Deadline; Channel 4: Inside The Doomed Sale Of A Crown Jewel Of British Television

Story from Deadline:

There was a moment in November when Channel 4’s senior executives breathed a sigh of relief.

Seated at the top table of Channel 4’s 40th birthday party, Chief Executive Alex Mahon was flanked by her friend Elisabeth Murdoch and doyens of UK broadcasting, including BBC Director-General Tim Davie and Carolyn McCall, ITV’s Chief Executive. They were raising a glass to a British success story in a rare public display of unity.

On the same table was Thérèse Coffey, a senior government minister who had survived three prime ministers in the space of little more than three months. Her presence at the V&A Museum event bemused others, who believed the government only had hostile intentions for Channel 4 after sanctioning a sale of the broadcaster against its wishes.

Things soon got weirder. Coffey turned to Mahon and asked if she could raise a glass to Channel 4. She then proceeded to surprise the room full of TV luminaries by serenading her hosts with a rendition of happy birthday. Channel 4 executives were amazed by the singalong.

The threat of privatization, rubberstamped eights months prior to the birthday bash, still hung in the air that night, but Coffey’s crooning came to symbolize a change of tone: selling a crown jewel of British broadcasting was no longer a fait accompli. Come January, Rishi Sunak, the UK Prime Minister, had removed Channel 4 from the shop window to celebratory scenes across the TV industry.

Deadline has spoken to nearly two dozen people about how the privatization plan unraveled and what will become of a broadcaster that gave the world Derry Girls and Shameless. Most spoke on the condition of anonymity as the government settles a package of reforms for Channel 4, which includes controversial plans to allow it to make its own shows for the first time.

Those close to the doomed sale took us behind the scenes of an unsettling and often fraught period for a company that boasts revenues of £1.2B ($1.5B). The sources explain how the government pursued privatization for both business and ideological reasons, and in doing so, took informal soundings from potential buyers, including Rupert Murdoch’s News Corp. They reveal moments of tension between Channel 4 and ministers, as well as differing opinions about how Channel 4 made its case to remain in public hands.

Ultimately, the journey to Sunak’s edict was as much about the coherent arguments against privatization as it was about political chaos in Britain. Boris Johnson and his closest allies were the architects of Channel 4’s sale, so his spectacular downfall ultimately neutered the government’s desire to make generational changes to the UK’s television ecosystem.

The invention of Margaret Thatcher, Channel 4 is wholly owned by the government, but commercially self-sufficient. It has spent 40 years funneling its TV ad revenue into disruptive programming from the UK’s independent production sector. But Channel 4’s longevity has not stopped successive Conservatives from attempting to unpick Thatcher’s legacy.

They came for the broadcaster in 2015, when the government’s desire to sell was inadvertently revealed by an official walking into 10 Downing Street clutching a document titled: “Assessment of Channel 4 Corporation Reform Options.” Channel 4 eventually won the argument, but only after agreeing to move hundreds of employees out of London.

If there was a sense of unfinished business among Conservative ranks, then the pandemic provided an opportunity. The Covid crisis bludgeoned Channel 4’s advertising revenue, forcing it to slash its content budget by £150M. The Gogglebox broadcaster was far from alone in feeling the pandemic pinch, but it allowed ministers to raise questions about its financial sustainability and suggest privatization as a solution.

Sir John Whittingdale, the then Media Minister, first posited this argument on the fringes of the Conservative Party conference in October 2020, when he said Channel 4’s ad model was under “considerable strain” in the age of streaming. Oliver Dowden, the former Culture Secretary, made the sale rumors official in July 2021, launching a consultation on Channel 4’s future. New ownership would be “better for the broadcaster, and better for the country,” he proclaimed.

The government’s public case for privatization has always been about sustainability. Ministers said Channel 4 was overwhelmingly reliant on traditional advertising, a decaying source of revenue. They said freeing Channel 4 from public ownership would allow it to borrow more money to invest in content and its digital transformation.

Whitingdale tells Deadline that he wanted to pull Channel 4 out of a potential “death spiral.” Department for Digital, Culture, Media, and Sport (DCMS) officials echoed this, arguing that they only had Channel 4’s best interests in mind.

The trouble for ministers was that those steeped in the business of British television overwhelmingly disagreed with the government’s analysis. Channel 4’s finances rebounded to record highs following the pandemic and it set in motion plans to wean itself off traditional ad revenue. Detractors argued that privatization was a solution in search of a problem and that a sale could wreak unintended damage on a successful UK television industry. Ricky Gervais and Steve Coogan were among the celebrities who voiced opposition. There was even dissent among a rump of Conservative MPs.

