The UK’s independent production sector is set to be transformed after the Conservative government confirmed broadcaster Channel 4 will be allowed to make and sell its own programs once it’s privatized.
Earlier this month, the Department for Digital, Culture, Media and Sport revealed it would push ahead with controversial plans to sell the government-owned Channel 4 to private hands. It partially fleshed out its proposal in a broader White Paper setting out a vision for the future of Britain’s Public Service Broadcasting.
Restrictions preventing Channel 4 from creating its own shows will lift after the sale, allowing it to “diversify its revenue streams and improve its long-term sustainability.” This would bring the channel in line with rivals BBC, ITV and Channel 5, which all have in-house production business to greater and lesser extents.
Channel 4 would still be required to commission a “minimum volume of programming” from indie producers, “in line with the quotas placed on other PSBs,” though the level wasn’t specified.
The development will be devastating for the UK’s thriving production sector.
Since the 2003 Terms of Trade agreement, indies have prospered massively from Channel 4’s existing “publisher-broadcaster” model. In effect, this stops Channel 4 from owning content and allows its producers to retain rights to their commissions.
However, the government claimed the UK production sector, now worth around £3 billion ($3.8 billion), was less reliant on Channel 4 for commissions and added that only 7% of those revenues come from the broadcaster. Additionally, it cited PACT census statistics to suggest the broadcaster spent considerably less (£210M) on external commissions than the BBC (£508M) and ITV (£356M) in 2020. Channel 4 immediately refuted the suggestion, noting it spent £370M with external producers that year.
The White Paper throws a bone to the indie sector by committing the government to creative sector tax reliefs, though further details weren’t forthcoming today and this will likely be scant consolation to a sector enraged by the move when it was first revealed last month.
The government called Channel 4 “a great UK success story” — which many will consider as evidence no change is needed — but added: “Having fulfilled its original mission, Channel 4 is now at a unique turning point. The government has consulted on the best means of ensuring its future success and sustainability and in its response to the consultation today concludes now is the time to pursue a change of ownership.
Having access to private capital and profiting from production and program sales would give Channel 4 the “important tools” needed to compete with rival PSBs and streamers in the future, it added.
The White Paper repeated the assertion that privatizing Channel 4 would save taxpayers money — despite the fact the broadcaster receives no public funds and makes its revenues through advertising and other streams, reinvesting that cash into programming. This has been pointed out publicly several times since Culture Secretary Nadine Dorries first made the claim.
The government claims that because Channel 4 is restricted in how much it borrows, the “associated risk” of these limits being eased so that the broadcast can invest in content and technology would increase for the taxpayer.
Channel 4 immediately responded to the White Paper by moving to correct several statements made by the government in recent weeks. It refuted that Channel 4’s spend had fallen, claiming it will reach £711M this year, up £40M on 2021; noted advertising revenue was up 25% in 2021; and pointed to significant growth in digital revenues and engagement.
“Channel 4 has never been in a better financial position and is financially stable,” the broadcaster said in an advisory note. “For the last two years, Channel 4 has generated a record financial surplus and revenue of £934M.”
