David Abraham issues call to arms against ‘backroom carve-up’ of Channel 4
David Abraham, the former CEO of Channel 4, has called upon ministers, advertisers, production indies and media owners to apply “forensic scrutiny” to the Government’s process as it looks to sell Channel 4.
Noting C4’s unique role in being a publicly-owned but commercially-funded public-service broadcaster (PSB), with a remit to deliver high-quality, challenging and distinctive programming for audiences under-served by rivals, Abraham was highly critically about the lack of process and due diligence currently being applied to the sale.
Addressing an opening session of Advertising Week Europe in London today, Abraham said: “Few really believe that this [sale of C4] is being driven by an authentic concern for the future of UK public service broadcasting.”
Speaking to The Media Leader after his speech, Abraham said it was “shocking” that the Government’s Broadcasting White Paper did not address advertisers’ or independent production companies’ concerns about C4’s proposed sale.
“They need to explain how it is the indies won’t be harmed, how it is that advertisers won’t be disadvantaged,” Abraham told this publication.
Abraham warned that Boris Johnson’s administration is forcing through a sale of C4 “in the face of unanimous expert questions and in the absence of a detailed impact assessment on the diminution in competition that will almost certainly result”.
A price is yet to be set for the broadcaster, but media analysts Enders have suggested Channel 4 would be worth between £600m and £1.5bn.
“The illogicality of trading an annual dividend to UK plc that has worked for over 40 years for a one-off lump sum that will be immediately swallowed up by the vast national debt is utterly baffling,” Abraham added. “And so the implementation of this public policy deserves our forensic scrutiny from here on in.”
Plans to privatise C4 are the biggest sale of a state asset since Royal Mail and, according to the Government, will enable it to “compete more effectively with new players” like Amazon Prime Video and Netflix.
The Government has suggested that having more access to capital will enable the broadcaster to facilitate competition with the streaming services, and foster innovation. However, a report from EY last month, commissioned by C4, found the broadcaster contributed nearly £1bn to the UK economy and supported more than 10,000 jobs across the UK in a single year.
Abraham, who has founded two ad agencies before and after his seven-year stint at C4, today noted confusion over what privatisation would mean for the broadcaster.
He questioned how privatisation would impact its ability to invest in programming: “Many MPs say they want to keep the full PSB remit of Channel 4, if not even see it strengthened, in this sell-off scenario. Now, in my view, this is at best naïve and at worst dishonest.”
“What the Government is actually up to feels a little bit more shady,” he went on. “Think of it in terms of a backroom carve up, using the fig leaf argument of strengthening the PSB system. Ministers have instructed a major US investment bank to begin the process of drumming up interest.
“In recent days the Government has let it be known, rather like an excitable estate agent, that there are already over 20 expressions of interest in C4. This needs to be taken with a very large pinch of salt.
“In truth, there are really only a small number of credible bidders, the rest are just interested in having a good look around the property.”
At a glance: C4’s credible bidders
Abraham singled out three potential bidders worthy of consideration: ITV, Sky and the BBC.
ITV
For ITV, the acquisition would help balance the scale of its existing channel portfolio with the younger and more upmarket demographics of C4, Abraham said. But ITV already has a 46% share of commercial TV revenues; owning C4 it would vault this share to 72% and present any bid with a major hurdle with the Competition and Markets Authority, which still upholds airtime pricing restrictions.
The Government is making noises about defining the ad market differently, to include digital. The only problem with this is that for TV advertisers, primetime television is not a substitutional medium. So, it is not surprising that brands and their industry representatives are already baulking at these proposals.
He said: “Expect to hear a lot more from them in the months ahead, after all it is the advertisers who are paying for the programmes on Channel 4, not the taxpayers.”
Another warning was issued to the independent production sector. Channel 4’s model of commissioning programmes from indies rather than employing its own teams is widely regarded as a great British success story, having helped thousands of companies over the years establish themselves in the market. Every year, it is estimated approximately 15 new TV production companies get their first ever commission from Channel 4.
