4 OCT 2021

Could Channel 4’s privatization threaten UK production?

The proposed privatization of the publicly-owned broadcaster would significantly impact the UK’s independent production sector, according to Ampere Analysis’ latest report.

Share

The UK government has reaffirmed its intention to review the ownership model and remit of Channel 4, but the proposed privatization of the publicly-owned broadcaster would significantly impact the UK’s independent production sector, according to Ampere Analysis’ latest report.

The UK’s television industry’s international success is widely felt to be due to the unique ecology of the sector. Public service broadcasters play an important role due to the quota requirements for commissioning original content from independent production companies, most of whom are small and medium-sized businesses. As a publisher-broadcaster, Channel 4 commissions over 70% of its programmes from UK-based production companies, with more than half of its current first-run commissioned content coming from the nations and regions outside London.

Ampere’s report examining the options surrounding privatization found that as many as 60 UK production companies could face serious financial difficulty following a sale of Channel 4, if the original programming budget were cut by a new owner in order to bring its margins closer to the level of other commercial broadcasters. Ampere examined 207 production entities that have worked with Channel 4 over the past two years and, for 66% of those, Channel 4 represented over half of their announced TV projects during the period.

The production sector also relies heavily on commissions from the UK’s other commercial public service broadcasters, ITV and Channel 5. For 62% of 171 production companies that have worked with ITV in the last two years, ITV’s commissions represented half or more of their total projects. As the UK’s largest commercial broadcaster, ITV creates, owns and distributes its content globally through its own in-house production studios and operations. Following privatization, Channel 4 could also increase its profits by setting up its own in-house production company and generating income from the sale of rights, but Channel 4’s current model would need to be dropped to allow such a move.

Channel 5 operates on a smaller scale than ITV and Channel 4, but of the 139 tracked production companies the broadcaster worked with in the past two years, Channel 5 represented half or more of total commissions for 56% of them. ViacomCBS purchased Channel 5 in 2014, and has long-term ambitions to invest in more original programming and to export more content and formats globally. A similar approach from a US-based buyer could see Channel 4 diversify its income and scale down its relationship with independent producers. However, this would come at the cost of its current model in which Channel 4 can reinvest any generated surplus back into content.

“Channel 4, though, sustains a larger number of small production companies than ITV and Channel 5. Although those broadcasters are also subject to independent production quotas, Channel 4 has a unique role in supporting smaller and regional production companies. Removing Channel 4’s publisher-broadcaster model would disrupt its diverse network of content suppliers and could have a disproportionate impact on smaller companies and those in the nations and regions, counter to the UK government’s ‘levelling up’ agenda,”  commented Neil Anderson, Analyst at Ampere Analysis and the author of the report.

Removing Channel 4’s publisher-broadcaster model would disrupt its diverse network of content suppliers and could have a disproportionate impact on smaller companies” Neil Anderson Analyst at Ampere Analysis