Exclusive-Britain's BBC, Channel 4 discuss broader tie-up to cut costs, sources say

By Amy-Jo Crowley

LONDON, Oct 8 (Reuters) - Britain's BBC and Channel 4 have held preliminary talks with the government about a broader tie-up of some operations, two people with direct knowledge of the discussions said, in a potential shake-up of the country's public broadcasters.

One option under discussion would combine Channel 4's advertising operations, channels including E4 and Film4, and its video-on-demand services, with UKTV, a commercial subsidiary of the BBC, the people told Reuters. 

A merged entity could be equally owned by the BBC and Channel 4 and represent a broader tie-up than the one previously indicated by BBC Director General Matt Brittin to include Channel 4 content in the BBC's iPlayer, the people said.

The talks could intensify next year depending on what progress the BBC makes towards a new funding deal ​with the government, one of the people said, adding that the assets included in the potential joint venture could be expanded. 

The joint venture under consideration would not include the Channel 4 flagship broadcast channel, which could benefit from fees from the joint venture, the people said. 

The move would be aimed at cutting costs and helping secure the future of the public broadcasters as linear viewing declines and larger streaming companies account for more of global advertising spend, the people said. 

A BBC spokesperson declined to comment.

"But as we've said before we believe increased collaboration between all (public service broadcasters) is vital to ensure the industry thrives in a highly competitive global market place," the BBC spokesperson said.

A Channel 4 spokesperson said: "We won't be commenting on any speculation but we welcome and support greater collaboration between Public Service Media and strongly believe working together can strengthen impact, innovation and sustainability in UK broadcasting. Channel 4 and the BBC already have a successful commercial relationship, involving ad sales for UKTV and the carriage of U on 4Streaming."

Claire Enders, founder and chief executive of Enders Analysis, said the idea of a tie-up between BBC Studios and Channel 4 was "a perennial that flowered every so often".

Although BBC Studios could end up as the ultimate home for Channel 4, Priya Dogra, who became Channel 4 CEO in March, had already taken steps to improve its financial footing, such as winning Skydance-owned Channel 5's advertising sales business, Enders said.

"We're very far from a situation where Channel 4 is a failing firm," Enders added.

DISCUSSING A DEEPER TIE-UP 

Channel 4 is government-owned but funded by advertisements, while the publicly owned BBC is mainly funded by a licence paid by TV-watching households. 

The talks involve UK Government Investments (UKGI), the entity responsible for managing publicly owned assets such as Channel 4, the people said. 

The plans could help Channel 4 and the BBC save costs, bringing some operations under one management and gaining a bigger slice of a consolidating market, the people said.

UKGI declined to comment. 

If it went ahead, such a move would represent one of the biggest shake-ups for the broadcasters since Britain scrapped plans to sell Channel 4 in 2023. 

Former Prime Minister Boris Johnson's government had announced the sale in 2022, triggering a backlash from lawmakers and the broadcasting industry.  

The two broadcasters had already been discussing partnerships around content sharing, such as a potential plan to carry Channel 4 content on iPlayer. 

Channel 4 already carries UKTV content such as "The Office" and "Red Dwarf" on its streaming platform and manages ad sales for UKTV under a long-standing agreement. 

While it has ruled out merging with the BBC, it is ​open to sharing content on the iPlayer streaming service, Channel 4's CEO Priya Dogra said at an industry event last month. 

Channel 4 and the BBC are pursuing cost-cutting, including through job reductions. The BBC said in June it would cut 550 jobs as part of plans under Brittin to save £500 million ($661 million) over the next three years. 

Channel 4, which cut its pre-tax deficit to £10 million in 2025, said last month it would cut about 340 jobs, representing more than a quarter of its workforce, in one of the biggest rounds of redundancies in its 43-year history.

($1 = 0.7569 pounds)  

(Reporting by Amy-Jo Crowley in London. Additional reporting by Paul Sandle. Editing by Anousha Sakoui and Alexander Smith)