Advertisers worried Channel 4 sale would hinder diverse audience reach
The UK government has launched a consultation to privatize non-profit public-service broadcaster Channel 4. Among a wave of concern are advertisers who have voiced worries about reduced competition in the TV ad market, as well as the blunting of its remit to reach diverse UK audiences underserved by other broadcasters.
Could a Channel 4 sale cannibalize the UK TV ad market?
On Monday (April 4) the UK’s Department of Digital, Culture, Media and Sport (DCMS) said it was intent on a sale of the broadcaster to “give the corporation new freedoms to innovate and grow while continuing to make an important economic, social and cultural contribution to the UK.”
Blaming the “rapidly-changing media landscape,” the government acknowledged that Channel 4 “holds a cherished place in our broadcasting landscape and we want that to remain the case.”
But would it remain the case?
Advertisers and analysts respond to Channel 4 sale
None of the advertisers or ad bodies questioned by The Drum were convinced by the government’s arguments, best voiced by Media Guido to date. But is it sincere to compare both parties?
Channel 4 has a valuation of about 1% of that of @netflix. If it wants to grow and compete globally it will need access to capital. Taxpayers can not be asked to provide risk capital. It will continue flat-lining as a small player if it stays in state hands.
— Media Guido (@MediaGuido) April 5, 2022
Ad trade body ISBA was “very disappointed” by the decision and urged the government to reconsider. Phil Smith, its director general, was worried the three leading TV ad sales houses in the UK (Channel 4, ITV and Sky) could be consolidated into two. This would impact competition, pricing and plurality. The body’s members were concerned about “the undue dominance” in the TV advertising market that may result.
But who would buy C4? Perhaps one of the other major broadcasters such as ITV, Sky, Discovery or Paramount (formally ViacomCBS). Smith warned this would result in lessened competition. “For the market to be effective for both advertisers and consumers there needs to be competition.”
In the UK media ecosystem, Channel 4’s unique remit to reach underserved audiences is valued by advertisers. Rik Moore, managing partner strategy at The Kite Factory, says: “All TV sales houses offer you something unique when you’re creating a plan. Given C4’s remit to deliver programs for underserved audiences, the end result is they offer you truly unique editorial you cannot buy elsewhere.”
He also warned of the risks of Channel 4 adapting commissioning to win over global audiences, which he says “jeopardizes specifically UK-focused content, which may not work in other markets but has huge validity and importance here.”
Managing partner of What’s Possible Group-owned Pintarget, Rachel Hall, however, argues a sale would allow the broadcaster to scale and expand its remit to compete with newer platforms.
She says: “There’s inevitable concern about the government’s agenda, which is understandable, but a better funding model should create the opportunity to deliver at scale.”
But is it right to claim that the domestic public service broadcaster should be competing with the scale of Netflix (which may have plateaued now)?
Simon Willis, chief investment officer, GroupM says "it’s critical that Channel 4's role as a public service broadcaster is wholly protected, including its approach to creativity and social responsibility, as it continues to deliver unique programming designed to appeal and represent to the diverse audiences of Modern Britain".
Meanwhile, Matthew Evenson a research analyst at Omdia finds it difficult to reconcile how Channel 4’s remit to deliver diverse and alternative programming for British audiences "can be wholly maintained under the additional commercial pressures that privatization would bring".
He adds: "A softening of that remit would likely increase Channel 4’s appeal to potential buyers but would also likely trim the channel’s more specialized and distinctive programming that does not necessarily deliver the profit that a commercially run-for-profit Channel 4 would be expected to deliver."
It is worth noting that C4 has a unique publisher model allowing production companies to retain all IP rights, and without an in-house arm, C4 provides major business to UK indies. Ampere Analysis research found that of 207 production companies, 66% of those C4 accounted for over half of its announced TV projects. Neil Anderson, an Ampere Analysis analyst, previously forecasted that as many as 60 UK production companies would face serious financial difficulty off the back of a C4 sale.
Ampere did say that C4 could increase its profits post-sale by setting up in-house productions. However, it remains to be seen if the broadcaster would be allowed to do so.
The decision by the secretary of state for digital, culture, media and sport Nadine Dorries comes a month after a group of senior Conservative MPs wrote a letter to prime minister Boris Johnson asking him to throw out privatization plans. The IPA has also previously come out against privatization.
In response to the news, C4’s chief exec Alex Mahon sent an email to staff on Monday evening to inform them of the government's plans.
The email said: “In our engagement with the government during its extended period of reflection, we have proposed a vision for the next 40 years,which we are confident would allow us to build on the successes of the first 40. That vision was rooted in continued public ownership and was built upon the huge amount of public value this model has delivered to date and the opportunity to deliver so much more in the future.”
It comes as the broadcaster resurrected beloved print property Smash Hits for a piece of Derry Girls marketing earlier today.
Additional reporting by John McCarthy.