The government is pushing ahead with plans to privatise Channel 4 in what will be the biggest sale of a state-owned asset since Royal Mail in 2013.
Ministers will end months of speculation by using the forthcoming Media Bill to pursue a potential £1 billion sale of Channel 4, unravelling a broadcasting business model created by Margaret Thatcher 40 years ago.
Government sources said Channel 4’s ownership structure has become a “straitjacket”, which would prevent it from competing effectively with deep-pocketed rivals, such as Netflix.
They said new ownership would allow Channel 4 to access more capital, make and sell its own programmes, and invest in overseas expansion. “We expect a lot of interest in purchasing Channel 4 from a range of serious buyers who want to build on Channel 4’s strengths and help unleash its full potential,” a government insider said.
ITV, Sky and Paramount, the US media company that owns Channel 5, are thought to be among potential buyers. Sources would not be drawn on whether the government has received any serious expressions of interest.
Ofcom, the media regulator, will play an important role in giving the green light to a new owner, with ministers hoping to clinch a sale by early 2024.
Proceeds from the deal will be reinvested in a “creative dividend”, which a source said will be used to train a new generation of skilled workers for the UK’s booming film and TV industry.
In pushing forward with a sale, the government is likely to face a backlash from Channel 4 and the UK’s £3.3 billion TV production sector, which is overwhelmingly opposed to privatisation. There is concern that the government has produced little or no evidence to back its position. Channel 4’s supporters said it had emerged from the pandemic in a good position and was on course to post record revenues of more than £1 billion for last year.
Critics said that privatisation was an act of “cultural vandalism” and accused the government of pursuing an ideological agenda against Channel 4 over its perceived liberal values. Government sources have denied this and argue that the broadcaster’s news service and responsibility to serve young and diverse audiences will remain.
Alex Mahon, the chief executive of Channel 4, said last year: “We have not seen any evidence that the irreversible change of privatising Channel 4 will be in the interests of either the British audiences or the UK economy.”
She added that Channel 4’s commitment to supporting the government’s levelling-up agenda would also be at risk under a new owner. Channel 4 has five regional bases, including its headquarters in Leeds, and supports numerous production companies outside of London. Labour has also voiced concern about privatisation in relation to levelling up.
A government source said: “This is not a decision ministers have taken lightly. We know there are some people who feel strongly about this issue.
“But it is sometimes hard for people close to an institution to envisage how change can bring a brighter future.”
Ministers launched a consultation on privatising Channel 4 last July.
Oliver Dowden, the former culture secretary, said the government was proceeding on the basis that changing its ownership model would be “better for the broadcaster, and better for the country”.
Nadine Dorries, who replaced Dowden in a reshuffle last September, has kept her cards close to her chest on privatisation, but has been convinced of its benefits.
There are some influential proponents of a sale within government circles.
These include Andrew Griffith, a former Sky executive who now serves as the head of Boris Johnson’s policy unit, and Lord Grade of Yarmouth, the Tory peer who has just been appointed as the chairman of Ofcom. Both sat on the government’s secretive public service broadcasting advisory panel, which has been helping ministers shape future media regulation.
Channel 4 was set up in 1982 with a unique remit to reinvest its profits from advertising in innovative programming from the UK’s independent production sector. It is a publisher broadcaster, meaning it does not own content.
It said in a statement: “With over 60,000 submissions to the government’s public consultation, it is disappointing that today’s announcement has been made without formally recognising the significant public interest concerns which have been raised.
“Channel 4 has engaged in good faith with the government throughout the consultation process, demonstrating how it can continue to commission much-loved programmes from the independent sector across the UK that represent and celebrate every aspect of British life as well as increase its contribution to society, while maintaining ownership by the public.
“Recently, Channel 4 presented DCMS [Department for Digital, Culture, Media and Sport] with a real alternative to privatisation that would safeguard its future financial stability, allowing it to do significantly more for the British public, the creative industries and the economy, particularly outside London. This is particularly important given that the organisation is only two years into a significant commitment to drive up its impact in the UK’s nations and regions.
“Channel 4 remains legally committed to its unique public-service remit. The focus for the organisation will be on how we can ensure we deliver the remit to both our viewers and the British creative economy across the whole of the UK.
“The proposal to privatise Channel 4 will require a lengthy legislative process and political debate. We will of course continue to engage with DCMS, government and parliament, and do everything we can to ensure that Channel 4 continues to play its unique part in Britain’s creative ecology and national life.”
A government source said: “Channel 4 has fulfilled its original purpose when it was set up by Margaret Thatcher — to be a disrupter in an analogue era of limited choice providing competition for BBC and ITV and stimulate the now-thriving independent production sector. It is time for a bright new chapter in its story.”
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Channel 4 to be sold off in largest privatisation since Royal Mail