Financial risk of allowing in-house production set out to Lords committee by John McVay

Pact has forecast that the independent sector is at risk of losing £3.7bn over the next 10 years if the government goes ahead with privatising Channel 4.

John McVay Photo 1

John McVay

Giving evidence yesterday (7 September) to the House of Lords Communications and Digital Committee, Pact chief exec John McVay gave a stark warning about the transfer of value to a private owner if it were allowed to set up in-house production at C4.

Referencing data from early modelling conducted by the trade body, McVay said the indie sector could lose £80-£100m in the first year of a sale.

“That is a material loss to private companies and a direct transfer of value from hundreds of small SMEs and creative entrepreneurs to private shareholders,” McVay told the committee.

Pact’s calculations include the reduction in income from international sales generated by indies’ C4 shows, as well as the value of the commissions themselves.

McVay said Pact will publish its complete findings over the coming weeks.

At the Edinburgh TV Festival in August, culture minister John Whittingdale confirmed that any buyer of C4 would be freed up to introduce in-house production.

“C4 in its current model is the optimum broadcaster for independent producers in the world,” McVay said. “In its existing framework indies have an optimum market of 100%.”

“Pact doesn’t see any upside to privatisation and is particularly concerned about the impact of allowing in-house as it will be detrimental to British businesses,” McVay said.

Small indie boost

Earlier in the day, McVay also poured cold water on Whittingdale’s suggestion that a privatised C4 could be obliged to commission a certain number of shows from indies with turnover under a certain level. 

Speaking at the launch of the Pact census, he claimed that such proposals were unworkable.

“Imagine I’m a small indie about to get a big commission from C4 – but also have an idea in with the BBC,” he said. “If I win the BBC order, will I suddenly become non-qualifying and no longer get my show away with C4?” 

McVay said the structure “punished success” and would also prove easy for indies to “game” by creating multiple shell companies.

He suggested “a cap on the scale of in-house production”, adding: “I don’t see how [Whittingdale’s idea] works fairly or practically because surely we want small businesses to grow and succeed and employ more people.”