There's trouble ahead for Ch. 4, regulator foresees

Business model needs changing

U.K. broadcaster Channel 4 might face a financial meltdown after 2010 as it tries to balance its remit for public-service content and commercial success, according to a report published Wednesday.

The report, commissioned and published by media regulatory body Ofcom, is a comprehensive independent financial review of the broadcaster and gives four options for its future.

The report says Channel 4 is "likely to be loss-making beyond 2010, even after taking advantage of cost-saving measures and the contribution from its other commercial ventures."

But the report does say that current cash reserves could be sufficient to cover losses until "at least 2012."

According to Ofcom, the broadcaster increasingly will "be forced to decide" between different types of investments that, on the one hand, support the group's long-term commercial health and, on the other, ensure the continued delivery of public-service content.

The study concludes that a not-for-profit, commercially funded Channel 4 "should remain an integral part of U.K. public-service broadcasting."

It also noted that while Channel 4's commercial performance in recent months has been strong, that is likely to decline in the near future because of competitive market conditions.

For its part, Channel 4 has steadily maintained that it will require public support in order to deliver its public-service remit in the future.

Ofcom said it is set to look at four options facing Channel 4 in light of the report's findings. These include ruling out any further public support for Channel 4 and a move to immediately assess the possibility of "major intervention."

Ofcom is now calling for further evidence from interested parties to help it determine the "most appropriate response" to potential regulatory intervention, with the deadline for submissions set for May 4.

Channel 4 welcomed the report, arguing that it only served to support its long-held view that "the business model that has sustained it for its first 25 years on-air is unlikely to remain viable in the longer term."

"In our view, this report makes clear that it's no longer a question of 'if' Channel 4 needs new forms of public support to replace our gifted analog spectrum, which is rapidly declining in value, but 'when,' " Channel 4 chief executive Andy Duncan said.

Duncan said Ofcom should now progress "to identifying appropriate new forms of support that will give Channel 4 a secure financial base from which to plan our future strategy and public-service contribution."

The broadcaster also noted that it is committed to cost-saving measures.