RTL boss discusses potential partnership between C4 and Five

Gerhard Zeiler, head of Channel Five’s parent company RTL, has approached Channel 4 about a possible tie-up between the two broadcasters.

According to reports in the MediaGuardian, Zeiler is understood to have had discussions with Channel 4’s chairman Terry Burns and the broadcaster’s incoming chief executive David Abraham earlier this month about a potential commercial partnership.

It is thought the possibility of a complete merger between Channel 4 and Five is unlikely, although a merger between the broadcaster’s advertising airtime sales houses is an option.

In response to the reports, a Channel 4 spokesperson said: “David Abraham has not yet joined Channel 4 as chief executive and is currently overseas.  He will be reviewing strategic options for the group once he has taken up his post.”

A spokesman for RTL added: “We don’t comment on any specific rumours. In principle we have said in the past that everyone is meeting everyone.”

The two businesses have discussed a full merger twice before, once in 2004 and again in 2008.  The government initiated the idea as part of its Digital Britain review, as a means of solving Channel 4’s funding shortfall.

Both Zeiler and Five’s chief Dawn Airey were keen to advance talks, but Channel 4’s management team, which at the time included chairman Luke Johnson and chief executive Andy Duncan, were opposed to the deal.

The new meeting between the bosses comes within weeks of RTL releasing Five’s financial results.  The Five group, which includes Fiver and Five USA, saw revenues drop 30% year on year in 2009 to €303 million.

As a result, RTL was forced to write down the value of Channel Five by more than half.  The Five subsidiary is now valued at €112 million.

The broadcaster is also losing it share of the UK TV advertising market, down from 9.6% to 8.4% in 2009.

If the two businesses combined their airtime sales operations, it with give them them more scale and would allow Five to cut staff costs.  However, any gains would depend on Channel 4 convincing advertisers that an enlarged ad inventory was worth backing without a deflation in pricing.

Other possibilities to secure the future of Five, would be for RTL to strike a deal with a US broadcaster, such as NBC Universal, and ITV or to take a stake in UKTV, the pay-TV operator.