BSkyB Strikes Out Against Channel 4

LONDON: The U.K. pay-tv company BSkyB launched an attack against Channel 4, claiming the commercial broadcaster is mismanaged and has wasted millions of pounds on failed business ventures.

These criticisms were made in a letter from BSkyB to the U.K. communications minister Lord Carter as part of a response to the government’s Digital Britain Report, which outlines ways of securing and maintaining the country’s public service broadcasting system. All U.K. broadcasters were asked to submit responses to the report.

In its response, BSkyB said, “In the case of Channel 4 specifically, we do not agree that the existing model is fundamentally broken. While recognizing that all commercial free-to-air broadcasters face short-term challenges as a result of the advertising downturn, Channel 4 has a strong balance sheet and has accumulated sufficient financial reserves to see it through the current recession.”

BSkyB went on to point out that, “In its latest set of accounts, Channel 4’s reserves stood at £452 million, including cash and other financial assets of around £200 million. Now is the right time to use some of these funds for the purpose for which they were originally intended, allowing Channel 4 to continue to invest in public-service programming at a time when its revenues are under short-term pressure as a result of the advertising downturn. Given the strength of its balance sheet and liquidity position, Channel 4 is better placed than many other U.K. companies to ride out the recession.

“Channel 4’s financial position today would have been even more secure had it not been for cumulative losses of £270 million in the last 10 years from unprofitable non-core commercial activities.

BSkyB believes there are measures that Channel 4 could implement today that would reduce short-term pressure. “These include eliminating unprofitable non-core activities and ensuring that going forward those that remain exist solely for the purpose of contributing financially to the provision of public service content on the main channel; developing new revenue streams including exploring the full potential of subscription funding (beyond the core free-to-air network); and rigorous prioritization of program spend to reduce reliance on expensive U.S. imports and ensure that investment in core public service output focuses on areas not well served by other broadcasters.”

Channel 4 is facing a shortfall of £150 million and is asking the government for help. The government in turn would like to combine Channel 4, which is a state-run broadcaster but is allowed to collect advertising, with another broadcasting entity. The most likely scenario at this point would be the BBC’s commercial arm BBC Worldewide, or with either of the commercial broadcasters, Five or ITV.

In its response to Lord Carter, BSkyB also noted that although it is a commercial pay-tv service, it also contributes to public service broadcasting.

“We invest £1.3 billion per year on programming for our own channels, more than any other British broadcaster apart from BBC. Of this almost £1 billion is invested in the UK, in sports and news as well as drama, documentaries, entertainment and, more recently, the arts. As well as our own channels we support UK programming through our joint venture and third party channel partners such as The History Channel, Discovery, National Geographic, Nickelodeon and Disney, with whom we invest £300 million per year.”