We take a look at the key questions on a possible privatisation for Channel 4
What is privatisation?
The concept of privatisation is of taking a previously government or public-owned organisation and selling it to private companies or individuals. The most recent famous privatisation was Royal Mail, which listed on the stock market in 2013 although the Government faced criticism for setting the price too low and allowing bankers involved in the process to make huge profits.
Who owns Channel 4 at the moment?
The channel is owned by the Government and has been since its launch in 1982. But unlike the BBC, which is funded by the licence fee, it receives all its funding from advertising. The money generated is then used to commission independent producers to make programmes for the channel.
Has there been talk of privatising it before?
Privatisation has been on the cards for several years and was first floated not long after the channel first launched. The closest it got to going private was in 2016 when David Cameron’s government looked at striking a deal under then culture secretary John Whittingdale – who has been pushing for its sale since 1996.
Mr Whittingdale is now said to be overseeing a consultation into its future, although previous attempts have come to nothing.
How could it be privatised?
There are a number of options available to the Government in terms of how to sell its asset. Ministers could list the broadcaster on the London Stock Exchange, putting it alongside rival ITV, which is already on the stock market. It could find a private buyer or could move it to a mutual ownership model.
Bankers would need to be appointed by the Government to drum up support for the sale and to seek out potential buyers. A prospectus would be drawn up and the financial details and potential revenues streams would be presented to interested investors.
How much could Channel 4 be worth?
A mooted £1 billion price tag has been given, although analysts who have looked at Channel 4’s numbers suggest it could be far less than that, given that the channel – unlike ITV – does not have its own in-house production unit and does not own intellectual rights to its shows.
This could be a key stumbling block for any sale because the value is usually derived from whether a show could be sold around the world or to other broadcasters. For example, ITV’s Love Island has helped it generate significant profits for years.
The most recent set of accounts show a pre-tax loss of £26 million in 2019 on revenues of £985 million, although the broadcaster said this was mainly due to the cost of opening its new headquarters in Leeds.
How would Channel 4 increase its profits?
The broadcaster could set up its own production house for shows, giving it the intellectual property rights. It will also – and has said as much – push into more streaming content with the hope of generating greater revenues via those channels.
Who could buy it?
Names in the frame include the likes of Disney, Amazon, Netflix or even ITV itself. Either way – the media landscape has been shifting towards more consolidation in recent years with a handful of big names controlling most of what we watch.
Channel 5 was bought by ViacomCBS in 2014 – itself part of a merger in 2019. Other big deals in recent years also include Amazon’s 8.5 billion-dollar (£6 billion) takeover of MGM Studios, alongside mergers with AT&T and Time Warner, Disney with Fox and a forthcoming HBO deal with Discovery.
This could, in theory, make the number of companies able to pick up Channel 4 relatively small, but the sorts of money involved mean a takeover would definitely be more than affordable for the big media titans.
What are the risks?
The key issues at stake are whether Channel 4 would continue to uphold its main objectives of creating programming for under-represented voices. There is also the risk that privatisation could see new owners looking to make profits ahead of quality programming.
But the risk to remaining in public ownership is that the business model could be starved of cash as advertisers look to other revenue streams away from traditional media and to online platforms instead.
