UK TV channels to merge?

Written by David_Redge

Channel 4 and Channel Five are in talks to merging, a move that would dramatically change the UK television landscape.

Mark Thompson, chief executive of Channel 4, confirmed yesterday that initial discussions had begun. It is understood to have met United Business Media and RTL (joint owners of Five) to discuss combining both channels (currently seperate) sales operations. But the talks have widened and a full merger has been placed on the agenda.

For any merger, the government would need to sanction a merger involving the publicly-owned Channel 4, and an act of parliament would be required to change its ownership.

One option being discussed is running the two businesses together, but with separate television schedules, along the lines of BBC1 and BBC2. Senior executives seem to favour creating a trust to own the channel, similar to the Scott Trust, which owns the Guardian newspaper. Combining public purpose with commercial strength is thought to appeal to executives who believe they can merge the two channels under the umbrella of a trust, with a subsidiary commercial company through which private money could be invested.

Executives at Channel 4 are known to be concerned about its survival over the next 10 years as a minority standalone channel competing against a merged ITV. Mr Thompson is understood to believe that the channels would optimise their strength in the marketplace by cooperating rather than competing.

The idea is believed to have originated with Lord Hollick, the minority shareholder in Five and the chairman of United Business Media, although Mr Thompson is understood to have met representatives of the German majority shareholder, RTL. He has presented the Channel 4 board with a number of options, ranging from asking for a share of the licence fee to privatisation.

Sources close to the board say, however, that the favoured option is a “horizontal” merger with Five. A senior Channel 4 source said “We would have to convince the government to give up an asset which Gordon Brown thinks is worth £2bn, and that isn’t straightforward.”