At fours ‘n’ fives

U.K. nets face tough future sans merger

LONDON — Where next for U.K. terrestrial players, Channel 4 and Five, now that merger talks between the two have collapsed?

For both outfits, the status quo is not an option in the competitive market.

Not only must the two come to terms with the digital switchover, due by 2012, they must factor into their business plans the effects of personal video recorders and the growth of on-demand broadband services — all of which could eat away at their auds.

At C4, recently given a much-needed boost by winning three prizes at the Intl. Emmys, new CEO Andy Duncan has laid his cards on the table.

He insists the only way to future-proof the broadcaster, best known for “Big Brother” but still making innovative shows as the Emmys indicated, is public funding.

Otherwise, come digital switchover, he reckons the station will be $170 million in the red.

To those unfamiliar with British TV, the idea of a handout for a profitable station — C4 is expected to make at least $120 million this year — looks absurd. But despite criticism that its schedules suffer from a surfeit of reality skeins and U.S. imports, C4 is no run-of-the-mill setup.

Although it is financed by commercials, it is owned by the state and all its profits go straight back into program budgets. As a pubcaster, C4 is obliged to show programs that are risky, irreverent and unavailable elsewhere, not even in the 400-channel world of digital TV.

Duncan calculates digital, satellite and cable TV — now in around 60% of U.K. homes — is eroding his audience share, leaving ad revenues seriously depleted and C4’s public service brief seriously threatened.

In other words, if C4 is to continue to screen edgy fare like Emmy-winning docu “The Boy Whose Skin Fell Off,” a handout from the state is necessary.

Either that, or abandon public service and go full throttle for ratings and revenue.

“There’s the simple arithmetic,” Duncan says. “We have a 13% share in terrestrial homes, a 10% or 11% share in homes with Freeview (the set-top box that gives free access to a range of digital channels) and a 6% share in pay TV homes.”

He adds, a mite contentiously: “All the other terrestrial broadcasters either benefit from or are effectively cushioned against the impact of digital switchover.

“We are working very hard to make sure that the same is true of Channel 4, allowing us to continue being Britain’s bravest and most innovative broadcaster, making a significant contribution to the creative and cultural life of this country.”

Not everyone agrees that C4 needs a handout to sustain its remit. Michael Jackson, the former C4 topper who left to work for Universal in the States but is now considering a move back into British independent production, is one of the skeptics.

“Michael’s been going around London telling his friends that Channel 4 can survive by virtue of the premium ad rates it charges for scoring so high with the under-35s,” says an associate of Jackson. “He thinks the idea of a public subsidy is daft. I, too, remain to be convinced that C4’s remit cannot be sustained in the digital world.”

But others, including ex-C4 commissioning editor, indie Stephen Garrett, whose Kudos Prods. makes shows for the web, think Duncan’s reasoning is sound: “While no one could pretend that ‘Big Brother’ represents public service broadcasting, I think Channel 4 stands a good chance of getting the money.

“This is because Channel 4 is demonstrably an important part of the ecology of British TV. Its public service remit is under threat and needs to be protected.

“To leave public service to the BBC is not good enough. Every so often, Channel 4 sends shockwaves through the BBC with shows like ‘Sex Traffic,’ ‘Musicality’ and ‘Wife Swap,’ and that needs to continue.”

Meanwhile, upstart commercial channel Five, owned by RTL and United News Media, is considered vulnerable unless it develops a digital strategy — or hooks on to someone else’s.

This fall, Five finally scored with a home-produced hit — reality show “The Farm.” Series was helped by extensive coverage in the tabloids. One episode featured a pig being masturbated by a woman who claims she slept with British soccer ace David Beckham.

This rather bawdy show demonstrates why any marriage between the downmarket Five and the rather more highbrow C4 was going to be a stretch.

However, C4 can get a bit naughty. It recently bowed “The Sex Inspectors,” a reality show in which two “sex experts” provide a makeover for jaded lovers.

But other potential suitors for Five are waiting in the wings.

One possibility is that satellite and cable channel provider Flextech, owner of successful niche station Living, may get into bed with Five.

Other possibilities include a partnership with ITV, Blighty’s biggest terrestrial operator (difficult because of competitive considerations involving airtime sales) or an outright takeover by Rupert Murdoch-backed satcaster BSkyB.

“I realize James Murdoch (BSkyB’s CEO) has indicated he is not interested in buying Five, but the synergies are obvious,” says a London media consultant. From the New Year, Sky News will supply Five’s news shows.

“Dawn Airey (Sky Networks topper) knows Five inside out, having helped to launch it,” the consultant adds. “Ultimately, it all comes down to price.”

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