Channel 4 Privatisation

Debate between Damian Collins and Kevin Brennan

Tuesday 14th June 2022 Commons Chamber

[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.

TV Licence Fee

Debate between Damian Collins and Kevin Brennan

Monday 20th November 2017 Westminster Hall

[Kevin Brennan]

That may explain why the hon. Gentleman’s wife agreed with the decision not to have a TV licence.

The hon. Member for Eastleigh (Mims Davies) made an excellent speech and highlighted her previous career both in the BBC and in commercial local radio. I completely agreed with the point she made about BBC local radio. In fact, as you will be aware, Mrs Moon, there is a programme late at night on BBC Radio Wales presented by Chris Needs, which I think ought to be funded by the NHS or social services, because it draws in people late at night who might be lonely and have no one else to talk to. It is an extraordinary service to the nation. Sometimes we forget about the role of radio in bringing comfort and companionship to lonely people.

The hon. Lady also advocated flexibility around the TV licence. I understand the point she makes, but there is a danger that if we unpick the simplicity of the licence concept we could get into difficulties. It is already costly to collect. The more we complicate it, the more difficult it will probably be to collect, and that might undermine the whole principle in a way that she would not intend. We should beware of unintended consequences to a suggestion that she makes with the best of intentions.

My hon. Friend the Member for City of Chester (Christian Matheson) rightly condemned both the far left and the far right for their attacks on journalism and on individual BBC journalists. I endorse everything he said. He told us that he had watched “Pobol y Cwm”, the Welsh language soap opera that appears on S4C. He might be aware that the news on S4C is produced by the BBC. It is not parochial news only about Wales; it is an international news programme produced in the Welsh language by the BBC. It does not seek in any way to present the news in a narrow parochial way.

The hon. Member for Solihull (Julian Knight) described his childhood trauma at being the only Julian brought up on his estate. He said that to abolish the BBC would be an act of “cultural vandalism”. I completely endorse that phrase and those remarks. He said there had been a tendency towards “despite Brexit” coverage on the BBC around the time of the referendum, but there was a time when one could not turn on the BBC without Nigel Farage’s visage appearing at every turn. It is a debatable point whether the BBC has been unfair on that particular topic. However, the hon. Gentleman made a good point about Ofcom’s oversight, which I agree is to be welcomed.

The hon. Gentleman made a point about the value of the back catalogue in potentially raising more funds for the BBC. That is a valid point, but licence fee payers have already paid for the back catalogue, so people would be charged twice if they were asked to pay again to access the back catalogue. There is a fine line to be drawn between making public service broadcasting available to people in this country who have already paid for it through the licence fee, and being able to commercialise it in an appropriate manner, perhaps on an international basis.

[Damian Collins]

There is some BBC content that has gone off the iPlayer because the original transmission was too long ago, but that can be watched through paying a subscription to Netflix or Amazon Prime, or through going out and buying a DVD. The principle that older content from the back catalogue that is not being broadcast must be paid for has always been there. In a new technological age, should there not be a “BBC Plus” subscription service that allows someone to buy that content directly from the BBC, as they would a DVD, rather than via an intermediary such as Netflix?

[Kevin Brennan]

I do not deny that, but I must say that I hugely enjoy being able to access things such as the BBC “In Concert” series from the 1970s via YouTube. There is, of course, an element of advertising to watch that content, albeit a very small one in the case of YouTube. I am arguing only that the right balance needs to be drawn. The hon. Gentleman is right that the BBC needs to raise funds through other means than the licence fee, and some initiatives have been happening in recent years. For example, the BBC is a 50% owner of UKTV, which includes the channel Dave, on which I have appeared from time to time on “Unspun with Matt Forde”—I may be declaring an interest by saying that. My point is that sometimes people do not realise the extent to which the BBC seeks to raise funds—over £1 billion, as was mentioned in the debate.

The hon. Member for East Londonderry (Mr Campbell) has been a long-term critic of the BBC. He made similar points the last time we debated the BBC, in this room not so long ago. He knows that I agree with him on the issue of transparency, particularly with regard to salaries. I think it has been proved that that information is in the public interest and should have been revealed. I commend the Culture, Media and Sport Committee for recommending that that should happen, and I agree with the Government’s decision to include it in the charter review. In an intervention, it was pointed out that the BBC had lost “Songs of Praise” during the commissioning process. It reminded me of the great Welsh hymn, Mrs Moon, “Cwm Rhondda”, with the words:

“Songs of praises, songs of praises

I will ever give to thee.”

“Songs of Praise” has unfortunately been lost to the BBC, but it will still air on Sunday evenings for us all to see.

The hon. Member for North Devon (Peter Heaton-Jones) spoke about how he had worked for the BBC in his previous career. I have to say, for an allegedly lefty organisation, the BBC seems to produce an awful lot of Conservative Members of Parliament, as evidenced by the line-up in today’s debate. They are all excellent Members of Parliament; clearly a BBC career is not a hindrance to a career in politics on the Conservative Benches. The hon. Gentleman said that in his judgment, and from his experience working on the opposite side of the world, the licence fee system is the best system and we should maintain it.

I am pleased to respond on behalf of the Opposition this evening. I will not repeat much of what has been said during the debate, because hon. Members spoke very well. We on the Opposition Front Bench understand the concerns that have been expressed in these e-petitions. It is probably true that if we were to design a public service broadcaster from scratch in today’s media environment, we would probably not come up with a licence fee system. As my hon. Friend the Member for Warrington North pointed out in response to an intervention, it is rather like what Winston Churchill said about democracy: it is the worst system, except for all the others. It seems to me that the charge against the licence fee probably boils down to people saying that it works in practice, but not in theory. That is the wrong way round, in a sense; it is things that work in theory but not in practice that we should be concerned about. The fact that the BBC licence fee is a bad idea in theory does not mean that we should abolish it. It is actually a practical and pragmatic way to fund our main public service broadcaster, in a world where other public service broadcasters are funded by alternative means.

We should remember what the licence fee supports and pays for. The BBC is the most used media provider among people of all ages, and in all parts of the United Kingdom. As well as creating content, it creates jobs and often serves as a creative centre of gravity in the communities in which it is based. I have to say to my colleague from the Scottish National party, the hon. Member for Argyll and Bute (Brendan O'Hara), that the extra funding that has gone into Scotland provides a real opportunity. I moaned about it, because we in Wales did not get as much as Scotland out of that particular deal. We will always have those arguments, but it presents a real opportunity to create the kind of centre of excellence that we have created in Wales—for example, in Cardiff around the drama village. There was not a very good drama service there a few years ago.