Channel 4 could be merged with the profitable BBC Worldwide to prevent it going bankrupt.

The deal being discussed by regulators and ministers would see the creation of “4 Worldwide” and represent the biggest transfer of intellectual property, including Radio Times and its lucrative BBC DVDs, away from the corporation. It would, however, generate the £100 million a year that Ofcom, the broadcast regulator, says that Channel 4 needs to survive.

The creation of the hybrid broadcaster would represent a huge financial sacrifice for the BBC, but would help Channel 4 to pay for expensive “public service” programmes such as the nightly news fronted by Jon Snow.

Channel 4 would run the business, with the BBC retaining a minority stake, under a plan that “has been gaining traction” during the past few weeks. Both broadcasters are publicly owned, although Channel 4 funds itself through advertising.

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Any merger would have to overcome opposition from within the BBC, which is reluctant to lose control of Worldwide, which made profits of £112.5 million last year. “Worldwide is not some portable cash machine to be delivered to the point of need,” one BBC insider said. But the scheme would avoid a raid on the licence fee to hand cash directly to Channel 4.

BBC Worldwide owns all the corporation’s profit-making businesses, including Top Gear magazine, and sells the rights to popular BBC programmes, such as Strictly Come Dancing, abroad. It draws no money from the £3.4 billion BBC licence fee.

Channel 4, which was set up a quarter of a century ago by the Thatcher Government as an alternative to the BBC and ITV, is still profitable. However, it believes that it risks going under in the next five years because it can no longer generate enough advertising to support the “distinctive” mix of programming – from Big Brother to Dispatches – that it was created to provide. Ofcom estimates that Channel 4 needs between £50 million and £100 million a year to survive for the next decade; Channel 4 says that it requires up to £150 million a year to keep afloat. Last year it made a profit before tax of £1.6 million.

Last night there were signs that the scheme could run up against political opposition. John Whittingdale, MP, chairman of the Culture Media and Sport Select Committee, said: “This is essentially a plan aimed at taking public money surreptiously, because it take profits away from the BBC, and forces the licence fee to go up. But I know Channel 4 is keen on it, because it thinks that it would be difficult for it to justify taking public money directly.”

Today the BBC will present its own plans aimed at heading off the loss of Worldwide, which will include a series of “commercial partnerships” with ITV, Channel 4 and other broadcasters. But those plans are likely to be rejected by Channel 4 as insufficient.

Ofcom needs to make a decision on Channel 4’s future by the middle of next month and will make a public recommendation to ministers. The regulator fears that if Channel 4 were privatised, it would have to ditch news and current affairs, with its schedules dominated by reality and entertainment programmes such as Wife Swap and How to Look Good Naked.

Several options remain under consideration. Yet the advantange of the 4 Worldwide merger would be that it allows Ofcom to dismiss an alternative proposal to hand some of the licence fee directly to Channel 4, leaving it open to the accusation that the public money funds Big Brother or Gordon Ramsay’s programes.

The tie-up would also have to overcome any state aid concerns raised by the European Commission, which has already objected to a proposed payment of £14 million of licence-fee money to help Channel 4 to pay for the costs of digital switchover.

The stakes remain high for all concerned, with Channel 4 battling for its surival, and Ofcom under pressure to present a plausible plan to be inserted into the Government’s review of all communications policy.

Channel 4 has a remit to innovate and cater for minorities, but the emergence of digital television has sent its audience share falling from 10 per cent in 2001 to 8.2 per cent this year.

The loss of viewers puts pressure on advertising income, which has also been hit hard by the recession and is expected to have fallen by 5 to 6 per cent this year.

BBC Worldwide

Turnover £916 million

Profits £112.5 million

Founded Dates from the creation in 1923 of Radio Times, which was formed when newspapers refused to carry the times of radio programmes

Ownership Commercial division of the BBC

Owns Radio Times, Lonely Planet, BBC America and 28 other international channels, Dancing with the Stars (US version of Strictly Come Dancing), bbc.com, Planet Earth DVDs

Channel 4

Turnover £944.9 million

Profits £1.6 million

Founded 1982, to break the BBC-ITV duopoly, with remit to transmit distinctive, innovative programmes, catering for minority tastes. Its chief executive was Sir Jeremy Isaacs. When Michael Grade took over in 1987, Isaacs threatened to throttle him if he failed to respect the channel’s remit.

Ownership Public corporation, state-owned.

Broadcasts Big Brother, C4 News, Hollyoaks, Dispatches

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