Johnson opens door to Channel 4 flotation that could yield £3bn

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The Independent Online

Luke Johnson, chairman of Channel 4, is "open-minded" about the privatisation of the broadcaster in a move that could lead to a £3bn flotation.

Mr Johnson, an entrepreneur who led the listing of the Pizza Express chain on the London stock market, said that he was not opposed, in principle, to the sale of Channel 4 to City investors. "That would be hypocritical because I'm a capitalist," he said at the annual Edinburgh television festival that took place over the weekend.

His remarks were at odds with official Channel 4 policy and astonished his colleagues. Channel 4 has consistently stated that it could not deliver its brand of "distinctive" programming if it had to pay dividends and answer to shareholders.

Mr Johnson was reacting to the keynote speech given at the Edinburgh event by the outgoing chief executive of ITV, Charles Allen, who used his address to launch a scathing attack on Channel 4. Mr Allen called for Channel 4 to show less "commercial" programmes or become part of the private sector.

Mr Johnson, who is known for being a maverick, said: "The structure of Channel 4 is an accident of history ... I believe in the free market. Taxpayers deserve great value."

Channel 4 has been state-owned since its birth in 1982. But unlike the BBC, Channel 4 is self-financing, from selling advertising. It re-invests its profits and has to make no payments to the Treasury. Mr Johnson said: "I'm open-minded [about privatisation]. I certainly think it's an area for debate. What is important is that Channel 4 doesn't end up as a subsidiary of a conglomerate, the BBC, or government."

While the Labour Party gave a commitment to keeping Channel 4 in state hands in the last election manifesto, political observers believe that a hand-over of the premiership from Tony Blair to Gordon Brown could lead to a review of the broadcaster's status. It could be one way for Mr Brown to distinguish his leadership from Mr Blair's, to raise money for some worthy cause, and appeal to the right-wing press, said one political insider.

Mr Johnson, who also runs the private equity outfit Risk Capital Partners, did say the current Channel 4 model was working - "if it ain't broke don't fix it" - but he admitted that the broadcaster faced a funding crisis in future years, which could be as much as a £200m a year shortfall.

Currently, Channel 4 is performing remarkably well, both in terms of viewing figures and its financial results. Last year, revenues grew 6 per cent to £894m, while profits at the core channel jumped to £80m, from £46.1m. Group profits came in at £56.9m, from £59.8m in 2004. It has launched a series of digital channels, including E4, more4 and filmfour. It is particularly popular among the 16- to 34-year-olds, the age group that is most appealing to advertisers.

Mr Johnson hit out at ITV's criticisms of Channel 4, arguing that ITV problems were of its own making. Mr Allen argued in his speech that Channel 4 had abandoned its public service remit. Mr Johnson, appointed as Channel 4's chairman in January 2004, said: "Charles Allen is a ferocious competitor. He's just been sacked from his job. Obviously he's not a very happy man."

Mr Johnson did however concede another suggestion put forward by Mr Allen in his speech. Mr Allen had said Channel 4 should produce some programmes in-house - it is currently barred from doing so - as content and content rights become increasingly valuable. "We're vulnerable [on production], there's no question" Mr Johnson said. "It may have to be where we head."

We must raise our game, says ITV contender for Allen's job

Simon Shaps, director of television at ITV and a contender to be the next chief executive, has admitted that the broadcaster's on-screen performance has not been good enough.

In the most frank admission of programming failure by a member of ITV's senior management team, Mr Shaps told the Edinburgh television festival over the weekend: "Across the schedule and across genres, we need to raise our game."

ITV's main ITV1 channel produced its worst-ever viewing figures in July, culminating in very disappointing figures for the football World Cup.

Programmes such as Love Island have bombed and the company has lost out on a series of high-profile presenters who have gone to other broadcasters, including Paul O'Grady, Gordon Ramsay and Jonathan Ross. In particular, it has lost higher-income and younger viewers.

The poor viewing figures were largely the reason why the group chief executive Charles Allen was forced to agree to quit. Mr Allen himself has refused to criticise the programmes.

Mr Shaps said: "For quite a while in the summer, we haven't covered ourselves in glory."

He said that ITV's drama formats had not worked - they were "somewhat missable, somewhat predictable" - the BBC had put on fewer repeats and on Channel 4, Big Brother had run further into the summer this year.

Mr Shaps said: "We want a channel that is more talked about ... our drama needs to feel fresher, more contemporary."

Mr Shaps, who has been charged with reviving ITV's on-screen fortunes, said that the schedule needed more "splashes of colour" and it needed to be open to a wider range of shows. He said the absence of comedy programmes had been "unfortunate". In a question-and-answer session he gave at the Edinburgh conference, Mr Shaps said: "Unless we are bolder, ITV will cease to be relevant to the audiences needed to ensure its long term future."

However, Mr Shaps was adamant that, at its best, ITV was still able to produce "unique, magical" shows, pointing to the success of the Dancing on Ice series. He also said that he was "comfortable" with the upcoming ITV autumn schedule and that the winter would be "solid". He added: "We have a small issue to resolve next summer."

Mr Shaps was appointed director of television last year and he has assembled a whole new creative team around him. One of his team, Andy Harries, the ITV controller of drama, comedy and films, recently described ITV1 output as "bargain basement" and "unwatchable" for more upmarket viewers.

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