Channel 4 could thrive under private ownership – it should seize the opportunity

At a time when heavyweight issues hog the headlines, it is perhaps surprising that a half-forgotten promise to sell off Channel 4 should re-emerge as a priority. Many commentators assumed that Boris Johnson, having removed both the ministers associated with privatisation, Oliver Dowden and John Whittingdale, had bowed to backbench opinion that Channel 4 and its management should once again be allowed to survive a stated determination to dispose of them.

So credit to the Prime Minister for deciding to press ahead (though, given Channel 4’s many supporters in the Lords, no-one should assume this is a done deal). But that decision requires a plan of action, not so much from within the Government as from the newly appointed Channel 4 chairman, Sir Ian Cheshire, and his fellow non-executive directors.

The fact is that Channel 4 is a classic case of corporate capture. The executives have had almost complete sway at board level for many years, and neither Ofcom nor the DCMS has had the will or the clout to intervene. The result is that Channel 4 is massively inefficient, with a bloated workforce enjoying levels of pay unknown anywhere else in the UK broadcast sector. A properly run Channel 4 could have been paying dividends to the Treasury of over £100 million a year for decades.

It has been obvious for some time that the standalone model for Channel 4 is sub-optimal: hence the attempt by it to acquire other channels at various times. When I ran Channel 5 (as it was then called), I offered Channel 4 the chance to make huge savings, by merging a range of back office functions – engineering, transmission, IT, HR, finance, advertising – whilst leaving the programme teams of both channels free to pursue their individual strategies.

The offer was ignored. Yet now, by finding partners or buyers for each of these functions, Channel 4 could still save huge amounts of money, allowing it to cut its workforce to below 300, and invest far more in original output. This would enable a major revival of public service content, which has been in sad and steady decline for many years.

Even though Channel 4 is required by law to offer significant volumes of content with educational value, and used to devote 15 per cent of its budget to education, it has not had a Head of Education since 2010 (nor any meaningful educational output since then). Without a dedicated Head of Arts, that area of output has also wilted over the years.

The channel could sell its London headquarters, worth £100 million, and move its key staff to its Leeds offices. It should ring-fence its news and current affairs budgets, expand its documentaries output and invest at least £20 million a year in education and arts respectively. This strengthened public service remit should then be locked in for potential acquirers.

Likewise, any sale document should specify a volume of commissioning for genuine UK independent producers, as well as separate quotas for producers with turnover below £10 million a year and production companies majority-owned by ethnic minority shareholders.

If Sir Ian and his fellow non-executives can drive this agenda for the next 18 months, a leaner and more profitable Channel 4 will emerge, with a stronger public service remit, along with renewed commitment to a regional strategy and UK independents. The sale process will consequently be simplified, and bids well in excess of £1 billion can be expected, with the proceeds available for further investment in the sector.

There is no good reason to retain the Channel 4 business in public ownership. A substantial commercial purchaser should have no difficulty in contractually committing to its expanded remit whilst also shielding it from economic headwinds, and leveraging its unique assets so as to play an even stronger and more distinctive role in the UK creative economy.

David Elstein is a former chief executive of Channel 5

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