Sky has told Channel 5 it is prepared to terminate its contract to produce news for the terrestrial channel two years early.

C5 has put its contract to produce Five News and Live from Studio Five out to tender, despite having two years left to run on its existing seven-year deal with Sky.

The move is the latest in a string of cost-cutting measures Northern & Shell chief executive Richard Desmond has introduced following his acquisition of C5 earlier this year.

John Ryley, head of Sky News told staff in an internal email that Sky is prepared to end the deal but underlined no decision had yet been reached.

Dear colleagues,

Many of you will be aware of the speculation about the future of Sky’s contract to produce news for Channel Five.

It is now five years since Sky News won the contract to supply Five with its news service. Over that period, we have been rightly extremely proud of the Five news service, which has won a string of awards and twice been shortlisted for RTS News Programme of the Year.

However, since the recent change in its ownership, it has become clear that Five’s priorities have changed and that it intends to focus increasingly on entertainment news. Channel Five recently informed Sky that they are already putting out to tender the contract to supply news after the current contract with Sky ends in December 2012 - yet the contract still has more than two years to run.

In light of these developments, Sky has told Channel Five that it is prepared to reach an agreement to end the contract early. At present, it is too early to say what the outcome of these discussions will be. I will keep you informed of developments and we will discuss what this means for employees in due course.

I recognise that this will come as great shock to many of you. I want to thank every one of you for the hard work and dedication that goes into making Five News and Live from Studio Five widely admired, distinctive and successful programmes, and to ask you all to support each other at an uncertain time.

John

He went on to praise Sky staff for the quality of the “widely admired, distinctive and successful” shows they have produced, which included being shortlisted twice for RTS News Programme of the Year.   

Northern & Shell confirmed it has put its news contract out to tender but said Sky could retain the business.

A C5 spokesman said: “Sky and other suppliers are invited to come back with proposals and we will look at each in turn. In the meantime, Sky will continue to be our news supplier until the deal expires in 2012.”

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