As part three of our seven-part series on the draft Media Bill (which can be found here), we covered the future of Channel 4 and, in particular, the Government’s U-turn on the privatisation of the Corporation. In this article, we return to the subject to look at the Government’s impact assessment in relation to the same (click here for the overarching impact assessment).
Channel 4 reform
By way of brief background, at the start of this year the Government confirmed that Channel 4 would remain publicly owned but indicated that reforms would be needed to give Channel 4 more commercial flexibility and provide a sustainable future for the broadcaster. Such reforms were set out in the draft Media Bill and will:
- introduce a duty on the Channel 4 board to ensure a focus on the Corporation’s long-term sustainability; and
- remove Channel 4’s publisher-broadcaster restriction.
As Channel 4 is a public authority the above proposal is exempt from the business impact requirements, however, the Government has said it nevertheless intends to publish an assessment of the impact of the measures (particularly the removal of the publisher-broadcaster restriction) ahead of the introduction of the Media Bill. In the meantime, it has provided a high-level summary of the potential impacts in the overarching impact assessment as part of its “commitment to provide a full overview of the Bill as a whole”.
Statutory sustainability duty
The impact assessment does not offer much in this area – the Government has said that the impact will be largely dependent on the choices the Channel 4 board make to promote the Corporation’s sustainability in line with its new duty. The Government has, however, acknowledged that the introduction of a statutory sustainability duty formalises what is already in place (the board already voluntarily abides by the principles of the general director duties under the Companies Act 2006 and the C4C-DCMS Memorandum of Understanding). Accordingly, this gives rise to the question of what impact this will really have in practice if the introduction of the duty is, in essence, designed to align the duty more closely to Channel 4 being a statutory corporation rather than a limited company, but otherwise maintains the status quo.
The potential cost impact has been considered in slightly more detail. The Government expects the costs to Channel 4 will be negligible – there may be small familiarisation and set up costs, as well as ongoing costs through increased reporting requirements but otherwise, as above, the expectation is the status quo is being maintained. The Government has also considered whether there could be potential costs to the consumer if Channel 4 starts to make more commercial content (particularly with the removal of the publisher-broadcaster restriction) in order to meet its new duty, instead of public service content. It is argued this potential consequence will be mitigated by the board’s requirement to consider its existing duties to fulfil Channel 4’s public service remit, abide by its media content duties and to continually provide the Channel 4 service. Delivery against the new statutory duty will therefore, it is said, not take precedence over delivering the public service remit, which will continue to be monitored and assessed by Ofcom.
Removal of the publisher-broadcaster restriction
The potential impact of this reform has caused more concern in the industry, with many querying the long-term effect if effective protections are not put in place. The Government argues in the impact assessment that the removal of the publisher-broadcaster restriction could benefit Channel 4 by providing an opportunity to Channel 4 to diversify its income streams, which are heavily dependent on advertising revenues. Indeed, much of the impact assessment that relates to the Channel 4 reforms focusses on this. However, this is hardly surprising given this is the main reason for the introduction of the reforms in the first place.
The Government has also recognised the concerns of the independent production sector, with the potential for Channel 4’s content spending to significantly decrease if it creates an in-house production arm. However, the impact assessment does not offer much more than the Government’s press release at the start of the year – the Government has again said it is working closely with the sector to consider necessary safeguards which “for example” could include increasing Channel 4’s independent production quota which is currently set at 25% but no concrete plans have been laid out – however, as indicated in our earlier article this proposal will do little to ease the concerns of “non-qualifying indies” (see further on this below). It is therefore difficult to assess true potential impact in this area until the safeguards are known. The Government has said that the Terms of Trade will be preserved, which enable independent producers to retain the underlying copyright and intellectual property rights to their content, which they can sell internationally. Of course, this could make non-indie commissions (e.g., Channel 4’s own in-house content) even more attractive to Channel 4 (particularly with the board’s sustainability duty) so it does seem that the level of the quota may be key to assessing impact here.
The impact assessment also concludes there could be costs to other producers who may lose commissions when Channel 4 is able to make programmes in-house. No further detail is given here, but our view is that this likely points to “non-qualifying indies” that might suffer from a squeeze between a higher quota for qualifying indies and Channel 4 commencing its own production activities. The Government has said it is “consulting the sector to develop mitigations against this impact”.
Conclusion
Overall, the potential impacts considered by the Government with regards to the Channel 4 reforms in the overarching impact assessment are limited and many questions remain unanswered, none more so than the question on the impact of the Channel 4 reforms on qualifying and non-qualifying indies. Perhaps this is not surprising given the Government’s intention to produce a more specific, in-depth impact assessment at a later date, however, with a limited window to pass through legislation before the next general election the sector will be hoping for further clarity very soon.
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