Critics of privatization have long suspected it is personal for the government; that the reasoning offered by ministers is a cloak for ideological opposition to Channel 4. Tory hardliners accuse Channel 4 News of left-wing bias and believe that the broadcaster espouses the kind of liberal values that have become polarizing in the culture wars. There is also a more simplistic Conservative principle at play: the belief that the government has no business owning a commercial broadcaster.

Some of Boris Johnson’s colleagues viewed his motivations as political, saying he pursued privatization with enthusiasm. “Boris was very committed to it,” says Whittingdale, his Media Minister for nearly two years. A second source, a serving Cabinet Minister, says: “It was a Borisian thing to do and he thought it would be popular with the right of the party.”

Others were more explicit in linking ideological motives to the disposal of Channel 4. Sources said Dominic Cummings, the top adviser to Johnson at the height of his political powers, messaged Channel 4 News journalists telling them that the government was going to “whack” the broadcaster because of its reporting on issues including Brexit. Cummings has not responded to a request for comment.

Whittingdale admits that Channel 4 played into the hands of unfriendly Tories, referencing a speech made by former news chief Dorothy Byrne at the 2019 Edinburgh TV Festival. “Having the head of [news] programs call the Prime Minister a liar on the biggest media platform of the year was not likely to make him favorably disposed towards them,” he says. “Channel 4 did not help themselves.”

But there was one Johnson acolyte who would eventually become the face of the sale. Nadine Dorries, a straight-talking Liverpudlian who once starred in I’m A Celebrity…Get Me Out Of Here!, was the surprise pick for Culture Secretary in September 2021. A diehard Johnson ally, she embraced Downing Street’s mission with vigor and energized the privatization effort.

“She wanted to make her mark and deliver on things that had been put on the back burner,” says a friend of the Conservative MP. “That combined with a political frustration at Channel 4’s tendency to be more sympathetic to the left, it was a great thing for her to get behind.”

After the government set the sale wheels in motion in July 2021, Channel 4’s Chairman came out swinging. In a leaked letter to Dowden, the former Culture Secretary, Charles Gurassa said the government was in danger of “sleepwalking into the irreversible and risky sale of an important, successful, and much-loved, British institution.”

Mahon, Channel 4’s Chief Executive, was more circumspect in mounting her defense, despite pressure to be more aggressive. Allies say she wanted to plot a careful campaign, which would stake out Channel 4’s credentials without antagonizing the government. She focused her case on Channel 4’s economic and cultural value, often referencing how the broadcaster’s spending with regional producers was in-step with the government’s priority to “level up” parts of the country.

“Her whole pitch was: I’m only interested in data and evidence. I can’t see the data and evidence for a sale, but if you show me the data and evidence that this is a good idea, I’ll be persuaded,” says a colleague. “It made her an incredibly credible advocate and witness.”

Channel 4’s positioning was a source of endless debate internally as executives war-gamed their way through 18 months of limbo. Mahon and her top team were heavily advised by two Eds: Ed Richards, the former Ofcom CEO who founded advisory firm Flint Global; and Ed Williams, president of Edelman, the powerful PR agency. One person familiar with Project Orchid, as the rearguard action was dubbed internally, estimated that Channel 4 paid more than £100,000 a month for the privilege of their outside counsel. The government has confessed to spending at least £2M on its own case for privatization.

Several sources say there was disagreement between Mahon and Ian Katz, Channel 4’s Chief Content Officer, over how far the broadcaster pushed its message. “He couldn’t understand why we weren’t being more aggressive or forthright,” says someone who worked closely with both.

Mahon preferred to be sterile with her language, saying there was no evidence a sale was “in the interests” of audiences or the economy. In contrast, Katz sometimes elected to use more “incendiary” rhetoric, a source says. In August 2021, just weeks after privatization was made official, he drew on the analogy of boiling a frog to suggest that the things that make Channel 4 unique would be “destroyed.”

The suggestion of tension was downplayed by others, who say it made sense for Mahon and Katz to play different roles. If Mahon was the scientist, Katz had a little more creative license to encourage the industry to swing in behind Channel 4, so the theory went.

The UK’s film, television, and advertising sectors were full-throated in their rejection of privatization. Such was the overwhelming support for the status quo, it was far easier to count the notable industry figures who actually endorsed a sale. The handful of names included Lord Michael Grade, the former ITV Chief Executive who now chairs Ofcom.

