Channel 4 Privatisation

Damian Collins Excerpts

Tuesday 14th June 2022 Commons Chamber

[Ms Dorries]

The impression given is that Channel 4, as a result of being sold, will cease to exist. That is not the case. Those independent production companies are actually overloaded with work. We made more films in the UK in the last quarter of last year than were made in Hollywood. This whole sector of broadcasting and film making is booming. We are selling Channel 4 so that it can have more inward investment, not taxpayers’ money, and so that it can make more content, not less. The work will continue for independent production companies, not least from many of the companies that are coming into the UK to make films and television content, just as in Northern Ireland.

Our vision for Channel 4 is one where it continues to do all the things it does best, while being freed from the shackles that currently restrict it. I repeat: all the things it does best. That means it will continue to make diverse, interesting and edgy content with independent production companies, just as it does now.

The Opposition motion talks about protecting Channel 4’s PSB remit. Anyone who takes the time to look at our proposals will see that they pose no threat whatsoever to that PSB remit—Opposition Members talk as if there is. Under private ownership, Channel 4 will still be required to commission a minimum volume of programming from independent producers—I hope the hon. Member for Cardiff South and Penarth (Stephen Doughty) heard that—just as all other PSBs are required to do. Under private ownership, we will maintain Channel 4’s existing obligations for regional production outside London and England, just as all other PSBs are required to do. Under private ownership, Channel 4 will still be required to provide original, innovative and educational programming that represents the breadth of society, as well as primetime news and current affairs—again, just as all other PSBs are required to do. Under private ownership—that is the rub here, is it not? The words “private ownership” are the nub of it. Under private ownership, we would also have the freedom to unlock Channel 4’s full potential by removing the publisher-broadcaster restriction, which the Labour party seems to want to protect, but which is the very restriction preventing Channel 4 from achieving long-term financial security. What company pays 100% for content but does not own the content? There is no other company that would regard that as a successful business model. The restriction effectively prohibits the broadcaster from producing and selling its content, denying it a crucial way to make money.

I cannot imagine another company—I look for anyone in this House to reassure me—that would be able to survive by paying100% of the cost of the business while owning none of the product.

[Damian Collins (Folkestone and Hythe) (Con)]

In Channel 4’s own response to the Government’s “Up Next” White Paper, it proposed raising £1 billion in private money through a joint venture partner, and that the joint venture partner would retain intellectual property and programming. The idea that the status quo is sustainable is not one that Channel 4 shares, and even it has called for a radical reset of its role.

[Ms Dorries]

It is exactly as my hon. Friend has outlined. The hon. Member for Manchester Central asked me what Channel 4 said, and one of its responses was that it wants to raise money. It wants to invest and raise money. The state—[Interruption.] Channel 4 is state-owned. The state cannot own a public service broadcaster that takes on the risk of borrowing money. If that goes wrong, it is the taxpayer who has to pay that debt. We as a Government cannot burden the taxpayer with risk, potential debt and responsibility.

Removing the restriction will allow Channel 4 to do exactly what my hon. Friend the Member for Folkestone and Hythe (Damian Collins) says: to raise that revenue stream and improve its long-term sustainability. We can do all those things with a sale, while protecting all that makes Channel 4 unique. We are not looking for any old buyer for this broadcaster. We are looking for the right one—one who shares our ambition for the business and our belief in what makes it special. It is precisely because of what Channel 4 does, and how it does it, be that distinctive programming, news content or film, that we are confident that we will find the right buyer.

Unsurprisingly, though it is early days, there has already been a lot of initial interest from a wide range of potential bidders. When a sale is secured, it will not just benefit Channel 4; we intend to use the proceeds to benefit the entire country. As I said, Channel 4 was originally established to help boost independent production, and it has been successful in that mission—so successful, in fact, that we face a new and very positive challenge. Production studios across the country are booming. They are so in demand that we need more and more people to work in them. We therefore intend to funnel some of the proceeds of the sale into addressing that new challenge and giving people up and down the UK the skills and opportunity to fill those jobs, delivering a creative dividend for all.

