January 9, 2023
The Secretary of State for Digital, Culture, Media and Sport, Michelle Donelan, has decided not to privatise Channel 4 after reviewing the business case for its sale. The broadcaster will remain in public ownership.
As an alternative to a sale, the Government, following discussions with Channel 4 and the independent production sector, has confirmed a package of measures to support the broadcaster’s sustainability and growth. This includes reforms via the Media Bill, which will eventually allow Channel 4 to make and own some of its content, and a new statutory duty on its board members to protect the broadcaster’s long-term financial sustainability. Channel 4 has also committed to increasing roles outside London and providing more opportunities for people from across the UK to gain experience in the sector as part of the package.
The Government says that Ms Donelan has decided that pursuing a sale is not the best option to ease the challenges facing Channel 4 or to support growth in the UK’s creative economy, especially the independent production sector. However, the Government believes change is necessary to ensure the corporation can thrive now and in the future in a rapidly changing media landscape.
Relaxing the publisher-broadcaster restriction
The Government explains that under current legislation, Channel 4 is more limited than other public service broadcasters in its ability to make and own its own content. It operates as a publisher-broadcaster, meaning that all its shows are commissioned or acquired from third parties, such as independent producers or other broadcasters, who typically retain the rights to those programmes.
This has been central to Channel 4’s role over the last 40 years in developing the UK’s independent production sector, which is now worth £3 billion. The Government says that it continues to consider this an essential element of the UK’s broadcasting ecology and the wider economy. However, this model also makes Channel 4 more reliant on advertising revenue than many of its competitors, which have been able to diversify their revenue by investing in content production.
To give Channel 4 more commercial flexibility in this area, while also ensuring that Channel 4 continues to play its key role in incubating and supporting the independent production sector, which often includes new and highly innovative companies, the Government will legislate through the Media Bill to relax the publisher-broadcaster restriction in Channel 4’s remit so it has a greater ability to produce and monetise its own content, accessing a wider range of potential strategic options that could put it on a more stable financial footing by growing its commercial income.
The Government says that any changes to Channel 4’s commissioning model would need to be introduced gradually, with appropriate checks and balances, and following consultation with the sector. This will include increasing the level of Channel 4’s independent production quota, which is currently set at 25% of programmes and potentially introducing specific protections for smaller independent producers.
Increased investment in skills and new roles
Channel 4 has agreed to enhance its support for the independent TV production sector and regional roles and skills. It will increase its annual investment in 4Skills (its paid training and placement programme for young people) from £5 million to £10 million by 2025. It will double its number of roles outside London from its original target of 300 to reach 600 roles across the UK in 2025. This will include roles in Channel 4’s national HQ in Leeds, as well as in Glasgow, Manchester, Bristol and potentially elsewhere.
Greater access to capital
To enable Channel 4 to make investments that could put it on a more sustainable footing, the DCMS will make it easier and simpler for Channel 4 to draw down on its £75 million credit facility. In the event it pursues more ambitious investment opportunities to promote the corporation’s long-term sustainability, DCMS will support Channel 4 to access more private capital under its current borrowing limit of £200 million set in law, while taking steps to minimise the risk to public finances. DCMS will also consider future requests to raise the organisation’s borrowing limit if appropriate.
A new statutory duty for the corporation’s board will be created through the Media Bill. The obligation on the corporation’s leadership to ensure the long-term financial sustainability of Channel 4 will be enshrined in law, alongside their existing duties to ensure the broadcaster delivers valuable public service programming. Delivery of this duty will be evidenced via increased financial reporting by Channel 4, and as a report which Channel 4 will provide to the DCMS Secretary of State as part of its Annual Report.
An updated and publicly available Memorandum of Understanding between the Government and Channel 4 will reflect the intention to legislate for this new statutory duty of sustainability.
Alongside the changes to Channel 4, the Media Bill will introduce a wide range of measures to modernise decades-old broadcasting regulations, including prominence reform to increase the growth potential of the UK’s public service broadcasters and foster innovations in the way TV is produced and consumed. Further details on the Media Bill will be announced in due course. To read the Government’s press release in full, click here.