose this scandal.
“All eligible applicants will receive an interim payment of £10,000. In exceptional circumstances, the independent panel can award above £300,000, which is not a cap.
“We have been in contact with Sir Alan’s legal representative and stand ready to provide further information to help all claimants.”
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‘This waiting is just unbearable’
It comes as documents seen by Sky News suggest that the Post Office knew about faults in Capture computer software before it was rolled out in 1992.
Notes from a meeting of “the Capture steering group” held in February – months before the system was introduced to branches – described files as being “corrupted”.
It highlighted that: “If the power was switched off when a file was open it would be corrupted. In this situation data should be checked and reinput.”
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‘All we want is her name cleared’
Another fault mentioned in the meeting notes was if “part of the system was closed early, to produce client summaries any additional transactions might not be captured for that day”.
“If a high error rate was detected the software would need to be reworked.”
A document called “Capture Troubleshooting Guide” from April 1993 – over a year after the steering group noted faults – again described “corrupt data” such as incorrect transaction values.
It concluded that the “cause” of this was “switching off the computer or a power cut (even if only for a few seconds) whilst in the Capture programme”.
It also put forward instructions to remedy the fault.
Rupert Lloyd-Thomas, campaigner for Capture victims, said: “The Post Office knew … in 1992, long before the launch, that Capture could be zapped by a power cut.
“They did nothing about it.”
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Steve Marston
Steve Marston, who was convicted of stealing from his Post Office branch in 1998 after using Capture, said the information “didn’t come as any surprise”.
“They’ve known since the very beginning it should never have been released,” he added.
A Post Office spokesperson said: “We have been very concerned about the reported problems relating to the use of the Capture software and are sincerely sorry for past failings that have caused suffering to postmasters.
“In September 2024, Kroll published an independent report which examined the Capture software that was used in some Post Office branches in the 1990s and we fully co-operated with Kroll throughout their investigation.
“We are determined that past wrongs are put right and are continuing to support the government’s work in this area.
“Post Office has very limited records relating to this system and we encourage anyone who has Capture related material to share it with Post Office and the Criminal Cases Review Commission.”
The proposed £1.6bn takeover of a big chunk of ITV by Sky would be the biggest consolidation in British broadcasting in more than 20 years, and reflects fundamental changes in viewing habits and commercial realities.
For Sky, a deal that brings together Ant and Dec with Gary Neville and Jamie Carragher would make it the UK’s largest commercial broadcaster, and strengthen its hand in the battle with US streaming giants that have upended the entertainment business.
For ITV’s shareholders, who have seen the value of their investment decline as advertising revenue, like viewers, has migrated online, it may be a chance to say, “I own a terrestrial broadcaster, get me out of here.”
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Neither Sky or ITV would publicly discuss who made the initial offer, and both stress that talks are at an early stage, but privately, both sides emphasise the mutual opportunity.
For Sky, owned by US giant Comcast since 2018, there is the opportunity to create a larger pool of content and subscribers.
The deal would see it acquire ITV’s media and entertainment business, including its free-to-air channels and public sector broadcaster (PSB) licence, which runs to 2034, as well as the ITVX streaming platform, which has 40 million registered users.
Ant and Dec host I’m A Celebrity… Get Me Out Of Here! on ITV Pic: ITV
The ITV brand is likely to be retained, and the two companies run separately, but Sky would look to leverage its commercial and technology strengths.
ITV’s PSB licence includes the requirement that ITV’s app be “available, prominent and easily accessible” on online platforms, a crucial shop window as viewers access content directly.
Added to Sky’s existing 13 million subscribers for largely pay-walled content in the UK, it would add muscle as the broadcaster competes for attention, subscription revenue and advertiser spend.
The acquisition would be a restatement of commitment to Sky from Comcast. Having paid £31bn for Sky in a bidding war with Disney seven years ago, it wrote down that investment by more than £6bn in 2022, and earlier this year announced the sale of Sky Deutschland.
While it is navigating the conclusion of exclusivity deals with content providers, including with HBO that gave it rights to hits including Succession, the £5bn renewal of Premier League rights this season underlined the centrality of sport to Sky’s offer.
Sky would bring its own content and rights, such as those for Premier League football, to the table. Pic: PA
Scale matters because even companies as prominent in the UK as Sky and ITV are competing with giants, both for audiences and advertisers.
Netflix has 301 million subscribers worldwide and annual revenues approaching $40bn. Amazon, the largest retailer in the world, is now an entertainment content provider. In the US, Warner Bros. Discovery is considering a sale, having already rejected reported offers worth more than $60bn.
Google and Meta, meanwhile, gobble up to 60% of all UK advertising spend, a shift in the last decade that has hit ITV particularly hard.
US platforms dominate the streaming space. Pic: iStock
When it was founded 70 years ago, the third channel was the only way advertisers could reach television viewers. Today, it and Sky are competing for a slice of a shrinking pie, with one source citing an estimate that their combined UK advertising revenue is nine times smaller than Google and Meta’s.
Any proposed deal will face regulatory scrutiny from Ofcom and the Competition and Markets Authority, but both parties will argue that these commercial realities mean consolidation would strengthen the broadcast sector rather than weaken it.
ITV still generates critical and commercial hits and live moments. Last year, the largest audiences for sport (England’s Euro 2024 semi-final), drama (Mr Bates v the Post Office) and entertainment (I’m a Celebrity) were all on ITV.
Translating that into a commercial model that satisfies investors has proved difficult, with the general drift of the UK economy not helping. The 19% bump in the share price on news of the proposed takeover may be a welcome series finale.
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