GMG warns against C4 and BBC Worldwide tie-up

GMG warns that the proposed tie-up between BBC Worldwide and Channel 4 would have a “damaging effect” on the commercial market.

In its response to Lord Carter’s Digital Britain report, the Scott Trust owned company urged ministers to dismiss the idea – “put simply, we believe that the market should be given the opportunity to deliver public service content before public intervention is applied,” GMG said.

GMG also complained that the proposed ‘bailout’ plan for Channel 4 is “flawed on a number of levels” – and said it is “likely to have a negative effect on the commercial sector, thereby undermining the potential for a genuinely plural public service content market”.

Channel 4 claims it is facing a shortfall of around £150 million a year due to the deteriorating advertising market and global downturn.

However, GMG said that a BBC Worldwide and Channel 4 tie-up would “pose a serious threat to commercial rivals” because it would allow the two organisations to combine their advertising sales operations and create a “cross-promotional powerhouse that would divert ad revenues away from commercial players”.

Last week, BSkyB also responded to Lord Carter’s report, which is set to shape the future of British broadcasting, claiming that Channel 4 has got into this mess by wasting £270 million on poor investments (see BSkyB launches attack on Channel 4).

Rupert Murdoch’s Sky said Channel 4 has wasted millions of pounds on failed business ventures and would still be profitable if was better run.

The satellite broadcaster claims that Channel 4 has wasted up to £270 million on “unprofitable non-core commercial activities”, such as its investment in digital radio, and said the government should step in to prevent it making the same mistakes in the future.

In its submission to Lord Carter, Sky argues that Channel 4 is in a stronger financial position to many of its commercial rivals, with cash reserves of around £425 million.

“Channel 4 has a strong balance sheet and has accumulated sufficient financial reserves to see it through the current recession,” Sky stated.

Since the interim Digital Britain report was published, a number of ideas have been thought-up to solve Channel 4’s funding deficit – Five expressed interest in merging with Channel 4; ITV explored the possibility of a three-way merger between the three leading commercial broadcasters; and BBC Worldwide hinted at a joint digital venture with C4 (see BBC Worldwide and C4 join forces).

Lord Carter is due to publish his final Digital Britain report, including proposals on Channel 4’s future funding and public service broadcasting remit, in two months time.