C4/Five merger rumors return

Speculation swirls around partnership

LONDON– There is fresh speculation concerning a tie-up between two of the U.K.’s cash-strapped webs, Five, owned by RTL Group, and hybrid pubcaster Channel 4.

RTL chief executive Gerhard Zeiler is believed to have made a new approach to Channel 4 regarding potential partnerships with Five, which recently reported a loss of £36.7 million ($55 million).

Zeiler, who sees Five’s future as part of a consolidated U.K. TV sector, has reportedly met Channel 4’s new chairman, Terry Burns, and its incoming CEO David Abraham.

But rather than a full-bodied merger between the two, an option favored in the past by Zeiler and Five’s CEO and chairman Dawn Airey, the talks are thought to have focused on merging Channel 4 and Five’s advertising sales houses.

A Five insider played down the significance of any meetings saying that “meetings happen all the time … everyone is talking to everyone else.”

The idea of a merger between Five and Channel 4 first emerged in 2004 as a way of saving money but quickly disappeared from the agenda, not least because culturally the webs were designed to fulfill very different roles.

Five is an entertainment-led commercial web while Channel 4, owned by the state, is a pubcaster funded by advertising.

However, under pressure from the U.K. government, the pair were encouraged to discuss a partnership around 18 months ago.

Zeiler and Airey were keen on the match, but the man then running Channel 4, CEO Andy Duncan, regarded it as like trying to “mix oil and water.”

Last year Thomas Rabe, the chief financial officer of Bertelsmann, majority owner of RTL, said Five’s current business model was “not sustainable.”

“The possibility of Five deal is still alive — as I understand it, David (Abraham) is really interested in making something happen,” said one senior industry executive quoted by U.K. website MediaGuardian.

“Forget ideological differences, now it is about does it make business sense or not.”