Ofcom backs Channel 4/ BBC Worldwide merger

The regulator has backed a merger for Channel 4 - and questioned the public-service broadcasting model...

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Last Updated: 31 Aug 2010

Ofcom has finally published its long-awaited report on the future of public-service broadcasting in the UK – and it’s not very cheery reading (not least because it’s a doorstop-friendly 130 pages long). The regulator reckons that the existing model of all the UK’s commercial stations is basically defunct, requiring some ‘difficult choices to be made’. Top of the agenda was the future of ailing Channel 4 – and Ofcom seems to think a merger with BBC Worldwide, Auntie’s commercial arm, is just about the best option. Although the BBC might beg to differ…

What’s clear to everyone is that Channel 4 can’t survive for long in its current form. The publicly-funded broadcaster reckons it will make an annual loss of £150m by 2012 – and although Ofcom was a bit more optimistic (it reckons the loss will be less than £100m), it still believes, not unreasonably, that it’s ‘no longer sustainable’. However, since Channel Four is best-placed to offer a ‘strong, alternative public service voice to the BBC,’ Ofcom thinks it’s worth saving (as opposed to letting it run down, or flogging it to the private sector).

It ruled out allocating a portion of the licence-fee (known as ‘top-slicing’), to avoid the BBC losing out, arguing instead that the best bet will be some kind of partnership, joint venture or merger. The most sensible option, it concluded, was a closer tie-up with the profit-making BBC Worldwide. A merger with Five, owned by German media group RTL, is also possible – but Ofcom thinks there may be competition issues, and it would also require a complete overhaul of the regulatory framework, to balance its commercial needs with its public service remit.

Indeed, this last point hints at the broader problem here. With audiences disappearing to digital channels, and with TV advertisers shrinking their budgets, the commercial operators find themselves under increasing pressure. They have all these costly public-service obligations in exchange for being on the free slate, but their sources of revenue are drying up rapidly – Ofcom reckons the shortfall could be as much as £235m per year by 2012. So unless something radical happens, ITV and Five will be in (even more) serious trouble before too long. The regulator has already moved to ease their regional news burden, to help them out in the short term.

Not surprisingly, the BBC is reluctant to lose one of the jewels in its crown – it prefers some kind of partnership deal (which Ofcom thinks is insufficient). But writing in today’s FT, director-general Mark Thompson accepts that ‘major restructuring’ is required to allow public-service broadcasters to invest properly in new digital content – which sounded a lot like greater protection for the free-to-air channels.  Not very free market, admittedly, but it might be the only way of keeping PSBs in business...


In today's bulletin:

Nationalisation calls mount as banks hammered again
Unemployment nears 2m - and graduates feel the squeeze
Ofcom backs Channel 4/ BBC Worldwide merger
Sick told to get packing (their suitcases)
Fiat to rescue Chrysler - or is it the other way round?

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