Channel 4 chief executive Andy Duncan has told MPs that he expects to have an agreement on a partnership with BBC Worldwide signed within weeks. 

Duncan told the culture, media and sport committee that both the channel and BBC Worldwide, the commercial arm of the BBC, were enthusiastic about forming a "headline" understanding of how the deal would work. 

BBC Worldwide is the commercial arm of the BBC that exploits the corporation's content through magazines such as Top Gear and the Radio Times and sells programme formats such as Strictly Come Dancing Abroad.

Channel 4, which is publicly owned but funded by advertising, has said it could be running an annual loss of £150 million a year by 2012.

The deal has the approval of the UK government with the media regulator having said in a report in January that Channel 4 could form partnerships with BBC Worldwide as it battles falling advertising revenues and structural changes in the industry.

Communications minister Lord Carter's interim Digital Britain report released earlier in January 2009 suggested that a new, enlarged public service broadcaster could be created, with Channel 4 at its heart, as a means of providing public service content beyond the BBC. (See: British government favours Channel 4's merger with BBC)

However, Guardian Media Group (GMG) has vociferously opposed the British government proposals for the joint venture between Channel 4 and BBC Worldwide, on the grounds that it would damage commercial media groups.

In its response to Carter's report, GMG called any tie-up between BBC Worldwide and Channel 4 "an inadequate solution for a converging media environment" that is unlikely to "have negative effects on the commercial sector - thereby undermining the potential for a genuinely plural public service content market." (See: Guardian Media Group comes out strongly against Channel 4 - BBC Worldwide merger)

The devil is in the detail
In the longer term, Channel 4 CEO Duncan said there may be more detail "which would take longer to sort out". Last week, Channel 4 said that it would be cutting its programming budget by at least £60 million in the next year as it battled to cope with rapidly falling revenues. The broadcaster has said it expects income to fall by 18 per cent in the first half of 2009, representing "the thick end of £100 million". 

Duncan said he hoped that a memorandum of understanding with the corporation's commercial arm would be signed before the government publishes its final Digital Britain report on 16 June.

Asked if he was concerned that the move could make the BBC even more dominant, Duncan said that areas of synergy would not create more dominance and one aspect being looked at was ploughing more money back into Britain from the rest of the world for British content. 

Duncan said that the UKTV pay-TV channels – which include Dave, Watch and Gold – could be part of a deal. UKTV is a 50:50 joint venture between BBC Worldwide and Virgin Media. "They could have a role to play, but it [an agreement] doesn't depend on it," he said.

A partnership with the BBC would help Channel 4 plug what it claims will be a £150m annual funding gap by 2012, although the commercial broadcaster has pushed for a full merger with BBC Worldwide. 

Channel Five is also lobbying for a tie-up with Channel 4, but Duncan said, "Five is a very troubled business ... although there could be some synergies with Five, we feel they would be more than offset by the scale of losses." 

After the committee meeting, Duncan told journalists: "We are very focused on the BBC partnership. Any partnership would be substantial in scale. That is where the focus is. I think BBC Worldwide are very positive, although there is some way to go." 

Channel 4 chairman Luke Johnson said he did not think there was a crisis in Channel 4's finances. He said the channel was under pressure "but we don't feel there's a crisis. We think we have challenges, we are under pressure to maintain investment in our output". 

Johnson, who was also appearing before the committee, said that the broadcaster would be able to carry on by itself without a tie-up with the BBC or another media organisation. But he added that the gradual decline in revenues would amount to "death by a thousand cuts".

"We will continue whatever and we will manage as best we can with self-help but over time the damage would become material," he said.

Duncan added, "We will do the best we can – we are not in danger of going bust – but there will be real damage to our creative output. Now is the moment for action."

When asked if he still expected to be in his job this time next year, Duncan replied, "Absolutely. We have made some very good progress. There is still some way to go and I would very much like to finish that job off."

Johnson, whose term as chairman ends in January next year, said he expected the process to find his successor to begin by late summer or early September.

Interestingly, the country's anti-monopoly watchdog had recently disallowed Project Kangaroo - a BBC Worldwide, ITV and Channel 4 joint initiative to provide a single destination for video on demand in the UK. (See: UK anti-monopoly body stops BBC - ITV - Channel 4 online joint venture Project Kangaroo)