The scale of opposition to privatization became clear when the government published a summary of the responses to its consultation on Channel 4’s future. Some 96% of the 55,737 responses disagreed with the idea that public ownership could eventually kill Channel 4. Only 2% advocated for a sale.

It did not deter Dorries, who in April 2022 decided to press on with the disposal. She dismissed industry protests as “lazy, overwrought and ill-informed rhetoric from the leftie luvvie lynch mob” and rejected an alternative to privatization put forward by Channel 4, which warned that the government’s plan would deal a £3B blow to the economy.

Dorries announced that the sale was going ahead in a tweet at 9.20PM on a Monday evening, just moments after telling Channel 4. It shocked Channel 4 executives and was a low point of the entire debate for Mahon and her team. “It was not normal process,” an insider reflects. “Then you think, what do we do next? How do we deal with this?”

Dorries’ colleagues say she was emboldened after the DCMS received as many as 11 “expressions of interest” in Channel 4 from potential buyers. Sources say the government was quietly confident that Channel 4’s oft-quoted £1B price tag was at the lower end of estimates, with Dorries even claiming it could fetch £2B. Alvarium, a merchant bank engaged by Channel 4, said £500M was more realistic because protecting the broadcaster’s public service remit would lessen its value.

ITV, Sky, and Warner Bros. Discovery were among those who held informal talks with the DCMS and JP Morgan, which advised on the sale. We can reveal that Rupert Murdoch’s News Corp also engaged in discussions about Channel 4 amid the launch of Piers Morgan-fronted TalkTV last year. Andrew Griffith, a former Sky executive who led Boris Johnson’s Downing Street policy unit, was among those angling for industry consolidation in government circles. ITV, Sky, Warner Bros. Discovery, and News Corp declined to comment.

Dorries could be combative in talks with Channel 4. Two sources say she was brusque with Mahon in their first encounter in October 2021, metaphorically waving the letter from Gurassa in front of the chief executive and demanding Channel 4 stop leaking to the press. A third source close to Mahon prefers to describe the encounter as “good-natured.”

In another incident, a friend of Dorries says Channel 4 leaders were called in for a “real bollocking” during a “no tea, no coffee” meeting at the DCMS last summer. “There was real anger over some of the things they were doing in terms of public speeches and briefing,” says the source. Others joke that it was not unusual for the DCMS to forget to offer refreshments.

An insider in the Channel 4 camp admits there were dicey moments: “There were times when people were completely frozen out by the DCMS. They didn’t return emails, they didn’t return calls, and they didn’t even return texts from Alex. That would really begin to freak people out.”

The biggest clash came over Channel 4’s annual report, which sowed resentment on both sides and culminated in Mahon accusing the DCMS of meddling in front of an influential Parliament committee.

In May last year, government officials asked Channel 4 to reconsider its language around sustainability in the annual report. The 244-page document makes repeated assurances about Channel 4’s financial performance and future. Given ministers had argued that privatization was necessary for Channel 4’s survival, the DCMS felt this was at odds with its own messaging.

The standoff delayed publication of the annual report and officials ultimately backed down. But Mahon was in no mood to move on. She was transparent about the issue when questioned by the cross-party culture select committee, telling lawmakers that the government would have “preferred to change some wording” in the report. She said it was the first intervention of its kind in Channel 4’s 40-year history.

The DCMS was “incandescent” that Mahon had gone public with the spat, according to two people. Officials accused Channel 4 of planting a question about the annual report with Kevin Brennan, a Labour MP who sits on the culture select committee. Brennan denies the allegation, saying he would never warn witnesses about his line of questioning. Channel 4 insiders argue that the annual report was always part of the agenda for the committee hearing.

Reflecting on the incident, a friend of Dorries observes: “If they were the CEO of a company where the shareholders wanted to sell, they would have been frogmarched into the office and fired summarily.”

As tempers flared over the annual report, a political earthquake was ripping through the UK. Johnson was dramatically forced out of office by his own party in July after a string of lockdown party and probity scandals overwhelmed the Prime Minister. Policy was put on hold, meaning the Media Bill, the piece of legislation required to sell Channel 4, was not published.

