Channel 4 could merge with BBC Worldwide

UK ministers and execs from broadcast regulator Ofcom are discussing a plan to merge the BBC’s profitable Worldwide wing with Channel 4 in a bid to save the beleaguered channel from bankruptcy. Though Channel 4 makes its money from advertising, it is publicly owned and, in the eyes of Ofcom, provides public service through its diverse output, which includes nightly news with Jon Snow and the Dispatches documentary series.

Giving Channel 4 a share of BBC Worldwide’s profits, which totalled GBP112.5m (USD168m) last year, could save the channel without needing to give it a slice of the licence fee. Ofcom wants to avoid giving public money directly to Channel 4 as, besides its reputable documentary output, the channel broadcasts controversial reality TV shows such as Big Brother. Ofcom considers these are not in the public interest, and fears a media backlash should licence fee money end up subsidising them.

Channel 4 expects to struggle as it loses its privileged position thanks to the digital switchover. It is also suffering from the general decline in ad revenues. Ofcom estimates the channel will need up to GBP100m (USD149m) a year if it is to survive for the next decade, while Channel 4 says it needs GBP150m (USD224m) a year.

The BBC is not keen on the proposal. When talk of the merger plan surfaced in September, BBC director-general Mark Thompson complained that BBC Worldwide is not ?a portable ATM machine?.

BBC chiefs clearly do not want to share either their GBP3.4bn (USD5.1bn) public endowment or their income from BBC Worldwide’s commercial activities. Their proposal is to share access to the BBC’s video-on-demand platform iPlayer, a solution that gives the impression of supporting fellow public service broadcasters without parting with any money.

If Channel 4 receives nothing more than the ?insufficient? commercial partnerships the BBC is currently offering, the channel says it will be forced to cut its news and documentary output entirely to rely on profitable reality TV. One possible strategy for the increasingly desperate channel is to use its low-brow content as a bargaining tool, gradually increasing the likes of Wife Swap and Big Brother to persuade Ofcom to act quickly to save its ?quality’ programming.

However, the strategy could backfire if it convinces an ever more supercilious BBC that the channel is not worth saving. It appears judgments on the relative merit of Channel 4’s output could be the key factor in deciding the broadcaster’s future.