Sky proposes to develop C4 pay channels

Monday, March 9 2009, 09:46 GMT

Sky has issued a stinging rebuke to Channel 4's claims that its funding model is fundamentally broken and said it is disappointed that the Government has not considered the multichannel sector's contributions to public service broadcasting.

In a submission responding to communications minister Lord Carter's suggestion that a second public service broadcaster be formed around the core of Channel 4, Sky said that the channel's model is not broken because despite the advertising downturn, "Channel 4 has a strong balance sheet and has accumulated sufficient financial reserves to see it through the current recession".

Sky criticised Channel 4's decision to invest in "unprofitable non-core commercial activities", of which it said "most... have been poor any any reasonable standard, and would not have been allowed to proceed in an organisation with a more disciplined financial ethos". It said Channel 4 had accumulated losses of 270m over the last ten years from these investments, which include the now-axed plans to launch digital radio services.

It called on Channel 4 to come up with its own proposals for "self-help" and suggested that it spend some of its cash reserves, eliminate loss-making commercial ventures and rebalance its programme spend away from US imports and redirect the funds to UK production.
Sky also said that Channel 4 needed to diversify its revenue source out of a complete reliance on advertising.

"Channel 4's decision to exit from subscription channels in 2004, when it declined to renew carriage agreements with Sky and other pay TV retailers for its E4 and FilmFour channels, was a strategic mistake that has left it more exposed in the current downturn," it asserted. "Based on our experience of supporting third party channel partners, we would be prepared to work with Channel 4 to create a profitable suite of pay channels that will complement and provide financial support to its core free-to-air public service network."

Sky said that the government should take into account its 1bn investment in UK programme production across its channels and the 300m it pumps into joint-venture channels with A&E, Discovery, Nickelodeon and Disney.

"Given this track record, we are surprised that there has been very little consideration of the potential opportunities that pay television affords by Ofcom and Government in the wider policy debate about the future funding of public service content," Sky said.