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A Channel 4 sell-off would wake up Sid and reinvigorate popular capitalism
The government should forge ahead with plans to privatise Channel 4, says Matthew Lynn. And small investors should get first dibs on the shares.
As gaffes go, it probably didn't have the same kind of impact as leaking plans to bomb Syria,or leaving David Cameron's "red lines" for renegotiated European Union membership lying on the train. It didn't even mention pigs. Even so, it was mildly embarrassing for an official to be photographed strolling into Downing Street with a document on privatising Channel 4 under their arm. But there's nothing to be embarrassed about.The sale of Channel 4 is a good idea and could be a very popular one too.
An odd but serious business
Channel 4 is a very odd asset, dating from the days when the government was nervous about private companies owning TV channels. It was owned by the state, but funded privately, initially by the ITV companies selling advertising on its behalf, and since the 1990s on its own. Its remit was to be a halfway house between the public-service ethos of the BBC and the full-on commercial strategy of ITV. It was paid for by advertising, but was meant to be a bit more high-minded and serious than its main commercial competitor. And it has remained in that space for the last 30 years.
Yet, over that time, the broadcasting landscape has changed out of all recognition. There were only four channels in those days. Now there are more like 4,000. There was no satellite and certainly no streamed television over the internet. For the government to own this single, commercially funded broadcaster makes about as much sense as it owning one regional newspaper, or a couple of cafs in Bournemouth. It is completely random, and whatever the logic for it might once have been, it has long since faded away.
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Channel 4 is a serious business. Last year its revenues were £938m, an increase of £30m over the previous year. It made an operating surplus of £4m, after a couple of years of high investment. It has branched out of its core channel, and now includes the Film 4 operation, which has made some very successful films, and expanded into digital channels, such as More 4 and E4, as well as streaming and catch-up services.
As anyone with teenagers will know, it is way ahead of its competitors in the youth market one of the demographics that advertisers most prize. Every organisation has its ups and down, but this is, by any measure, a successful operation, and one that would command a decent price if it was sold off. An estimated value of £1bn has already been put on the company. It could well be worth more.
The government is refusing to say whether it will definitely go ahead with the sell-off or not. The instinctively left-wing arts community is already fiercely opposed to the idea, and no doubt the Jeremy Corbyn-led Labour Party will be just as hostile. This is a party, after all, that now wants to renationalise the railways it is hardly likely to want to sell off a broadcaster. But the public is likely to see it very differently. It is a long time since Channel 4 had any serous public-service remit.
It is the station that gave us Big Brother, which hardly improved the nation very much. Its biggest hits of the last decade include repeats of the hit US sitcom Friends and reality show Big Fat Gypsy Weddings fantastic programmes, as it happens (OK, admittedly I haven't watched the Gypsy one, but I'm sure it's great), but notsomething the state needs to finance. In a world where we are increasingly turning to Sky and the internet for our TV, most people will be baffled by the case for keeping C4 in the public sector.
Even better, broadcasting is booming. Just look at the success of Netflix and Amazon Prime. A quality British broadcaster, which C4 certainly is, can now tap into a global market or supply the American giants with quality original content. Unleashed and told to goand make some serious money, C4could potentially be very successful.It could also be the privatisation to reinvigorate popular share ownership, just as British Gas was when that was sold off to the public way back in 1987. Private shareholding is already seeing a modest uptick, after many years of decline. There is not much left to sell off that is likely to excite anyone very much, but C4 is a brand that everyone is familiar with.
Speed up the sell-off
If anything, the government should accelerate its privatisation and not endlessly delay it. And it should make sure that it works for small investors. If necessary, it should reserve the entire issue for individuals, and cut the institutions out of the float completely. At a value of £1bn, it could allocate £1,000 of shares to up to a million subscribers.
It should price the issue at a relatively low level, so those individuals make a profit for a government that owes more than a trillion, whether it gets £900m or £1.1bn for C4 doesn't make a great deal of difference. It could even use one of the new crowdfunding platforms for the float to cut out the investment banks and their multi-million-pound fees.
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Matthew Lynn is a columnist for Bloomberg and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.
