Should Channel 4 acquire Virgin Media's UKTV stake?

Gaining a stake in pay-TV broadcaster UKTV is gaining credence as a remedy for Channel 4's funding problem. But is it the right solution and would Virgin acquiesce to such a deal?

NO - Simon Guild, director, BassRock Media; Ex-chief of MTV Networks Europe
The future of Channel 4 seems to be the issue no-one wants to deal with.

Top-slicing the licence fee or combining C4 with BBC Worldwide in some way both effectively represent subsidies by the BBC.

Having C4 buy out Virgin Media TV's share of UKTV does not require a subsidy at least, but it assumes Virgin actually wants to sell its 50% at a price that represents a good use of what is also "our" money, ie C4's reserves. And even if this is achieved, what's the outcome? An ever-closer union between the BBC and C4.

In 10 years' time, the idea of having two separate PSB players will seem like an expensive anachronism.

I think there will be one PSB plus ITV and Sky. And then there will also be an enormous range of content providers creating innovative material, largely delivered online, for niche audiences.

YES - Rosie Choueka, competition lawyer, LG
Ad revenues will continue to fall; by investing in UKTV, Channel 4 will diversify its portfolio and open itself up to attracting more revenue.

Using government funding will in effect be investing for growth. In this economy, C4 needs to seize opportunities in order to ensure its survival.

The partnership with BBC Worldwide may lead to further commercial ventures for C4, offering it alternatives for diversifying its revenue streams and making it less reliant on ad revenue and government grants. All that said, it will be interesting to see how the competition authorities approach this potential investment.

BBC Worldwide and C4 have already been stung by the investigation into their joint video-on-demand venture with ITV (known as Project Kangaroo). Whether C4 buying into UKTV would be better received is an interesting question.

NO - Nigel Walley, managing director, Decipher
The success of such a deal hinges on the content rights that would be transferred between BBC Worldwide and Channel 4 within any deal.

We have to assume UKTV would retain access to BBC Worldwide content for pay-TV broadcast, but there is a significant grey area around UKTV getting its hands on BBC on-demand content. It is unlikely that these would be transferred to UKTV.

So C4 would be hampered in how much it could help UKTV evolve in a world increasingly dominated by video-on-demand.

While there would be a short-term benefit to both organisations from rationalisation of HQ functions, the broader benefits are harder to define.

C4, a struggling old-world business with declining viewing share, would be given ownership of an old-world business with declining viewing share. Not a recipe for 21st century success.

NO - Tom George, chief executive, Mediaedge:cia
I don't think anyone doubts the logic of the Channel 4 funding gap. Although estimates vary as to the amount, the accepted range seems to be somewhere in the £100m to £150m range by 2012.

This leaves C4 with the option of a full-blown merger with Five or a halfway house partnership with the BBC in the form of taking a stake in UKTV. Clearly, C4 prefers the latter. Because details of any deal are scarce, it is unclear whether this really would solve C4's future funding problems.

UKTV's ad revenues of about £125m would fill C4's estimated funding gap, but this in itself is too simplistic an answer. Clearly, money has to be spent on its purchase. Then there is the question of associated costs and the long-term problem of declining ad markets.

Certainly, a deal with UKTV would increase C4's share of the TV ad cake, although it would still lag some way behind ITV's market position.

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