Five, which is owned by RTL and United Business Media, paid around £24m for its licence in 2002. The new terms would see it pay an annual cash sum in 2004 of £4.4m, as well as a percentage of qualifying revenue, to be charged at 8%. According to estimates on revenues, this could see Five pay around £12m in 2004.
However, while it will make savings over the next 10 years, if Five accepts the new terms 2003 will prove expensive. This is because the channel must pay a cash sum of £24.6m, as agreed under the previous licence terms, as well as 8% of qualifying revenue between April and December 2003.
The new licence deal means the fee is responsive to market conditions. As it only applies to revenues from analogue advertising and sponsorship, any revenue from digital services is exempt from percentage of qualifying revenue. The annual cash sum, set at £4.4m for 2004, is index linked.
Shareholders in Five, which won its licence in October 1995 and began broadcasting in March 1997, have invested around £500m in the service and have yet to see any return.
The channel has until March 14 to inform the ITC as to whether or not it agrees to the new terms. If Five's board rejects the present offer, there is a further opportunity to apply for licence renewal before December 30.
Sir Robin Biggam, chairman of the ITC, said: "In setting the financial terms, the ITC has looked to ensure that Five can continue to provide a range of services to viewers while providing a fair return to Treasury for the right to broadcast. The terms have been derived from a realistic assessment of the value of the licence in an increasingly competitive market and a number of different scenarios were considered in arriving at these terms."
The ITC looked at Five's projected revenues for the next 10 years in setting the terms.
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