As I have to keep reminding those who choose to ignore it, the sale of Channel 4 is just one crucial part of a much larger piece of broadcasting reform, and the question of Channel 4’s long-term sustainability is—[Interruption.] The accusation is being thrown at me from a sedentary position that I am going to get rid of the BBC. It is not good enough to invent accusations from the Front Bench. Commentary has to be based on what the Government are actually proposing and what is actually happening. [Interruption.] Okay, so we did freeze the licence fee—yes. In this environment, that is a cost of living saving. There is absolutely no way, in today’s environment, that we could go to the country and ask individuals to pay for an increase in the BBC’s licence take. I am absolutely amazed that Opposition Front Benchers think that would be an acceptable thing to do, when hard-pressed families are struggling to pay their bills—[Interruption.]

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[Damian Collins (Folkestone and Hythe) (Con)]

Before I start, I would like to do as the shadow Secretary of State did and declare my entry in the Register of Members’ Financial Interests. I, too, was a guest of Channel 4 at the BAFTA ceremony. I would also declare, as other Members from across the House have done, that I am a fan of “Derry Girls”, as, I am sure, as part of his cross-community work, is the hon. Member for North Antrim (Ian Paisley). This is a channel that makes great programmes that are part of our national psyche and it is an important part of our broadcasting landscape.

However, I say to Opposition Members and some on our side that I have an honest disagreement with Channel 4 and with people who are opposing privatisation; the company, although well run, is running into such strong industry headwinds that this cannot be taken off the table and it has to considered seriously. As Channel 4 said in its own “The Next Episode” response to the Government’s White Paper, all options have to be considered. That has to include the option of privatisation.

The challenges to the sector are very real. A lot has been made of the fact that the last financial year was a successful one for Channel 4 and for the UK advertising industry. There was a major spike in advertising revenues. That is partly to do with a major surge in advertising spend coming out of the pandemic, which saw a big increase in revenues for all broadcasters. The pandemic also meant the delay to the European championships and the Olympics, and such major international tournaments traditionally have a considerable inflationary impact on the advertising market. So we have to look at this in a wider context: the increases in ad revenues seen in 2021 may not be repeated; and the diversion away from linear television advertising—traditional spot advertising—to digital media is a continuing trend. Channel 4 may be the leading UK broadcaster in that respect, but currently only 16% of its revenues come from digital advertising. Although it wants to move that target to 30% by 2025, that may still be a significant challenge.

If there is a major challenge to the TV industry, to the advertising industry, and if there were a recession—TV advertising is traditionally one of the earliest and worst-hit sectors—Channel 4 would be much more vulnerable to the economic shocks that would come, because it does not have other revenue sources. These trends may be familiar across PSBs, which have seen long-term declines in revenue if they are commercial, and in audience numbers, including at peak time. However, the BBC can make money from making programmes. ITV can make money from making programmes, for itself and for other people. Channel 4 does not have that option.

Let us look at the period before the pandemic. In trying to observe a trend, that is probably the fairest thing to do, because we do not yet quite know what impact the pandemic has had, in terms of lockdown in 2020 and recovery in 2021. What does the picture look like? I think everyone here would agree that when Channel 4 was set up its purpose was to invest its money in UK original productions made by independent production companies. It was set up at a time when the BBC and the ITV companies largely made most of their stuff in house, so it was a necessary vehicle to get financial investment into the independent production sector. This was a sector where Sky, Amazon and Netflix did not exist, and it was far more reliant on that funding.

If we look at what has happened to Channel 4, and this is true for other PSBs as well, we see that in 2006 it spent £516 million in first-run original content. In 2019, the year before the pandemic, the figure was £436 million, so we have seen a 15% decline. That declining revenue also bought a lot less as well, because inflation in the TV production market is making it more and more expensive to make programmes. So in 2006 Channel 4 broadcast 3,388 hours of first-run original content, whereas in 2019 it broadcast 2,473 hours, which represents a decline of 27%. This trend away from traditional broadcasters towards digital markets, with the pressure that has on their budgets and the declining amount of money they can afford to spend on new programming, has been a trend for a number of years now. The concern we must have is that if there was a shock in the digital ad market and if Channel 4 cannot hit its targets of allowing digital revenues to grow as broadcast revenues decline, it is much more vulnerable. It does not have the reserves and it does not have the ability to make money elsewhere. That is why even Channel 4 is proposing significant changes to its remit.

