Emily Fielder is the Head of Communications for the Adam Smith Institute.
As to be expected, the reaction to the Government’s decision to privatise Channel 4 has been fierce.
Detractors of DCMS argue that Margaret Thatcher, who originally oversaw its inception, would be spinning in her grave, and that it would destroy a great British institution.
Their desire to protect an important cultural asset is admirable, but such appeals entirely miss two of the most compelling arguments in favour of privatisation; firstly, that the broadcasting landscape has changed beyond all recognition since the 1980s, and secondly that emancipating Channel 4 from state ownership is the best way to ensure that it continues to succeed in the future.
At present, Channel 4 is funded in much the same away as other privately owned TV stations, with the greater part of its revenue derived from advertising. To its credit, its finances are in a stable position; it made a total annual revenue of £985 million in 2020, and it has not received money from the taxpayer.
Having said that, it’s net revenue has remained broadly stable since 2006, and is likely to continue to do so. Moreover, during the torrid year that was 2020, it was forced to cut content spending by 21 per cent, in contrast to Netflix, which actually raised spending by 26 per cent in 2021.
The new giants of the media landscape are able to continue spending vast sums of money on producing new shows, whilst Channel 4 is fettered by its inability to raise private funding or capital.
On a similar note, under its current charter, Channel 4 is barred from creating any of its own intellectual property, and instead it must commission work. One way of competing effectively within the market would be to allow the broadcaster to set up its own production company, which would sit alongside the commissioning work it would continue to do.
However, producing IP would likely engender huge start-up costs, and therefore would necessitate raising a large amount of revenue.
Critics of the move to privatise Channel 4 have raised concerns about the potential impact on the UK’s creative industries.
It is certainly true that our independent arts sector is something we should be proud of, but they have failed to note that the major firms now dominating the media scene are driving investment into the British production sector to a record high. In 2018, for example, Netflix and Amazon spent £280 million on big-budget British-made shows.
Moreover, British commercial broadcasters, such as ITV and Sky manage to commission UK-made programmes without direction from the Government. ITV invests around £1 billion a year, whereas in 2021 Channel 4 spent £700 million.
Giving Channel 4 access to greater investment would allow it to both produce its own work, and likely commission more in the UK than it is already able to do.
The question, therefore, is not how effectively did it function in the past, but rather how sustainable is its present funding model in the future?
For the Channel to really grow in the future, and therefore be able to compete with streaming giants, and even other British commercial channels, it will require more revenue, which will either have to be derived from taxpayer money or from private sources.
Liberating it from state control would mean it would be able to access private capital and investment, and diversify its revenue streams, rather than having to have recourse to public money.
It is right that a close eye is kept on exactly how the Government intends to sell the Channel. It is likely that it will either be sold to a bidder, the direction in which the Government appears to be moving, or it will be floated as shares on the stock market.
If the latter, this would mean that the British public, through purchasing shares, would actually have more direct ownership of the Channel. If the former, Ofcom should take its deliberations over who is fit and proper to purchase it.
Previously, the Adam Smith Institute raised concerns that the acquisition of Channel 4 by ITV would reduce private sector competition within the British TV market, and so should be designated as an ineligible bidder. The notion of fit and proper should include questions of competition in order to ensure the sustained success of Channel 4.
Turning aside from purer economics, there is also the Conservative philosophical argument to consider. When Thatcher set up Channel 4 in 1982, there were only three TV channels, so by introducing another, she was following her principle of improving a sector by increasing competition.
Now, however, there are over 460 channels available in the UK. The idea therefore that the Government knows how to run a TV channel in such a varied market is as ludicrous as it is fundamentally unconservative.
What’s more, it is surely a curious thing in this country that we are so quick to deride other countries for having state-owned broadcasters, but are so fiercely protective of our own – even when it is detrimental to the broadcaster’s finances and future growth.
This, indeed, is the most fundamental point. Calls for Channel 4’s privatisation should not be seen as an indictment of its previous successes, but rather an endorsement of it and an acknowledgement that its future would be better served through its liberation from state ownership, as befits its place in the media landscape of a modern, liberal Britain.