Channel 4 could merge with BBC Worldwide
Channel 4 could be merged with the profitable BBC Worldwide in a new move to prevent the broadcaster from going bankrupt.
The BBC’s merger plan to save Channel 4 is currently being discussed by regulators and ministers, though Ofcom originally dismissed the idea.
In July, Ofcom rejected the idea of giving Channel 4 a stake in BBC Worldwide to help make up its funding shortfall, saying it would be “too complicated” (see Channel 4’s Proposed Share In BBC Worldwide Is Dismissed).
However, if the new proposed ‘4 Worldwide’ deal goes ahead, it would generate the £100 million a year that Ofcom claims Channel 4 needs in order to survive (see Ofcom Warns That Channel 4 Faces £100m Funding Gap).
The hybrid broadcaster would represent a significant financial sacrifice for the BBC though, and would mean its biggest transfer of intellectual property, including the corporation’s Radio Times title and lucrative BBC DVDs business.
However, the scheme would avoid the need for top-slicing the BBC’s £3.4 billion licence fee to secure the future of Channel 4, which culture secretary Andy Burnham said was a real possibility (see Culture secretary will not rule out top-slicing licence fee).
Channel 4 would front the proposed merger and the BBC would retain a minority share, however, any plans would need to overcome opposition from within the BBC.
The BBC is reluctant to lose its commercial arm, which made profits of £112.5 million last year, as it owns all of the corporation’s profit-making businesses.
Ofcom is currently under pressure to make a decision on Channel 4’s future, which it is expected to be presented by the middle of January.
In April, Channel 4 chairman Luke Johnson warned that the broadcaster had reached a “tipping point” in its funding shortfall (see Channel 4 Suffers First Operating Loss Since 1992).
At the time, he said: “2007 will be the last year in which Channel 4, under its current funding model, manages the difficult balance between increased creative investment and financial break-even.
“The tipping point we have been warning about has been reached, with the core channel now in deficit and being supported by profits from secondary activities.
“In response to market conditions, we are already having to cut editorial budgets and a new public funding solution is now urgently required if we are to maintain such impressive levels of public service plurality in competition with the BBC.”
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