UK’s House of Lords criticizes government approach to Channel 4 privatization debate

The UK parliament’s House of Lords, in a newly released report, has criticized the Tory government regarding its approach to launching a consultation on the future of pubcaster Channel 4, ...
November 29, 2021

The UK parliament’s House of Lords, in a newly released report, has criticized the Tory government regarding its approach to launching a consultation on the future of pubcaster Channel 4, and has also weighed in on the UK’s terms of trade between independent producers and broadcasters in the process.

The report from the House of Lords Communications and Digital Committee takes aim at the government’s stance that privatizing Channel 4 is its “preferred option.”

“This was not the right approach,” the report states.

“The government should have set out its vision for the future of public service broadcasting as a whole before examining what place Channel 4 should have in that ecosystem, and which business model it needs to realize that role. What kind of content public service broadcasters should produce, for what audiences and in what markets are crucial questions that must be answered before a decision is made about the ownership of C4C [Channel 4 Corporation].”

The report adds: “We are not convinced either by those who claim that privatization is an urgent necessity or by those who warn that it would be a catastrophe for viewers and independent producers. Rather, the risks and opportunities of privatization must be weighed against the risks and opportunities of continued state ownership.”

Elsewhere in the report, the Committee elaborates on its theory that the discussion concerning privatization to date has been binary, solely considering privatization or the status quo. The committee says it was surprised that C4C only described the potential risks of privatization in ots written and oral evidence, and not possible benefits, when C4C was asked for both. The corporation described risks like the possibility of its public service remit and content investment eroding under private ownership.

“We would have been more reassured to see C4C, as a publicly owned corporation, openly demonstrate that the potential benefits of privatization had been considered by its board, and judged to be outweighed by the risks,” the committee says.

Citing the steadily increasing competition from top streamers in audience share and programming budgets, the committee report argues that current conditions in the UK’s terms of trade between broadcasters and independent production companies prohibit networks like Channel 4 from benefiting from IP ownership. These conditions puts C4C at further disadvantage when compared to major global streamers like Netflix or Amazon Prime.

The report adds that the UK’s terms of trade were introduced to protect independent production companies from dominating against public service broadcasters, but the sector has matured since then.

“As a ‘publisher–broadcaster’, all C4C’s content spending must be invested in independent suppliers. C4C therefore lacks the long-term revenue from intellectual property which Netflix, Sky and others enjoy,” the report states.

The report adds that a potential alternative for the UK government to investigate is to relax the terms of trade to enable Channel 4 to negotiate for a greater share of intellectual property in the content it commissions, enhancing C4C’s market power and enabling it to expand further into international markets.

But Pact is disappointed with the Lords’ report on Channel 4, the organization’s CEO John McVay (pictured, left) said in a statement supplied to Realscreen. McVay said the report wrongly assumes that the terms of trade are too restrictive and that the indie quota should be refocused.

“We are concerned that the supposed alternative — the recommendation that Government allows Channel 4 to own more IP, and an amendment to the indie quota — will go against the delicately balanced ecosystem that currently exists within the UK broadcasting system,” he added.

“Ofcom’s recent report on the future of public service media found that there were risks associated with changing the indie quota definition and believes that it will continue to be important in future regulation. It is also not clear what the Lords mean by changing the terms of trade, and we fear that the committee may misunderstand the nature of the terms of trade which are not restrictive, are always changing and have stood the test of time due to their flexibility.

“A drastic change to the Terms of Trade could revert a hugely successful indie sector to the work-for-hire cottage industry it was before the introduction of the terms of trade, losing the creativity and diversity of ideas that it is known for.”

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