Channel 4 is no stranger to privatisation talk – but this feels different

Published

3 years ago

June 18, 2021

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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”.

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.

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.

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.

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.

Business

Telegraph bidders given new deadline as £100m Spectator sale looms

Published

14 hours ago

September 8, 2024

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Telegraph bidders given new deadline as £100m Spectator sale looms

The remaining bidders for The Daily Telegraph have been given a deadline for revised bids for the right-leaning newspaper as its stablemate, The Spectator magazine, clinches a £100m sale to the hedge fund tycoon Sir Paul Marshall.

Sky News understands that RedBird IMI, the Abu Dhabi-backed entity which was thwarted in its efforts to buy the media titles by a change in ownership law, has asked at least three parties to table second-round offers on 27 September.

It comes after bidders began holding talks with Telegraph bosses last week about the company’s business plan.

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The remaining parties are understood to include Sir Paul and National World, the London-listed media group run by newspaper veteran David Montgomery.

At least one other party whose identity has yet to be disclosed publicly is also in contention to buy the newspapers.

A separate bid orchestrated by Nadhim Zahawi, the former chancellor, is the subject of bilateral discussions with IMI, the Abu Dhabi-based venture which wanted to take a controlling stake in the British media assets before being blocked by the government.

Sky News revealed exclusively last month that Sir Paul was the frontrunner to buy The Spectator, which along with the Telegraph titles was owned by the Barclay family until their respective holding companies were forced into liquidation last year.

His deal for The Spectator, which will be implemented through Old Queen Street Ventures, will be announced this week, and potentially as early as Monday.

It will also include the art magazine Apollo.

RedBird IMI, a joint venture between IMI and the American investor RedBird, paid £600m last year to acquire a call option that was intended to convert into equity ownership.

A sale of The Spectator for £100m would leave it needing to sell the Telegraph titles for £500m to recoup that outlay in full – or more than that once RedBird IMI’s fees and costs associated with the process are taken into account.

One source said the price RedBird IMI had secured for The Spectator had exceeded expectations and left it well-placed to break even on its investment.

“The original decision to pre-empt an auction has been vindicated by the level of interest since it started,” the source said.

Of the unsuccessful bidders for the Telegraph, Lord Saatchi, the former advertising mogul, offered £350m, while Mediahuis, the Belgian publisher, also failed to make it through to the next round of the auction.

Lord Rothermere, the Daily Mail proprietor, pulled out of the bidding earlier in the summer amid concerns that he would be blocked on competition grounds.

Sky News recently revealed that Mr Zahawi had sounded out Boris Johnson, the former prime minister, about an executive role with The Daily Telegraph if he succeeded in buying the newspapers.

IMI is controlled by the UAE’s deputy prime minister and ultimate owner of Manchester City Football Club, Sheikh Mansour bin Zayed Al Nahyan.

The Lloyds debt, which totalled more than £1.15bn, was repaid by RedBird IMI on behalf of the family.

RedBird IMI’s attempt to take ownership of the Telegraph titles and The Spectator was thwarted by the last Conservative government’s decision to change media law to prevent foreign states exerting influence over national newspapers.

Spokespeople for RedBird IMI and Sir Paul declined to comment.

Business

Bank of London finalises capital-raising after HMRC winding-up petition

Published

1 day ago

September 7, 2024

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Bank of London finalises capital-raising after HMRC winding-up petition

A clearing bank launched just three years ago is raising tens of millions of pounds of fresh funding just days after it was served with a winding-up petition by the UK tax authorities.

Sky News understands that The Bank of London, which attempted to rescue Silicon Valley Bank UK last year, is progressing plans for the capital-raising, which one person close to the company said could secure “up to £50m”.

The precise figure was unclear this weekend.

The new funding is understood to be being lined up from a number of investors including an entity called Aphorism Holding, according to the person.

Nada Hadadi, a wealthy investor who was suggested as being the primary source of the capital, has in fact only contributed a six-figure sum.

News of the company’s capital-raising plan comes days after it announced that Anthony Watson, its founder and chief executive, was stepping down to become a senior adviser and non-executive director of its holding company.

HM Revenue & Customs had issued a winding-up petition against The Bank of London’s holding company over unpaid taxes.

The liability has now been settled, according to an insider.

It described the issue as a “simple administrative handling delay caused by an internal miscommunication, which has been addressed”.

“We spoke with HMRC on Friday morning, and they are currently updating the filing.

“While this update may take a couple of days to reflect online, it is in process.”

The Bank of London claims to have amassed 4,500 clients since its launch but was outgunned last year by HSBC in a weekend race to rescue SVB UK.

Business

Body Shop’s remaining stores saved after rescue deal struck

Published

2 days ago

September 7, 2024

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Body Shop's remaining stores saved after rescue deal struck

More than 100 Body Shop stores have been saved from closure after a deal was struck to rescue one of Britain’s best known high street chains.

The well-known retailer was bought out of administration by a consortium led by “Cosmetics King” Mike Jatania.

The millionaire tycoon’s investment firm Aurea announced the completion of the acquisition on Saturday.

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Mr Jatania and Charles Denton, former chief executive of beauty brand Molton Brown, will head the new leadership team.

In a statement, Aurea said the deal would “steer the Body Shop’s revival and reclaim its global leadership in the ethical beauty sector it pioneered”.

It is understood there are no immediate plans to shut any of its 116 remaining UK stores.

Sky News revealed earlier this week that Aurea was poised to finalise the buyout as it lined up more than £30m in new financing.

Mr Jatania previously ran Lornamead – the owner of personal care brands including Lypsyl, Woods of Windsor, Yardley, and Harmony haircare – which he sold to rival Li & Fung for around £155m more than 10 years ago.

The Body Shop fell into administration in early February after previous forecasts for how much funding it would need to keep going proved too low.

In the weeks that followed, administrators warned hundreds of jobs would be lost and dozens of shops closed.

The business had employed about 1,500 store workers before its collapse into insolvency.

The company’s administration underlined the decline of the high street stalwart.

It was founded in 1976 by Dame Anita Roddick, trading out of a small shop in Brighton, which made its name selling cruelty-free fair trade products.

Mr Jatania, co-founder of Aurea, said: “With the Body Shop, we have acquired a truly iconic brand with highly engaged consumers in over 70 markets around the world.

“We plan to focus relentlessly on exceeding their expectations by investing in product innovation and seamless experiences across all of the channels where customers shop while paying homage to the brand’s ethical and activist positioning.”

Charles Denton, chief executive of the Body Shop, said: “We believe there’s a sustainable future ahead and working closely with the management team we aim to restore the Body Shop’s unique, values-driven, independent spirit.”