[Kevin Brennan]

The hon. Gentleman says that Channel 4 is proposing this, but that proposal was a direct response to a request from the Secretary of State to propose alternative sources of revenue. It was not initiated by Channel 4 because of its concerns about its finances.

[Damian Collins]

As I pointed out earlier in the debate, in that document Channel 4 itself says that it requires a radical reset of its role. If it is to take the opportunity of the changing digital landscape in the future, it needs to be in a position to invest more money. That extra investment will not come from advertising revenues. Channel 4 has been the most successful traditional UK broadcaster in switching to digital, but even there the best one can say about the last few years is that the increase in digital revenues has just about kept pace with the decline in broadcasting revenues. Digital is not raising more money incrementally for Channel 4 to invest in programming at a time when new entrants to the market are increasing their spend significantly—by hundreds of millions of pounds. The danger is that Channel 4, with its unique voice, will be less able to compete, less able to commission, and will run less new programming than it could in the past and that other broadcasters will do. That has to be addressed.

Channel 4 has said that its role needs to be radically reset. It is calling for its digital streaming service, All 4, to be global—to reach a global audience—to increase ad revenues. That is a sensible idea, but the independent production companies that make programmes for Channel 4 would have to give their consent to being unable to sell their programming internationally on their own, as they would in other territories. It calls for the creation of a joint venture in which Channel 4 holds a minority stake that would raise £1 billion to invest in new programming over the next five years. That would be a sensible measure to bring in a significant extra boost in revenue, although it would only bring Channel 4 back to where it was in 2006. As part of that joint venture, Channel 4 would have the intellectual property rights for programming and make money from selling those programmes. Channel 4 believes that may be within its current remit, although it would significantly change the spirit of the remit. The independent production companies might have concerns about that extension, but it is probably necessary.

The idea that the status quo can continue is wrong. It would be wrong of us to assume that it can continue and to say that we will deal with this problem, if it comes, in the future, and in the meantime see Channel 4 gradually wither on the vine, with declining revenues, declining investment in programming, unable to compete, until the point where it cannot go on and requires a bail-out from the Government or the other PSBs. That is the risk we are taking.

The Government’s “Up Next” White Paper is not an ideological tract; it is a sensible and serious at look at real issues in the TV sector. We may have different views on what the right format would be; Channel 4 has put forward its ideas and other bidders will do the same. I think the bidders will be more than the traditional players; others will bid as well and we should look at those options, but they will all be options for change, suggesting a way that Channel 4 can raise more money to invest in what we want it to do—making great programmes.

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[Ian Murray]

Yes, it is the cultural levelling up that Channel 4 has been able to achieve as part of its own agenda.

Analysis by EY—Ernst and Young—which was mentioned by my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), estimates that over £1 billion would be lost from the UK’s nations and regions if Channel 4 did not invest in the way that it does now, and that nearly 2,500 jobs in the creative sector would be at risk. That is independent analysis. It is not just those directly employed by the broadcaster who would be impacted, but the entire British creative economy. As my hon. Friend mentioned, it is a creative economy that relies on economies of scale, security of funding and a pipeline of skills.

In its lifetime, Channel 4 has invested—we have heard this already—£12 billion in the independent production sector in this country. Every year, it works with almost 300 production companies, many of which are tiny, as well as medium and large-scale production companies. This proposal does not just impact the big stars in London studios, but the camera operators, the crew runners, the location scouts and everything that makes a production happen in every single region and nation of the UK. The harsh reality is that a privatised Channel 4 would be commercially incentivised to buy in programmes from overseas instead of supporting new and innovative projects in the UK. Why? Because it costs a lot of money to make content and that would hit profits. Look at some of the big loss makers, such as the award-winning Paralympics coverage which has not really been mentioned in this debate. It is a huge loss for Channel 4 in terms of its financial viability, but it does it and it does it incredibly well.

