Channel 4 faces 'inevitable decline' under state ownership and could be sold for £1.2bn, claim ex-bosses

Former Channel 4 boss Michael Grade has warned the broadcaster will face “inevitable decline” unless its current state-owned operating model changes - while a previous station chief has forecast it could be sold by the Government for £1.2bn.

Baron Grade of Yarmouth, who was chief executive of Channel 4 between 1988 and 1997 and is now a Conservative peer, told the House of Lords Communications and Digital Committee hearing investigating the potential privatisation of the Leeds-based broadcaster that the “status quo is not an option” for its future survival.

As Channel 4 boss he fought against attempts to privatise the channel but came out in favour of such a move in 2015 when the idea was being considered by the Cameron Government.

With the proposal now back on the table after a recent Government consultation, Baron Grade - who sits on a Government panel on the future of public service broadcasting - said: “The status quo is not an option. The time to change the nature of Channel 4 is now, before it falls over, before it succumbs to the inevitable decline.”

Former Channel 4 boss Michael Grade has suggested Channel 4's operating model must be changed.

He said Channel 4 was a “minnow” in the broadcasting world.

“It is no good waiting until the thing falls over before we decide to take action,” he added. “It’s in a straitjacket of regulation and statutes, which completely prevented from taking advantage of what it has achieved so far. The world has changed. The arguments for the status quo of backward looking back to an age of huge government intervention.

“Channel 4 started as the only buyer of independent production and it was the mother and father of the independent sector, which is one of the great success stories of the British creative industry.”

Noting that Channel 4 is no longer the only buyer of independent productions, he said: “Channel 4 needs to do what every other free-to-air advertiser-supported business is doing, which is to own its own IP and to be able to gain scale.

Channel 4 chief executive Alex Mahon said privatisation could negatively affect programming.

“Everything in the Channel 4 constitution presently is against that and therefore it will, in my view, in a very short time really begin to struggle.”

Lord Grade said he was proud of his role in Channel 4’s history but its current remit was like a “straitjacket” in today’s media landscape.

He said: “I am proud of the part I played in the history of Channel 4. The history is important – and it is a product of its history – but it is history, folks. It is backward-looking.

“We have got to look forward to the next 10 to 20 years and try and preserve as much British broadcasting as we possibly can and protect it as best we can.

“But that doesn’t mean the same straitjacket remit – not programme remit but corporate remit – that Channel 4 has today which is 30 years out of date now.”

The TV executive criticised the idea that a privately owned Channel 4 would lose its distinct identity.

“Anyone acquiring that business, if they destroy that brand they are doing nothing but destroying value for their own shareholders,” he said.

“So I believe the best of Channel 4 in an acquisition, merger, consolidation move, will be preserved because the new owners would be mad to suddenly turn it into a sub-Channel 5 or aping ITV or whatever. It would be nonsense. It would be business insanity.”

Baron Grade said: “The least risk is to set the channel free and follow what every free-to-air advertising supported broadcaster is doing in the rest of the world.”

Channel valued at £1.2bn by former chair

Former Channel 4 chair Luke Johnson said the station is currently probably worth at least £1.2bn. But he warned that in a more diverse media landscape the channel is becoming “gradually more irrelevant and at some point the momentum will slow and you get into a vicious spiral and you might get a fraction of the £1.2bn you would achieve now”.

“It is about are we trying to achieve value for taxpayers or not,” he said.

But the broadcaster’s chairman Charles Gurassa dismissed the idea it was only surviving in the current media landscape.

He said: “I don’t equate surviving with our best year ever in history. We will end the year with £280 million of cash in the bank, balance sheet assets of more than £500 million, no overdraft, growing audiences, growing digital. It’s better than surviving.”

Current chief executive Alex Mahon said Channel 4 was moving with the times by focusing on digital services, with its streaming subscriptions growing more quickly than Netflix.

She said: “Channel 4 is in a very strong position for the future. This year, our revenues will grow 19 per cent on last year and more than 10 per cent on 2019.”

Ms Mahon was asked whether there was a compromise where the broadcaster could make content and own rights to that content while also having a quota for small start-up producers.

She said: “Of course you could do that, and of course you could remove the IP restriction without privatising.

“I think it is a question of the structure of the creative industries. There is the underlying question about, ‘Where do we want as the UK to be able to help grow and nurture the creative industries?’

“And, ‘How must we be careful to not go so far that in five to 10 years that we have done something that has unintended consequences in terms of the creative industries?’”

Warning over impact of privatisation

She also warned that privatisation would risk having a “negative impact on the types of content” produced by the channel.

Alex Mahon said shows such It’s A Sin, the TV film Help, the Paralympics and a Dispatches special about sexual abuse by serving police officers would not be aired by commercially minded streaming giants.

She singled out South Korean Netflix drama Squid Game – in which cash-strapped contestants compete in deadly children’s games for a prize – as the kind of content privately owned competitors were making.

The Government has been consulting on plans to privatise Channel 4, which could be sold off to a private buyer.

Ms Mahon told the House of Lords Communications and Digital Committee: “There is a real risk that if a private owner came in they would be naturally minded to maximise profit and that would have a negative impact on the types of content.

“It would have a negative impact on the production sector, as we have talked about.

“We have got to be clear about that because it impacts (small companies) and it impacts out-of-London producers.

“We have been clear there will be a real risk of impacting our work in the regions, which we have only just started in – we have only just opened our big office in Leeds – and particularly on bringing young people into the sector.”

Speaking about Channel 4’s slate of programmes, she added: “I don’t believe that Netflix would be making those pieces.

“Squid Game is very good. It is very uplifting to see 250 people killed in the first episode. But they are not really focusing on the things that we are, like those kind of… documentaries about stop and search or things that are going on in our country. And that is important.

“We have in our response (to the consultation) tried to focus on what the risks are in the choice that was laid out, not other things. But we would always welcome those discussions.”

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