Learning from Channel 5
Friday 28 April 1995
FOR CHANNEL 5
Virgin Group 20
Associated-White Rose 20
Philips Electronics 15
Goldman Sachs 15
(Shareholdings not confirmed)
(Fourth unnamed bidder) -
(Shareholdings not confirmed)
BY MATHEW HORSMAN
The scramble to win Channel 5, in its final stages ahead of Tuesday's deadline for bids, has revealed important lessons about commercial television, UK regulations and the heavy costs associated with making the new channel work.
Cynics have long argued that a fifth terrestrial channel would not fly: with the advent of cable and satellite, and the declining audience shares experienced by most terrestrial channels, a fifth commercial service would be difficult to justify.
The illustrious line-up of interested bidders has put paid to that. Although the three serious contenders for the service do not expect to see the national advertising pie grow with the introduction of Channel 5, all expect to break even within three to five years of going on air.
That will mean charging competitive rates to draw advertisers away from ITV and Channel 4, a prospect that will delight big corporate spenders, who have seen commercial television rates climb ahead of the inflation rate for the past two years.
As well, there remains a large national audience for terrestrial TV in the UK, despite the trend. No other medium can offer up to 10 million viewers for a single programme; satellite and cable reach a combined total audience of only 3.5 million.
The potential size of audiences for the new channel has dictated its likely character. By all accounts, Channel 5 will be an "ITV2", dominated by films, drama, light entertainment and a smattering of rather light- hearted current affairs.
The battle for Channel 5 has also revealed the contentiousness of current regulations, as policed by the Independent Television Commission. One leading contender, grouping media and information giant Pearson, media and financial services company MAI and European broadcaster CLT, faces difficulties arranging the group's shareholding to abide by strict cross- ownership rules that limit Pearson's participation. The group is considering options that might pass ITC scrutiny.
Similarly, a competing consortium led by Virgin, is looking at ways of giving partner Associated Newspapers greater control than the 5 per cent voting interest allowed. While it is understood that Associated will initially abide by the 5 per cent limit, it is nonetheless structuring its Channel 5 participation through a separate vehicle, White Rose, in which it can raise its stake once regulations allow.
Both contenders are privately furious that the third likely bidder, a group led by satellite and cable broadcaster BSkyB, does not face the same restrictions. BSkyB's 40 per cent-owner Rupert Murdoch owns five national newspaper titles but no commercial television contractors: as a result, BSkyB can take up to 20 per cent of Channel 5. By contrast, its partner, Granada, the subject this week of rumours that it would leave the consortium, is limited to only 5 per cent, because it already owns two ITV licences, Granada and LWT.
Finally, the bidding process has revealed the extensive costs of getting the channel up and running. Due to licensing limits and signal interference, only 70 per cent of UK homes are likely to receive the new service - about 16 million television sets.
Many UK households have VCRs that use the frequency set aside for Channel 5 as their playback signal. One industry source estimates suggests that more than 6 million VCRs will have to be adjusted, and the ITC has insisted the retuning must not inconvenience viewers or cost them money.
Conservative estimates suggest that £70m might have to be spent to send technicians into homes to do the retuning. The huge retuning costs were one reason Mirror Group's consortium decided not to proceed.
Those costs are a measure of the risk. But the number of serious contenders still in the running is testimony to the attractions of commercial TV.
Sales of the tablet are set to fall again, say analysts
Met Police confirm there was a 'minor disturbance' and that no-one was arrested
George Lucas criticises the major Hollywood film studios
Does Chris Grayling realise what a vague concept he is dealing with?
Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets
Parties threaten resort's image as a family destination
I Am Bread could actually be a challenging and nuanced title
- 1 Indian footballer Peter Biaksangzuala dies after injuring spine doing somersault celebration
- 2 Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
- 3 Banksy arrest hoax: Internet duped by fake report claiming that the street artist's identity has been revealed
- 4 Drink alcohol and eat meat to improve male fertility - but cut down on coffee, studies suggest
- 5 Brian Harvey turns up at Downing Street and 'demands to speak to Prime Minister'
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Residents should throw a street party and mix with immigrant neighbours, councils told
London bus driver allegedly kicks gay couple off for kissing
Russell Brand threatened with arrest after filming outside Fox News headquarters
Amal Alamuddin calls for the return of the Elgin Marbles from Britain: 'Injustice has persisted for too long'
Lord Freud: Tory welfare minister apologises after saying disabled people are 'not worth’ the minimum wage
iJobs Money & Business
£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...
£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....
£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...
£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...