The turmoil did not end there. Liz Truss replaced Johnson, crashed the economy, and resigned within seven weeks. Her economic vision was then junked by Rishi Sunak, who succeeded her as the UK’s third Prime Minister in less than a year. Amid the chaos, there was at least one consistency: Truss and Sunak agreed that the case for selling Channel 4 needed to be re-examined.

Andrew Neil, the presenter who hosts his own politics show for Channel 4, sums up the events: “Governments come to power determined to carry out some major reforms in broadcasting, which will be unpopular with the broadcasters but not necessarily unpopular with the public, and then something major happens and it gets put on the back burner.”

Michelle Donelan, a rising star of the Tory party, was named Culture Secretary and was asked to take a pragmatic approach to privatization. Sunak, the new Prime Minister, had contact with Channel 4’s executives during its long period of limbo and is said to have made clear that he was not willing to “lie in a ditch” for the sale. Hamstrung by a divided party, cratering ratings, and no personal mandate from the British people, some argue he had little choice but to abort policies that could cause him unnecessary headaches.

More than 20 Conservative MPs were prepared to vote against the sale, while members of the House of Lords, which has a role in shaping UK legislation, also said they would protest. One Conservative peer, who was supportive of a sale, concedes: “It would have been subject to a huge amount of argy-bargy … the government would have been defeated left, right, and center.”

The consistency of Channel 4’s campaign against privatization came into its own amid the mayhem, say those fighting the broadcaster’s corner. “The government ran out of reasons to do it. It became more of a political move to privatize the broadcaster,” a well-placed source says.

Just before Christmas, ministers told Channel 4’s top team that they were abandoning a sale. Executives were summoned to meetings with Donelan and there was a flurry of activity in the days running up to Christmas Eve. “It interrupted me making my cranberry sauce,” jokes one person close to the process.

The government’s view was that if it wasn’t going to succeed in selling Channel 4, it should at least extract some commitments from the broadcaster. So ministers and executives spent the final working days of 2022 negotiating a deal that would draw a line under the privatization saga. The government asked Channel 4 to start producing its own content for the first time, double its £5M investment in training, and move 58% of its 1,035 staff out of London. The deal was eventually announced in the first week of January.

The in-house production proposals are easily the most controversial of these reforms and will be subject to intense negotiation with the Pact, the independent producer trade body. Byrne, Channel 4’s former head of news and current affairs, thinks the idea will be privately welcomed by some of her former colleagues — so long as it is done carefully. “Channel 4 contributes to the creation of brilliant programs. How is it right that Channel 4 gets virtually nothing from that?”

Ministers also want to make “long-term financial sustainability” a statutory duty for Channel 4 by requiring the broadcaster to increase its financial reporting. DCMS and Channel 4 insiders say this change is little more than housekeeping to protect the broadcaster. But someone who spent months working on privatization for the government interprets the plan differently, arguing that it could be used as a mechanism to make it harder for Channel 4 to campaign against privatization in the future.

“It is all baked in from the fact that Channel 4 refused to hand over [financial] numbers when we wanted them and was employing people to campaign against privatization,” says the source. Channel 4 insiders strenuously deny it failed to submit information when requested.

Donelan says the deal secures Channel 4’s future for decades to come, suggesting that privatization is unlikely to be revisited any time soon. Others are not so certain, particularly if Channel 4 runs into financial difficulty. “There’s a half-life in this issue which means it seems to keep coming around,” says one Channel 4 insider. Whittingdale adds: “There will come a point where the [Channel 4] model is no longer delivering a sufficient return to invest in programming … We are likely to have to come back to it at some future date.”

Neil, the former BBC presenter, thinks the Tory obsession with privatization is dead in the water. He explains: “There is nothing this government will now do to the broadcasters, nothing. It doesn’t have the political capital or the bandwidth. It has no idea what to do anyway. It’s over. Game set and match to the broadcasters.”

As Channel 4 executives breathe a sigh of relief, they are beginning to refocus. Officially it has been business as usual, but employees will tell you privately that the uncertainty has been debilitating. Creative energy has been expended campaigning, hiring has become more difficult, and there is a suspicion that production companies have taken some of their best ideas to rivals. “Privatization sucked the oxygen out of the room,” reflects an insider.

The clouds will not clear immediately and new challenges will emerge. Channel 4’s record £700M content budget will be cut this year amid falling ad revenue, while there is plenty of speculation about Mahon’s future, with rumors of job offers from America. The broadcaster is, however, back in control of its own destiny for the first time in 18 months. For many, it will be a reason to raise a toast when Channel 4’s 41st birthday rolls around.