If I could reflect on the contribution made at the end by the right hon. Member for Hereford and South Herefordshire (Jesse Norman), he made a critical point. Not only did he say that there are no options papers on where the future of Channel 4 could be beyond privatisation, but he hit the nail on the head. A lot of the contributions from the Government Benches have been about the headwinds that are just about to hit Channel 4. Those headwinds will hit Channel 4 whether it is in the public sector or private sector. It is hardly a good selling point to say, “We want to privatise one of our national assets to ensure it is not hit with these headwinds,” when a commercial broadcaster would cut the very things that Channel 4 does so well in times of hardship.

[Damian Collins]

The hon. Gentleman implied that commercial companies would look to buy in programmes, rather than make them. Why is it, then, that most TV companies that have their own production studios are massively investing in making more programmes? ITV, BBC, Sky and Netflix are. Everyone recognises that the way to make money in the TV market today is to make programmes to sell, not buy in from other people.

[Ian Murray]

Yes, but Channel 4 puts all those issues on the table in terms of investing directly in production. Channel 4 provides that shop window. If you say to a production company in Scotland which makes “Location, Location, Location”, “Would you like to make that for Channel 4, but you don’t get the IP?” either the costs will shoot up or they will not make it at all. This model works. It is part of the ecosystem. Production in places such as Leeds, Salford and Scotland is working so well at the moment because we have the BBC, ITV studios and Channel 4, all different parts of that ecosystem working together, so we have the economies of scale, the skills and the ability for people to be able to invest, because they know they can make great shows and great films in those places.

Let me reflect on some of the contributions that have been made this afternoon. The Father of the House kicked us off, and was absolutely correct to say that Channel 4 does not want privatisation. The Secretary of State is essentially saying, “We know best, so we will do to Channel 4 what we think is best.” The Father of the House concluded by saying, “stop messing it around”. That is right. Why try to fix something that is not broken?

My hon. Friend the Member for Cardiff West (Kevin Brennan) in his own wonderful style did a superb “Yes Minister” characterisation. Channel 4 does not have a problem to solve, but the Government are trying to find one; he was right to call it “Parliamentary Pointless”.

I will reflect on the impacts on Scotland later in my speech, but the hon. Member for Ceredigion (Ben Lake) was right to say that privatising Channel 4 will have a huge impact on the Welsh production sector. With the BBC investing in Cardiff and Channel 4 putting productions into the city, the sector in Wales has flourished in a way that it did not before.

The hon. Member for North Antrim (Ian Paisley) is right to say that Channel 4 is an enabler. We need the big production companies to be able to make programmes in order to seed smaller production companies and the entire industry. If we do not have those productions—the big returning drama shows—it is difficult to maintain a production company in an area, which Channel 4 does so well.

The hon. Member for Aberconwy (Robin Millar) said, “D’oh!”—maybe the first person to mention Homer Simpson in the Chamber, although I am not sure whether he was impersonating Homer Simpson or recalling the motto of Downing Street.

The hon. Member for Milton Keynes North (Ben Everitt) told us that he watched Channel 4 at night when he was younger, but that he has never watched “Naked Attraction”. Mr Deputy Speaker, he needs to come to the House and correct the record, because nobody believes him! [Laughter.]

My hon. Friend the Member for Canterbury (Rosie Duffield) reeled off a list of wonderful television programmes and films that Channel 4 has made over the years, including “Drop the Dead Donkey”, or, as it was rebranded last week, “Vote of No Confidence”.

The hon. Member for Mansfield (Ben Bradley) also tried to create a problem that does not exist. Along with a number of contributors this afternoon, he said that Channel 4 should be released from its shackles to be able to borrow. Well, it has not borrowed or required to borrow in 40 years. Maybe it will not require to borrow in the next 40.

Let us not forget about film, as this is not just about the impact of privatisation on television. As we heard from my hon. Friend the Member for Manchester Central, the broadcaster is the single largest investor in British film through Film4. We can see how wonderful some of those films have been, as they have won BAFTAs every single year and have really put the British film industry on the map. I think that gets to the heart of why so many people are outraged by the Government’s proposals.

