Channel 4 Weighs Up Merger with Either Five or BBC Worldwide, Tries to Avoid Endless “Friends” Repeats

The Financial Times reports today that the BBC Worldwide’s long-mooted merger with Channel 4 has coalesced a bit more, with a rescue plan being discussed that would see the BBC injecting £500m into a new merged media company.

BBC Worldwide is the commercial arm of the BBC – it invests in production companies, and gets revenue from DVD sales, making localised versions of BBC shows abroad, creating foreign channels like BBC America, the bumper Christmas edition of the Radio Times, and so on. In the Channel 4 deal, parts of BBC Worldwide would be split off and merged – chiefly 2Entertain (which sells DVDs, CDs, audiobooks etc, and until recently was part-owned by Woolworths), and the BBC’s 50% stake in the UKTV cable stable. The FT says someone told them that this plan is now seen as “the one to beat”.

So what’s going on at Channel 4? Steve and Miquita seem chirpy enough, I thought everything was fine! Well no, it’s set to lose £150m a year by 2012, thanks to that same old chorus being sung from media orgs worldwide. Altogether now: DECLINING AD REVENUES. Ratings have been hit by a splitting of audience across the bewildering prism of digital telly, and Channel 4 ad space just ain’t what it used to be; meanwhile it’s down to its last £200m in cash reserves.

The reason why everyone isn’t just shrugging and letting 4 go the way of Play UK is that it isn’t so much “too big to fail”, as “too nice to fail”. Channel 4 has a lot of public-service broadcasting requirements, which everyone is at pains to keep going, especially the government, whose culture department is consulting investment advisers UBS. Privatisation, which would inevitably compromise the level of often loss-making public service output, isn’t seen as an option.

The Guardian’s line on the Worldwide/4 merger is that it’s much less likely, saying: “The BBC has been privately lobbying heavily against the idea of any formal tie-up between BBC Worldwide and Channel 4, telling ministers that its rival would not bring anything to the table and that any merger would not get past European regulations.” Another available option is greater public subsidies, but even the likes of the rabidly pro-PSB Greg Dyke are saying that top-slicing the licence fee would a) damage the BBC and b) annoy everyone who’s paying it.

So the other option based in a real, commercial world is a merger with Channel 5. “A 4-Five tie-up could generate savings well in excess of £30 million a year, insiders believe, as both sides would cut overheads, merge sales departments and trim their respective portfolios of digital channels, some of which lose money”, says The Times. Firing people, in other words. Andy Duncan, head of 4, chucked out previous merger plans in 2004 because it wasn’t going to help in “protecting and strengthening Channel 4’s public service role”. What, softcore pornography and “Shops, Robbers and Videotape” aren’t for the public good? No! A total merger and therefore privatisation would be opposed, but a partial merger could potentially placate Duncan and Ofcom.

It’s good to see faith in PSB from Duncan and the government – though the Reithian ideal of telly educating the unwashed masses may be patronising, it’s nevertheless worthy, and a Channel 4 pumping out 5’s primetime output would be depressing. Let’s just hope the recession doesn’t make anyone so desperate they lose their principles…

Posted by Ben Beaumont-Thomas in Creative Economy | December 18, 2008 2:07PM |