1. The UK’s free-to-air TV market could be about to get a big shot in the arm, as Richard Desmond prepares to sell Channel 5 to Viacom, owner of MTV and Paramount Pictures.
The deal, announced Thursday morning, is worth £450 million and makes Viacom the first US company to control a UK public service broadcaster.
Viacom said 5 was “one of British television’s biggest brands” and said it would complement its existing pay TV networks.
Desmond paid RTL £104 million for the network in 2010 and has left his stamp on it, bringing in Big Brother from Channel 4 and more US film rights buy-ups. This also confirms Desmond as one of the most wily operators in the media jungle, quadrupling his investment in less than four years.
His assertion that Five is worth £700 million – ten times its £70 million-a-year profits – and his threat to buyers that he’d consider a stock market flotation if he didn’t get what he wanted, appears to be the kind of pomp and bluster we’ve come to expect from a man who runs a successful stable of magazines and newspapers with ruthless zeal.
Previous bidders included Discovery and BSkyB, but they dropped out of the race, apparently blinking at such a high price for a network with relatively few original programmes and formats.
2. The deal could mean a greater presence for Viacom’s original programming, which it’s been making in the UK for years.
Viacom said in its statement today: “We will introduce our popular content to new UK audiences and create a comprehensive offering for our commercial partners on-air and on-line… This deal will dramatically increase Viacom’s investment in content produced in the UK, which has a widely admired.”
Right now, 5’s most watched shows include documentaries including The Nightmare Neighbour Next Door; big budget US buy-ins such as The Mentalist and Ice Road Truckers, and Hollywood movies.
5 could be a natural platform for shows that Britons already watch via Viacom’s satellite and cable channels, such as the Daily Show on Comedy Central, Geordie Shore on MTV and all sorts of things on Nickleodeon. Viacom claims to be the “most successful international supplier of pay TV channels to the UK market in 2013”.
As well as Channel 5 there is also 5* and +1 catchup channels for each – leaving any potential buyer with four channels to convert from free to paid. However, any buyer will have to stick the terms of 5’s broadcasting licence which requires it to broadcast 408 hours of “high quality” news programming a year.
3. Despite the growth in online viewing, driven by tablets and and smartphones, the UK’s TV market can still be a lucrative place to be.
People tend to mess around with smartphones while they are watching TV rather then turn it off completely, with 53% of UK adults admitting to multitasking while watching the box.
Audience and commercial interest in TV remains high, with total TV advertising remaining at around £3.5 billion in 2012, only a slight drop since the recession of 2008/9.
Channel 5 only receives a fraction of that – £260 million in 2012/11, or four and a half times what ITV makes in ad revenue - but it could be a very effective way for a foreign media giant to get a foothold on a very important and profitable European TV market.
4. But seriously, why would anyone want to buy Channel 5?
Tim Westcott, a TV market analyst at IHS Screen Digest, told BuzzFeed that there would be no business sense in buying an advertising-funded public service broadcaster in the UK to run as a standalone business.
But for a business already making shows here, it makes great sense. “Channel 5 isn’t the market leader in free-to-air but it’s one of the public service broadcasters and it has a fairly high share of viewing and advertising,” he says.
“For Viacom the point of it is adding a lot of eyeballs to its portfolio. Viacom has access to the kind of first-run programming that’s in line with Channel 5’s audience, like Jersey Shore.”
He says the potential stumbling block could be the public service remit that governs 5’s licence - for example, at least 10% of its original programming budget must be spent outside London, to help support media businesses across the country.
But Westcott adds that since Viacom has established production offices in the UK already, it might find those requirements easier to meet than other US media giants.