Our great nation punches so well above its weight when it comes to our cultural impact on the world. There are few better examples of that than the British stars of screen—big and small. Many of our most famous faces got their big break through Film4 productions, many of which were huge risks to Channel 4, but because of its funding model and way it was set up, it was able to take those risks and some of those productions were hugely successful. I think of Ewan McGregor, Olivia Colman and Dev Patel, who we have heard about already, and film-makers including Danny Boyle and Steve McQueen. It is little wonder that so many stars, film-makers and directors have come out against and condemned the Government’s plans.

What of training, skills and jobs? We have heard from my hon. Friend the Member for Leeds North West (Alex Sobel) on this issue. Let us not beat about the bush: getting into the television and film industry is incredibly difficult for those who are lower down the socioeconomic scale. Channel 4 has been at the forefront of helping young people to get into the industry through 4Skills, which gives 15,000 young people a year opportunities to get into the sector. That costs money and is not the kind of thing that a commercial broadcaster will do. It has an industry-leading production training scheme through its supply chain that focuses solely on social mobility. That is all at risk. Why? Because it is not protected in the White Paper.

The move to sell off Channel 4 will have a particular impact on the Scottish creative economy. Since 2007, Channel 4 has spent more than £220 million on Scottish productions—about £20 million a year in recent years. It is the key commissioner from Scottish independent production companies and other Scottish broadcasters such as Scottish Television. Channel 4’s features and daytime team, its largest creative team, is now based at its Glasgow office. The broadcaster’s emerging indie fund and its indie growth fund have provided support to fantastic Scottish production companies such as Black Camel Pictures, which was responsible for the BAFTA-winning “Sunshine on Leith”.

And who can forget “Location, Location, Location”, one of Channel 4’s most successful shows, which is produced by IWC, a Scottish production company? Maybe the Prime Minister might need Phil and Kirstie’s help in finding a new place soon. I hope so. Even TV’s most famous house hunters might struggle to find a place with a built-in karaoke bar, but that is the challenge

Channel 4’s influence is not just on Scottish television. Film4 has produced memorable Scottish hits—perhaps none more so than “Trainspotting” in my home city, even though it did not portray Edinburgh in the best of lights. Film-making brings in £600 million a year in UK-bound tourism, right across the United Kingdom, although I am not sure that “Trainspotting” did Ladbrokes toilets any good. Channel 4 has given us generation-defining entertainment, and it will again.

I am grateful for the SNP’s support for our motion. The hon. Member for Ochil and South Perthshire (John Nicolson) made an excellent speech, but I must say that Channel 4 is also under threat from the SNP’s plans for independence. It proposes to put an end to Channel 4 in Scotland, because it would be independent, and it set out in 2014 that it would do the same for the BBC. What are its proposals for Channel 4 and the BBC? Governments are attacking our public sector broadcasters because those broadcasters hold the powerful to account, whether they like it or not. They are attacking the very principle of a UK-wide public service broadcaster delivering for diverse audiences all over the country. None the less, we are grateful for the SNP’s support for the motion.

Today, though, it is for Conservatives to make their decision. As we have heard, 91% of respondents to the Government’s own consultation made their opposition to the proposals clear. Those who oppose the proposals include the advertisers that pay for advertising on Channel 4 because of the diverse audiences that it produces, which other broadcasters cannot reach. If the Secretary of State is looking for a “Countdown” of Conservative Members who do not support her proposals, I say to her, “Three from the top, two from the middle and one large one.”

Will Conservative Members vote to sell the broadcaster to a private entity that is likely to centralise creative output in London, or will they vote to continue a model that invests in our creative economy in their very own constituencies? Will they sell a cornerstone of modern British culture to the highest bidder, or will they continue a great British institution that proudly exports our culture around the world?

The country would be grateful, the industry would be grateful and viewers would be grateful if the Secretary of State scrapped this privatisation. In the words of Mrs Doyle from another of the channel’s famous shows, “Go on, go on, go on.”