UK Netflix rival looms as BBC and Discovery eye UKTV breakup

Splitting channels between them would have big impact on Britain’s TV industry

The BBC and the US pay-TV company Discovery are understood to be in the final stages of agreeing a £1bn breakup of the Gold and Dave broadcaster, UKTV, in a deal that will accelerate plans to build a British streaming rival to Netflix.

UKTV, which has a mix of 10 free-to-air and pay-TV channels, is jointly owned by the Eurosport owner Discovery and BBC Studios, the commercial arm of the BBC.

The BBC has long sought to take full control of UKTV - which made more than £90m in profits last year and pays £54m annually for rights to BBC shows ranging from Top Gear to Dad’s Army.

Earlier this year, the BBC explored a buyout after a change of ownership clause in the joint venture contract was triggered by Discovery’s takeover of Scripps, the corporation’s previous partner in UKTV. The BBC, which does not have the financial flexibility to stage a buyout on its own, held talks with ITV and Channel 4, but the 90-day window to make a bid expired in June with no partner on board.

It is understood the BBC and Discovery have all but agreed a deal to instead break up UKTV, which has operated since the early 1990s, splitting the channels between them.

It is not clear how the mix of channels will be divided but those most filled with BBC archive content, such as Drama and Gold, would be obvious candidates to remain with the corporation.

If a final agreement can be reached, a BBC board meeting later in September is thought to be when the plan would need final approval.

In addition, talks between the BBC, Channel 4 and ITV about joining forces to create a British streaming service to combat the increasing power of Netflix and Amazon in the UK have been hampered in part by the uncertainty surrounding UKTV.

Much of the blame for the delay has centred on the BBC splitting the video-on-demand rights to its programmes, with the corporation packaging up different deals for UKTV and others such as Netflix. Earlier this year, Virgin Media took UKTV’s channels off air, accusing the BBC of being a “linear dinosaur in an on-demand world” for holding back and splitting digital rights.

A breakup of UKTV would have major ramifications for Channel 4, which handles the broadcaster’s £250m-per-year TV ad sales contract. Channel 4 stands to lose potentially tens of millions of pounds in revenues, depending on what channels are secured by Discovery, which has its TV ad sales contract with Sky.

Channel 4 and the BBC have been in talks for months about a potential partnership, including video-on-demand rights, which would be able to be hammered out after the fate of UKTV is known. The BBC’s talks with ITV about UKTV are also understood to have stalled in part over issues relating to video-on-demand rights.

The established British broadcasters held similar talks two years ago but in the end only the BBC and ITV managed to hook up to launch a Netflix-style service in the US called Britbox. It was hoped that partners including Channel 4 would come on board for a UK service, but a British launch did not take place.

The BBC, Discovery and UKTV declined to comment.

Meanwhile, Big Brother could return on ITV after the FTSE 100 broadcaster reportedly entered the bidding for the show’s production company, Endemol Shine. The Dutch firm, which also makes The Fall, MasterChef, Black Mirror and Peaky Blinders, is being sold by the private equity house Apollo and Rupert Murdoch’s 21st Century Fox in a £3bn auction.

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Endemol is lossmaking and received a blow last week when Channel 5 said it would axe Big Brother after the current series, almost two decades after the show first appeared on British television.

Other bidders reportedly include All3Media, backed by Liberty Global, which owns a stake in ITV, and Banijay Group, a French production company backed by Vivendi.

At ITV’s half-year results in July, its chief executive Dame Carolyn McCall, who joined from the budget airline easyJet in January and was previously chief executive of the Guardian Media Group, said she wanted the broadcaster to do “more than TV”.

Contributor

Mark Sweney

The GuardianTramp

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