Channel 4 To Seek Public Funding To Combat Sliding Share
Channel 4 is preparing a request to Ofcom for public funding to support its flagging advertising revenues in the face of increased multi-channel competition, according to reports circulating this morning.
The request is expected to be made to the media super-regulator in Channel 4’s submission to Ofcom’s review of public service broadcasting. The move could see Channel 4 awarded a slice of the BBC’s licence fee, or may result in the BBC assuming Channel 4’s obligation to fund upgrades for analogue transmitters to digital equipment.
The move, as reported in today’s Financial Times, would mark a significant change of ethos for Channel 4, which has previously favoured market-based or business solutions to its funding. The switch to partial public funding would also underline the end of merger possibilities for the broadcaster, which pulled out of talks with rival broadcaster Five earlier this week (see Channel 4 Walks Out On Merger Talks With Five).
Speaking to the FT, Channel 4 chief executive Andy Duncan said: “A merger with Five had some obvious attractions, but the devil was in the detail and it became clear that the most fundamental thing is that we protect a certain magic as to how Channel 4 works and what it does.”
The talks between the two broadcasters are believed to have collapsed as Five sought a larger share of the proposed combined business, as Five’s shareholders, German television group RTL and United Business Media, hoped to win 40%, while Channel 4 is believed its rival deserved no more than around 15% (see RTL Expresses Interest In Channel 4 And Five Merger).
The fact remains, however, that Channel 4 will require additional funding in the future, whichever revenue stream it chooses to pursue. The broadcaster is expected to suffer an annual funding deficit of £100 million by the time analogue television signals are switched off in 2012, brought about by a decreasing audience share.
The broadcaster’s share has falen over the past five years, losing 1.21% points since 1999 to command a share of 8.91% today, a situation which looks set only to worsen with the advent of a digital-only television landscape.
It has been suggested previously that Channel 4 could be awarded a portion of the BBC’s £2 billion a year licence fee, with proposals raised in September for the broadcaster to take control of the Corporation’s flagship youth station, Radio One (see Channel 4 Could Get Slice Of BBC Licence Fee). Amongst other plans to safeguard Channel 4’s funding in the future are direct Government funding and complete privatisation.
The transition from analogue to digital television is expected to be costly for almost everyone involved, with figures released earlier this month by Freeview predicting that the cost to consumers of converting to digital television is likely to be in the region of £1 billion, a third more than previously estimated.
According to research commissioned by Freeview, the cost of digital terrestrial television more than doubles for nearly a third of those who buy Freeview set-top boxes. Of 1,000 viewers interviewed, 29% claimed they had to spend an additional £80 to £100 in order to have their television aerial upgraded once they bought their Freeview box (see Digital Britain Will Incur £1 Billion Bill).
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