ITV, in contrast, produces most of its programmes in-house, and a government White Paper has opened the door to Channel 4 being able to do the same, putting at least half of its current 350 indie suppliers out of business [which includes Abraham’s Wonderhood Studios]. Many of them are based outside London, a move seemingly at odds with the government’s own levelling-up agenda.
“So, expect to hear a lot more from the independent production sector too.”
Abraham added: “Furthermore, ITV has itself been subject to foreign takeover bids and speculation in the past, so this makes the longer-term protection of Channel 4’s unique remit even more challenging without the imposition of conditions, which will act rather like a poisoned pill and reduce its own value.
“In my own direct experience as someone who has run a channel in America, US media executives, unless they have lived for decades in the UK, really do struggle to understand the way that public service broadcasting works in the UK, as it is inherently non-profit maximising.”
Sky
Sky, which already partners with C4 on the likes of Formula One coverage, could usefully flex C4’s free-to-air assets to help promote its pay business, and could commit to protecting Film 4, one of the crown jewels of the UK independent film industry.
But the aspect of the Sky bid which might focus minds in the Department for Culture, Media & Sport (DCMS). If successful, the move would harm ITV by reducing its market share, pricing power and making its audiences Sky’s beginning to look very old indeed. Overnight, the Government would have weakened the central part of the PSB system that ITV currently delivers.
Abraham noted: “Interestingly, a successful ITV bid harms Sky a lot less than the over way round due to the diversity of revenue models that Sky has built. A successful Sky bid could, however, interfere with Channel 5’s current arrangements within Sky’s airtime sales house. As a result there is jeopardy within Channel 5’s role within the PSB system here too.”
The BBC
The BBC has the benefit of being familiar with C4 and its remit and already partners with them on airtime sale on UKTV channels. However, the Corporation’s biggest problem is that it substantially reduces competition for high-quality public service content, especially in news.
Abraham added: “The BBC is also unlikely to have the deepest pockets in a competitive bid scenario…. it would be quite surprising if this Government backs an outcomes that actually strengthens the BBC.”
Other potential bidders for Channel 4 could include Channel 5 / Viacom; Warner Brothers / Discovery and STV, but Abraham warned: “They all come with limitations, baggage and tricky trade-offs for the government as a seller, not least because to the US companies Channel 4 will be a bit of a rounding error in terms of their global scale, and therefore the remit will forever remain at risk of dilution.”
Abraham noted that Channel 4 itself has tabled a “carefully thought through and innovative solution” in which it would partner with private companies and invest even more in the nations and regions of the UK. This is an approach that critically also maintains the editorial independence of the channel, and is worthy of careful consideration by parliament.
“It is telling that ministers have quickly moved to stifle debate about it and shut it down as a credible option,” he said.
He reminded Ofcom of its duty to support and strengthen the PSB system, and the CMAs commitment to challenging mass media consolidation. Noting that we might be heading for another major global recession, Abraham concluded that “some might argue [the sale of C4] is about the most reckless thing in terms of timing in the last 40 years to attempt to do”.
“At direct risk are thousands of job losses in the independent sector across the UK, the diminution of competition in advertising sales and in production supply. And crucially, a loss of editorial independence and creative risk taking that will come with answering to shareholders who are obliged to maximise profits.”
Speaking to The Media Leader after the event, Abraham added: “It has to be up to the Government to explain how they going to pull off this complex challenge. They need to explain how it is the indies won’t be harmed, how it is that advertisers won’t be disadvantaged, and how it is that the British viewer won’t, in the end, have less choice of public service content?
“There is nothing in the White Paper about any of that detail. It is as vague as vague can be, and remarkably contains no impact analysis. This is shocking – where’s the Green Paper? Where’s the debate among the different stakeholders and proper consultation on the White Paper before it is honed into legislation that’s deliverable?
“Currently it feels vague, it feels rushed and it is haphazard and full of peril for all involved. It is right that we apply forensic level of accountability for every step of the process for here on in.”