For both broadcasters, the appeal of a merger is clear. It offers economies of scale as well as a stronger negotiating position with advertisers.
Together, Channel 4 and Sky would account for a 35% share of TV viewers, approaching that of ITV.
The advantage to advertisers is less clear, however. Media agencies warn that the more power handed over to the broadcasters, the worse the deal for their clients.
Richard Oliver, managing partner investment at Universal McCann, says: 'I would be sceptical about consolidation. The channels could cut costs, yet have the power to charge more. There is no way they would do the former without the latter.'
Agencies also argue that advertisers could fall victim to conditional selling, with prized channels such as Sky1, Sky Sports or Channel 4 being used to drive ad sales across less successful channels in the portfolio.
Some advertisers, however, insist a strong commercial TV market is vital to them. It is a view echoed by Ian Armstrong, Honda's manager of customer communications. 'If this [consolidation] can make broadcasters more efficient, then advertisers will welcome it,' he says.
Nonetheless, the broadcasters also fear the dominance of ITV if contracts rights renewal (CRR), which regulates the channel's negotiations with its advertisers, is scrapped.
'It's important not to repeat history,' adds Armstrong. 'CRR was introduced to protect advertisers from ITV's dominance in the first place.'
Other mergers have been discussed recently, with Five and ITV also weighing up the potential of joining forces with their rivals.
However, Oliver argues that a Channel 4 tie-up with Five would 'dilute' its brand.
A Channel 4/Sky merger is more likely, he says, as the two could offer a diverse range of channels to advertisers.
Merged ad sales teams would offer advertisers yet another advantage, enabling brands to develop cost-effective, integrated cross-channel campaigns.
'Advertisers can specify exactly what they want,' explains Andy Barnes, sales director at Channel 4.
With a 15% year-on-year decline in TV revenue expected in 2009, such consolidation may be an inevitable consequence of the pressure on the TV ad market. Broadcasters warn that quality programming is already at risk.
Ad sales teams, then, are the only place left to target savings. For advertisers, though, such a merger could be an unhealthy concentration of the market, hitting them where it hurts most - the wallet.
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