Media: All about ... The Channel 4/Emap TV deal

C4 has its eyes on Emap's consumer media divisions, Alasdair Reid writes.

It's a shame that Channel 4 is run by a public corporation that reports to Ofcom and, ultimately, to the Department for Culture, Media and Sport. If it wasn't - if, for instance, it was a privately owned media company - then it would be rather neat for all concerned if it did acquire Emap's consumer media divisions.

The timing would be great. Last week, Emap basically admitted it is up for sale at a price that could fetch £2.6 billion for its business-to-business, consumer magazine and radio businesses. And Emap and Channel 4 are two companies who share much in terms of culture, philosophy, self-perception and audience. Together, they could be stronger.

But it's a big "if" here. Channel 4 has extremely limited scope for wheeling and dealing, and the City would very much like to see Emap concentrate on its more profitable business-to-business media assets. If a break-up is on the cards, the consumer assets are likely to be sold piecemeal to the highest bidder.

So last week's Emap/Channel 4 tie-up is about as close as they are ever likely to get while Channel 4 remains a glass and pine annexe to the ministry of youth. It has paid £28 million for a 50 per cent share in Emap's music TV businesses - a clutch of digital channels including The Hits, Kiss and The Box.

You can see why some analysts believe this is a natural development for Channel 4. It has, after all, been moving more deeply into the music sector, not just in TV, but also, now it has won the UK's second Digital Audio Broadcasting multiplex, into radio, too.

For many months now, the Channel 4 chief executive, Andy Duncan, has been warning that, given continuing fragmentation of the television audience and the march of digital media, the organisation will soon face a "funding gap". As advertising revenues begin to decline, meeting its TV remit (to deliver distinctive quality programming) will become harder.

Diversification - and especially a diversification that keeps it more or less centre stage in the internet- delivered video-on-demand game - is one way of trying to make good (some of) that gap as it widens.

From Emap's point of view, it appears to be buying into Channel 4's expertise in managing brand assets across several platforms. Emap has been making a go of cross-platform strategy on its own since the late 90s; but it needs the resources of a mainstream broadcaster if it wants to stay within touching distance of the on-demand video business.

1. Emap first became involved in music television when it acquired The Box in 1997. It was owned by one of the cable companies that have since merged into Virgin Media. When Emap took control, it launched The Box on Sky Digital, too. Its revenues are mainly derived from advertising and sponsorship, but they also come from cable and satellite carriage fees and from viewers requesting tracks via premium-rate phone lines.

2. All of Emap's music TV channels rely on the same revenue mix. In addition to The Box ("the hits of tomorrow") there's The Hits (cross-genre pop), Smash Hits (teeny pop), Kerrang! (heavy rock), Kiss (dance music), Q (indie and rock), and Magic (easy listening). The Hits commands the biggest audience (and is the UK's most-watched music TV channel) because it is one of only two music channels on Freeview (the other being Viacom's TMF).

3. Channel 4 broadcasts more music content than any other terrestrial broadcaster - more than 750 hours a year in recent times, including coverage of festivals such as V, Isle of Wight and Download. It has used this as the basis for the launch of an umbrella brand, 4Music, which covers not just TV content, but also a range of services available via a web portal, Worryingly, though, Channel 4 has been unable to secure the domain. The music portal offers news, features, reviews, music downloads and video streaming.

4. Channel 4 is a leading player in the 4 Digital Group joint venture that won the UK's second DAB licence on 5 July. Emap is also a member of the consortium, with BSkyB, Chrysalis, Ulster Television, the Carphone Warehouse and UBC Media Group. Emap's content contribution to the new multiplex will be Closer, "a mix of current and classic chart music with lifestyle conversation aimed at women aged 30 and over". Channel 4 will offer two music-oriented stations: E4 Radio, an interactive music and entertainment station aimed at 15- to 29-year-olds; and Pure4, a home for "original radical artists".



- Arguably, this deal slightly diminishes its room for manoeuvre now that it is contemplating the wholesale disposal of its consumer media interests. It is unlikely that it would be able to sell on its stake in the Channel 4 joint venture to another media owner - Channel 4, for instance, would not want to work alongside a rival broadcaster.

- This might compromise, for instance, its ability to attract a trade buyer for its current radio properties - Magic is, after all, primarily a radio brand. Or indeed its consumer magazines - among which there just happen to be the titles Kerrang! and Q.


- The broadcaster appears to have the better of this deal. It has acquired extra content and some little kudos in a sector that has been given great priority by the current management regime.

- The cost is relatively low, so the risk is marginal. It will doubtless do something spectacular with The Hits, which it is expected to rebrand as 4Music, and its hugely valuable Freeview slot. On the other hand, it might have to wait a little to reap the full revenue rewards. Unless it breaches current sales agreements with Sky Media, it won't be able to gain direct control of advertising sales on these channels until 2009.


- This initiative should be welcomed warmly by brands targeting younger demographics, especially given Channel 4's skills in using terrestrial television to cross-promote its digital channels. "It will grow the audience, which has to be a good thing," Neil Jones, the managing director of Carat, says.