MEDIA PERSPECTIVE: Murdoch's pursuit of Channel 5 might aid RTL's standing

It's no surprise that Channel 5 is eagerly casting around for a

white knight to haul it up a gear. The channel may be gaining in

confidence, but the bigger picture is one of simply treading water.



Even if the TV market wasn't in recession, Channel 5 needs either a

bigger platform or a bigger stakeholder to batten down its long-term

future. Attempts to expand its sales operation with independent

contracts from other broadcasters have been mooted, but nothing has

materialised and its messy shareholder structure has meant that there is

not the paternalistic drive to invest in the product that some other

broadcasters enjoy.



That it should entertain conversations with Rupert Murdoch is also no

surprise. Over the years, Murdoch has made no secret of his desire to

get into UK terrestrial TV and Channel 5 is a reasonable point of

access.



Channel 5's unsatisfactory shareholding structure affords Murdoch

several possible routes to entry. RTL, Channel 5's largest shareholder,

is co-owned by Germany's Bertelsmann and Pearson, and Pearson has made

clear its intention to off-load its investment in RTL at some point.

Then there's Lord Hollick's United Business Media, which once held a

raft of TV interests but which has now clearly redrawn its strategy away

from the TV market.



And, finally, the Channel 5 management are said to be interested in

getting into bed with Murdoch - not just for access to his purse but

also to a bigger ad sales platform (which Channel 5's deputy chief

executive, Nick Milligan, would no doubt like to get his hands on).



The problem with the whole scenario, though, is the usual knee-jerk

jingoistic fear that meets any suggested strengthening of Murdoch's hand

over the UK media industry. Yet the Murdoch/Channel 5 deal might

indicate there's a bigger (foreign) game in town. Because if Murdoch

gets his hands on RTL's stake, RTL will release equity to make an even

bigger move elsewhere.



RTL is already cash-rich and ambitious. It is keen to make greater

inroads into UK TV and the obvious next port of call would be an ITV

licence.



At ITV there is a stench of vulnerability in the air, more than enough

to attract potential predators. So perhaps Murdoch's move on Channel 5

could herald a bigger deal in British TV and the emergence of RTL as a

major terrestrial player.



All of which begs the question about TV legislation. By the time the

draft Broadcasting Bill is produced next spring, the Government could

well find itself playing a game of catch-up. Again. If Murdoch and RTL

pounce while stocks are down, the Government could be forced to endorse

a commercial structure which has already been dictated by market

conditions - which is, after all, what happened when Granada took on

Hollick's ITV licences. Deals wait for no man, particularly in a

recession where bargains are to be had.



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