One of the key UK TV channels, Channel 4, is headed for bankruptcy or at least the risk of bankruptcy is there in the 2012 time frame, according to a report commissioned by regulator Ofcom.
It has now asked for UK opinion on whether it should intervene given that Channel 4 has a level of public service broadcasting. Ofcom could either allow Channel 4 its own TV license revenue, have the government bail it out or just let it die in peace.
The problem identified by an independent consulting body is the erosion and wide spreading of TV advertising in the UK across multiple new channels. Once all TV advertising was targeted at a single channel in the UK, whereas now there are over 40 DVB-T channels through the country’s Freeview service and most of them are funded by advertising. At the same time Pay TV services such as BSkyB and Virgin Media are both soaking up a considerable amount of advertising.
The call for comments is likely to deliver howls of derision from all the new TV interests in the country, and any intervention by Ofcom would be considered a betrayal of the market forces that are forming around digital TV services in the UK.
The scenario is likely to be repeated across Europe as DVB-T services compress more and more TV channels in to digital signals that were once used for analog TV, at a rate of roughly 6 digital TV channels on the same spectrum needed for one analog channel.
France, Germany, Italy and Spain all have impressively growing DVB-T populations of TV channels and most of these countries have the same beliefs about TV, that it should have an element of high quality public service broadcasting to ensure that the public get services of quality, with local programming and news and documentary services, and not just imported programming, which so often comes from the dominant US studios.
But Channel 4 has already found that the cheapest way forward is to make less and less of its own programming and import more and more, one of the findings of the report which Ofcom commissioned.
But the proliferation of TV channels through digital terrestrial services is only part of the problem. As multiple mobile TV services come online, and as most of Europe’s cable operators have been bought by Private Equity groups and funded to transform their services to high capacity digital services, there will be yet more advertising competition in the lead up to the Europe wide digital switchover in 2012. After that there will be a plentiful supply of UHF spectrum across Europe stimulating the creation of yet more and more TV channels.
Not only are companies like Channel 4 likely to have served their purpose and be doomed, but even the remit of the large publicly owned broadcasters such as the BBC will come increasingly under question.
In the Autumn of 2006 Ofcom commissioned LEK Consulting to carry out an independent assessment of Channel 4′ s financial and operating performance.
The LEK report concludes that there is a wide degree of uncertainty about Channel 4’s forecast performance, particularly in the period beyond 2009;
The Group is likely to be loss making beyond 2010, even after taking advantage of cost saving measures and the contribution from its other commercial ventures
Current cash reserves could be sufficient to cover losses until at least 2012;
Channel 4 will increasingly 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.