Channel 4 may be just a ‘corner shop’. But it’s our corner shop
Editor’s column
Perhaps privatisation is the only long-term solution for Channel 4 in an age of streaming giants. But why do it now? And why has no obvious buyer emerged?
Hooray, the pandemic is over!
Or so you might think judging by the stock market and the performance of so-called ‘stay-at-home stocks’ whose valuations have tumbled in recent weeks.
Netflix, the OG streaming service, warned in its latest financial guidance that it would only add 2.5 million subscriptions this quarter – the lowest three-month add since 2015 – having previously expected to gain 4 million between January and March.
Netflix shares have dropped by over 40% in recent months, while Roku, Disney, Channel 5 owner ViacomCBS and Discovery have all declined too by a smaller degree.
The same is happening with brands that have become household names during Covid times, such as Zoom (down 20% in the last month) and Peloton (down 38%).
In its letter to investors on Thursday, Netflix was quick to talk about how competition from Amazon, Disney and Apple has “intensified” over the last two years. A report in the FT just before Christmas forecast that media groups will spending more than $100bn on new content this year in an arms race to attract new viewers as there are unlikely to be further lockdowns to keep us at home watching telly all day.
All of which might be a scary prospect if you’re a UK public-service broadcaster. Whether for base political purposes or not, the UK government has put the future of the BBC and Channel 4’s funding on the national agenda by respectively proposing to abolish the licence fee and privatisation. You might well ask why these are considered priorities when we’ve just spent £400bn on managing Covid and are presiding over Brexit, an energy crisis and devastating climate change.
Is Channel 4 ‘too small’?
After a flurry of worry around the government’s consultation on privatising Channel 4 last year, attention has quietened down in recent weeks. I wrote in November that insiders had seen a change of tone on the issue, apparently because Boris Johnson no longer considered it a hill worth dying on.
But future of Channel 4 is far more precarious than that of the BBC, even if the latter continues to be the bigger bogeyman for Conservatives and right-wing newspapers like the Mail on Sunday, whose columnist has made the inane suggestion that CBBC, of all things, should be axed.
Channel 4, unlike the BBC, is dependent on ad revenue. While even John Whittingdale wrote last week that the licence fee currently remains the best (or least worst) option to fund the BBC, a free-to-air broadcaster that is almost completely dependent on advertising faces multiple long-term threats.
Netflix et al may have been overvalued during pandemic times, but their recent stock stumbles do not change the fact that millions of people are consuming more of their content each month.
Companies like Apple and Amazon can invest billions of dollars into streaming services which don’t need to be breakout hits, they just to help sell a few more iPhone and Prime subscriptions and keep people in their ‘ecosystems’. Meanwhile, Channel 4’s entire 2021 revenue is expected to reach £1bn for the first time – and that was considered pretty good.
This has led former Channel 4 CEO Michael Grade to describe the broadcaster as a “corner shop”.
Speaking at an excellent debate by Tortoise Media last week, Lord Grade argued that the time was right for a private company to buy Channel 4, if they were prepared to grow the business by investing.
“Channel 4 is too small,” he said. “It’s a corner shop and it’s surrounded by 10 major supermarkets. How long is the corner shop going to survive?”
It’s telling that Grade is now arguing for privatisation given that he has arguably been the the most successful CEO in Channel 4’s 40-year history as a state-owned company, which must put profits from ad revenue back into the business for investment. He created a sustainable advertiser department and a golden formula in which the broadcaster targeted advertisers that wanted to reach young people as well as older wealthy people.
But why try to privatise Channel 4 now? The company has forecasted that last year would deliver a record financial surplus of £74m, so it’s hardly in urgent need of funding support.
The Channel 4 historian and journalist Maggie Brown reminded the Tortoise event that the company is still in the middle of a massive reorganisation under orders from Theresa May’s government. It has relocated its HQ to Leeds and has new commissioning teams with budgets in regional centres outside of London – during a devastating pandemic which collapsed the TV market by 50% in April and May 2020.
How about letting Channel 4 finish one massive reorganisation before embarking on another?
Who would buy it and what would they do?
Meanwhile, what clear strategy would a buyer for Channel 4 have to compete with streaming giants, other than to presumably lobby the government to weaken its PSB commitments at every opportunity?
It’s certainly telling that no obvious buyer has emerged from the shadows to suggest an offer for Channel 4. As Raymond Snoddy explained last year, the government would ultimately have to dilute the company’s remit to disrupt and innovate, which would mean gutting its unique selling point. Unlike ITV, Channel 4 has no programme library and few programme rights.
Viewing the debate, Joanna O’Sullivan, ITV’s head of policy, commented: “No-one’s worked out what public broadcasting means in a digital age. The rules around this are now 20 years old.
“Rules on prominence [on electronic programme guides] are all based on a linear channel lineup. When Google and Amazon are mediating a lot of our content, siphoning off audience share and advertising revenue. Is it realistic to deliver really difficult, minority, or risky pieces of content?”
And that’s the key point – there is no realistic prospect that the free market will provide regional, risky, diverse and challenging content in the way that Channel 4 does through its current state ownership.
Now is the time to think seriously about how Channel 4’s future can be secured for the long-term. Perhaps privatisation is inevitable in the long-term. But we must not forget why it was created in the first place: to be a disruptive, innovative force in UK broadcasting.
Channel 4 is not supposed to merely compete with big-budget US streaming companies. It is supposed to provide something different and distinctive that these giants would never think to offer, so our society does not degenerate into a cultural sludge in which we have nothing better to do than eat dinner in front of a Friends rerun night after night.
It may be just a corner shop, but it’s our disruptive and innovative corner shop.