Privatised Channel 4 ‘will struggle to compete against streaming giants like Netflix’

Channel 4 ‘provides competition to the BBC’ says Jeremy Hunt

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Despite the Government’s aims to see Channel 4 compete with international streaming giants the more national focused nature of the broadcaster is predicted to make such a shift difficult. Ben Barringer, an equity research analyst at Quilter Cheviot specialising in media and telecoms, predicted in its current form Channel 4 would struggle to appeal to an international buyer. He said: “Increasingly with shows like Squid Game and Narcos and so on, Netflix is proving that people are much more attracted to the story and the production quality of that story. TV has, like lots of businesses, become a scale game. If I can make really high quality content and then monetise it across 220 million subscribers like Netflix can then I can continue to produce super high quality content and the cost per user is tiny.”

“Think about that from ITV or Channel 4’s perspective, the base over which they can monetize their content is much much smaller and so they’re not able, I don’t think, to compete in that content production game.”

Channel 4 is scheduled to be sold by 2024 meaning it may be some time before details of a potential buyer emerge.

In the meantime attention will be focused on discussions in Parliament over how much Channel 4 will remain under public sector broadcasting regulation.

Any major decisions here could alter how much content Channel 4 is required to produce in certain areas such as education and regional coverage.

Mr Barringer predicted this would “define who’s interested in it” and determine what business they were buying.

In its current form with most revenue coming from advertising he predicted it made most sense for an existing UK advertising channel such as ITV, Channel 5 or Sky to buy it.

“Say ITV buys them, they have the best synergies because basically Channel 4 is a big sales house selling the advertising on Channel 4 and merging those two businesses, ITV’s sales house and Channel 4’s sales house, would create a really big scale player”.

This however could attract considerable scrutiny from the Competition and Markets Authority.

According to Mr Barringer a purchase by Channel 5 owner Viacom could see more interest in US content on Channel 4 while Sky owner Comcast, having its own production in the UK, sits somewhere in the middle.

The likelihood of another major channel buying ITV sits at odds however with the Government’s stated aims for selling.

Culture Secretary Nadine Dorries said: “I have come to the conclusion that government ownership is holding Channel 4 back from competing against streaming giants like Netflix and Amazon”, suggesting a desire to see more on demand content.

Meanwhile Mr Barringer said he was “not convinced” a streaming company such as Neflix would buy Channel 4 due to the lack of its own intellectual property.

He added: “It’s going to be interesting to see whether the Government will let Channel 4 really beef up its production asset, create like an ITV studios, create like a Channel 4 studios, because then that has more longevity.”

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With discussions to go through both the House of Commons and House of Lords the future of what sort of Channel 4 might be up for sale is still highly uncertain meaning any future cuts or changes to programming are a long way off.

Channel 4 has so far called the decision “disappointing”, adding that it has demonstrated “it can continue to commission much-loved programmes.”

The proposals have also attracted criticism from Channel 4 stars with Location, Location, Location presenter Kirstie Allsopp warning news, current affairs and dramas could be “thinned out.”

MP Julian Knight, Chair of the Digital, Culture, Media and Sport Committee, suggested the decision could be seen as “revenge” for Channel 4’s coverage of Brexit however it still presented opportunities for the broadcaster.

Writing in a tweet he explained: “Privatisation- even for some wrong reasons- can work for C4 but must be part of a thorough overhaul of all public service broadcasting.

“If this is in the media bill I will support the government.”

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