BBC Worldwide chief executive confident of striking a deal following new streamlined proposal

The BBC Worldwide chief executive, John Smith, is confident a deal to form a joint venture with Channel 4 will be signed within weeks following the tabling of a new streamlined proposal that he claims has gained traction with both parties.

Both broadcasters have been locked in at times fraught discussions to thrash out a commercial partnership deal to secure the future of Channel, 4 which claims it faces a funding gap of as much as £150m from 2012.

Smith, who would not elaborate on specific stumbling blocks, said the new proposition would pull in parts of Channel 4′s operation, including ad sales as well as using its strong heritage in genres such as gardening, property and food.

“[I feel we are] weeks away from being able to agree – longer for a legally binding contract – a term sheet [document outlining main points of the deal]. I’d like to think we will do it irrespective of politics. If it makes commercial sense I always believe we should do it.”

Outgoing communications minister Lord Carter had urged a final plan to be submitted for inclusion in last month’s Digital Britain report. The failure to do so left the report calling weakly for further discussions on “the practical and strategic implications of further structural separation”.

“We pitched to Channel 4 our proposal for a UK-only joint venture in November last year,” said Smith. “To be honest it was a bit frustrating [that a deal was not done]. A couple of weeks ago we pitched an amended, smaller proposal taking away the things that were sticking points”.

Following the publication of Digital Britain Luke Johnson, the Channel 4 chairman, reiterated the broadcaster’s desire to join forces with BBC Worldwide as the “preferred means of securing more sustainable funding to support our public service delivery”.

The implications of a smaller deal are unclear, with the BBC warning in its submission to Digital Britain in March that a tie-up with BBC Worldwide would not fulfill the government’s ambition of creating a new public service broadcaster of “real scale”.

The Channel Five chief executive, Dawn Airey, a keen proponent of a tie-up with Channel 4 as an alternative, has warned that any deal that involved the transfer of assets, and which could be interpreted as state aid for Channel 4, would be pounced upon by rival broadcasters also feeling the pinch.

A month before Digital Britain was published, Smith told the House of Lords communications committee that the partnership would include BBC Worldwide’s UK assets, including its 50% stake in the UKTV pay-TV channels business – including Gold and Dave – and its 60% stake in the DVD business 2Entertain. The venture would also include the remaining 50% stake in UKTV held by Virgin Media, which BBC Worldwide is keen to acquire, and the 40% of 2Entertain owned by Woolworths.

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