Moguls bid to bring 5 alive

Major players are lining up to win the licence to run Channel 5. The stakes are high, but so are the rewards, says Mathew Horsman

Second time lucky? The bidding is on again for the right to broadcast on the new Channel 5, and the list of interested parties reads like a who's who of Britain's media businesses. This is a high-stakes game, requiring plenty of cash and not a little gumption; it is not for the faint-hearted.

Analysts predict the winning bidder (applications close on May 2) might have to spend £200m to get a new channel up and running. The pay-off, however, could be enormous. A fifth terrestrial channel is projected to reach around 70 per cent of UK households, giving its owners a steady flow of advertising revenues.

This marks the second time the licence has been on offer. The Independent Television Commission, the body regulating commercial TV in the UK, declined to award the channel to the single bidder in 1992, concerned that the group, led by Thames Television, did not have firm financial commitments.

Though the deadline for the current round is only five weeks away, little is known about what the new channel will look like.

There is a real possibility that Channel 5 will be an ITV2, without any regional or local input, though there are strong rumours suggesting one bidder might want to start a Scottish service. Potential licence-holders have been far more interested in lining up partners, costing proposals and estimating likely revenue streams than in deciding what they will offer the great British public.

Leading the pack of potential licence-holders is a consortium made up of Pearson, MAI and CLT, the Luxembourg-based European media group. Pearson, owner of Penguin Books and the Financial Times, also controls Thames Television, the independent television production company. MAI, chaired by Lord Hollick, is emerging as a major media company, to balance its financial services holdings.

Another strong contender brings together direct-to-home satellite and cable broadcaster BSkyB, 40 per cent owned by Rupert Murdoch's News International, independent television company Granada, also a BSkyB shareholder, and TCI, the major US cable operator. The head of Granada, Gerry Robinson, will play a key role in developing the consortium's plans.

The likely shortlist is rounded off by Mirror Group, publisher of the Daily Mirror and Sunday Mirror, which is working with the US broadcaster NBC and SelecTV, makers of popular programs such as Lovejoy and Birds of a Feather.

Pearson's bid has generated the most ink to date. The company has formed a special company to prepare the application and is expected to rely on Greg Dyke, the recently named chairman of Pearson Television and former head of LWT, to spearhead its efforts.

The Mirror's Group can tap the services of Janet Street Porter, the driving force behind Live TV, Mirror Group's new cable channel which launches in June.

Allan McKeown, chief executive of SelecTV, is effusiveabout his consortium's prospects. "We've got NBC, with its deep pockets, the Live TV studio, our own programming and a national newspaper to support the new channel and help us win viewers," he said.

Getting the backing of a national title is a proven way to win audiences. Murdoch's high-stakes, high-risk bet on satellite television, Sky TV, was promoted relentlessly in the pages of his newspapers, particularly the Sun.

Other names of interested parties are bandied about, some more far-fetched than others. Richard Branson's Virgin Group is thought to be looking, perhaps with Philips, the electronics company, and Associated Newspapers.

With all those companies vying for a shot, the field has grown confusing. More confusing still are the rules that apply to the media sector, which prevent newspaper owners from taking more than 20 per cent of ITV licence- holders, and which impose other restrictions on cross-ownership.

Those limits may yet change, depending on the outcome of a government review, although the ITC expects to award the licence according to existingrestrictions.

Indeed, the rules are one of the factors dictating the ownership configurations chosen by the various groups. Pearson, for example, will not be able to own (outright) more than 5 per cent of Channel 5. Its partners, therefore, are obliged to take much bigger shares, and this is one reason the consortium has so many partners. Analysts suggest that there are ways round the problem, and the ITC confirms it is open to suggestions. One solution would be for Pearson to take an "economic interest" of up to 20 per cent (a device pioneered by the BBC at the UK Gold satellite channel) but not a fully representative shareholding.

Beyond ownership, there are a number of other issues regulators will be watching. Channel 5 is meant to be a commercial, entertaining service. All the same, the winning consortium will have to give some precise undertakings as to its planned news, current events, educational and religious programming.

None of the bidders will reveal its plans about programming. Pearson's Greg Dyke simply refuses to answer questions about content: "That is information our competitors would dearly like to have." Philip Reevell, head of corporate affairs at Mersey Television, says: "They are so intent on putting together consortia, not enough attention is being paid to the programming. No one has plans to do regional opt-outs. This is a great wasted opportunity."

Whoever gets the ITC's nod will be faced with the immediate, potentially costly task of retuning many of its viewers' VCRs, which cannot receive the Channel 5 signal. While hardly a hi-tech problem - a screwdriver and 60 seconds would do it - the winning consortium will have to make the adjustment at no cost to the viewer, and that probably means sending a technician into the home.

Some observers have asked why a new terrestrial channel is needed, in light of the rapid pace of technological change. In the words of a senior broadcaster, "those who are working in terrestrial television are in the business of managing decline".

All the same, the cable and satellite markets are less developed than their promoters had originally hoped. In the interim, established television channels may continue to win big audiences.

"Just think of all the millions who watch EastEnders," SelecTV's Mr McKeown said. You could see covetousness in his eyes.

Sheffield is hosting a `Channel 5: Due North' conference on Friday (31 March). Details 0114 275 7727.

Pearson plan - Business, page 25

Pluses

*Deep pockets of American broadcaster

*Partner with track record in independent television

*Backed by high-selling national newspaper titles

*Live TV studio already up and running

Minuses

*Driving force (Mirror Group) limited to small stake

*Mirror may be over-extended with new cable channel

Pluses

*Pearson TV chairman has wide experience

*MAI has broad media and financial services experience

*Connection to leading European broadcaster

Minuses

*Leading company limited to small stake

*No link to mass market newspaper

Pluses

*Experienced broadcaster with deep pockets

*Allied to existing ITV licence holder: could use satellite to serve whole UK

*Backed by Rupert Murdoch's five national titles

Minuses

*Already linked to several satellite channels through Sky; winning might be politically controversial

*Partners already stretched; YTTV in recovery mode