Channel 4 and five moot co-operating to face merged ITV

The management of Channel 4 and five have discussed merging some of the two channels' operations in a move designed to counter the threat from the merged ITV.

Although it has been no secret that Channel 4 and five have talked about what benefits could be achieved from consolidating their respective sales functions, the discussions then extended into other areas such as co-operation on programme acquisition.

The discussions fell short of a full-blown merger, which would require an Act of Parliament to change Channel 4's ownership status - currently, the broadcaster is publicly owned.

Such a change would be controversial and if the Government were to go ahead with a sale they would give it a price tag of £2 billion. Any alteration in status is also likely to dilute its public service remit - Channel 4 is run as a not-for-profit channel, with any profits made re-invested in the schedule.

However, there would be some benefits in creating a strategic alliance - Channel 4's share of audience slipped below the 10 per cent mark for the first time last year.

Five's share of audience is generally considered to have reached its peak at around 8 per cent, and, with just one terrestrial licence, five will also find it increasingly difficult to compete in a multichannel environment.

The possibility of a merger of some of Channel 4 and five's operations is just one of the numerous permutations that could occur since the Government introduced the Communications Act. Another, more likely, possibility is that BSkyB will make a bid for five.

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