Artsworld, the digital arts and music channel, is to shut down at the end of the month, blaming media regulation for permitting the launch of rival BBC Four.

Programmes on the channel, which has 100,000 paying subscribers, will stop being transmitted on 31 July, 20 months after it was first launched.

Survival has finally proved impossible

Artsworld statement

A statement from its parent company, Artsworld Channels - which is also likely to close - said it had failed to secure further funding necessary to continue broadcasting.

Highlighting the pressure it faced from BBC Four, Artsworld said the corporation's arts and culture channel was "lavishly funded".

Mr Hambley told the Media Guardian website: "I don't blame the BBC for this. They are just doing what any broadcaster would do and expanding into new areas.

"Where the blame lies is in the lack of regulation of the BBC by the government and the board of governors.

"I think we were forced to operate against BBC Four in an unregulated environment, which has seriously distorted the market."

In the past Mr Hambley has said using public money to start channels that compete with commercial services already on television and radio was "absolutely contrary to good public policy".

Impact

A statement released by Artsworld read: "With the arrival among those channels of BBC Four, lavishly financed by increased licence fees to compete in the same digital sector, survival has finally proved impossible."

But the BBC has denied the launch of its arts channel has had any impact on Artsworld.

A BBC spokeswoman said: "The chief executive of Artsworld assured Greg Dyke a month ago that if Artsworld were to close it had nothing to do with the launch of BBC Four.

"In fact, John Hambley noted at the time that Artsworld had done considerably better this year than last.

"We are sorry to hear about the closure. We feel the channel added value and choice to the multi-channel world."

Artsworld was until recently the only satellite channel devoted to arts and culture and attracted viewers paying about �6 a month each for access.

'Void'

The company said it had "added lustre" to digital television and "played a part in encouraging terrestrial broadcasters to re-examine their commitment to the arts".

It said broadcasters had not and would not "fill the void which Artsworld's closure will leave for its many subscribers".

When it was launched in December 2000 the then Culture Secretary Chris Smith described it as "a momentous event in the cultural life of our country".

The channel offered broadcasts of opera productions, documentaries on art exhibitions and films from directors such as Pasolini, Visconti, Marcel Pagnol.

BBC Four launched in March this year offering arts and culture programming on a launch budget of �35m a year.

On its launch, the channel's director Roly Keating said: "Each evening you might drop in to enjoy the best in contemporary documentary, music, theatre or international cinema."

Expansion

Mr Hambley said BBC Four affected shareholders' views of the "long-term viability of the channel".

The BBC's expansion into so-called niche channels has been criticised by commercial companies.

Plans for BBC Three, currently under review by Culture Secretary Tessa Jowell, have been attacked by Channel 4 and BSkyB because of concerns it would impact on E4 and Sky One.

But a recent report by the Independent Television Commission said the impact of BBC Three would be "manageable".