The chief executive of S4C said has cuts are inevitable but a 40% reduction in funding would be "beyond the pale".
The Welsh-language channel receives £100m a year from the UK government but has been told this level of funding is unsustainable.
The broadcaster has submitted a document to the UK government detailing the effect of cuts of up to 40%.
Arwel Elis Owen said cuts at that level would cause "serious issues" at the channel.
Mr Owen said the document submitted to the UK government asked for nine months so the broadcaster could conduct a "root and branch" review of its operation.
He said: "We recognise things have not been perfect.
"We want the opportunity over the next nine months to conduct this root and branch review so that by next June we will be in a position to offer recommendations and changes in the way that we currently operate, the type of programmes we might do and the type of programme we might commission."
He said that the review would allow the broadcaster to operate a "considerably enhanced and different service to Wales" from 2012 onwards.
He said while he accepted savings had to be made he believed the level of cuts was still up for debate and cuts of 20%, 30%, or 40% was not a given.
But he said the "Process for Renewal" document S4C had submitted to the UK government was simply to show the effect of cuts at every level.
Mr Owen said: "We've done the risk assessment so that if (UK culture secretary Jeremy Hunt) says next Tuesday or Wednesday we're talking about 10%, or 30% or 40% these are the knock-on effects.
"I don't want anybody not to be aware of what the risks are involved with such cuts".
"Certainly the S4C Authority is of the view 40% would take us beyond the pale simply because the S4C Authority is an independent authority set up by law and has a statutory responsibility to do a certain type of programme and a certain amount of programmes.
"If the 40% cut is applied then there are serious issues as to whether or not the S4C Authority can legitimately say that it is fulfilling its obligations."
BBC Wales and S4C have announced that they are to consider collaborating is some areas.
Long term options, including moving both broadcasters into a single media centre, are to be considered.
Mr Owen revealed that the broadcaster was keen on programming with "many many partners" including the BBC, ITV and the independent production companies as well as public bodies including the National Library, Cadw, and museums.
S4C is funded by the UK government's Department for Culture, Media and Sport (DCMS).
Mr Owen would not be drawn on whether it was time for the broadcaster to come under the remit of the Welsh Assembly Government.
He said: "That is a political debate, it's for politicians to decide. It's not an issue for me. The fact of history is that we are controlled by the Department for Culture, Media and Sport from London."
Mr Owen said the loss of the broadcaster's guaranteed funding, protected by law, was a "threat to S4C".
Wales' Heritage Minister Alun Ffred Jones said he was disappointed by the decision to change the channel's funding arrangements and accused the UK government of "jeopardising the good relationship between the Welsh speakers and non Welsh speakers with these cuts".
He said: "This is the only Welsh service we have.
"We need to make sure that the budget - whatever it will be - is sufficient to provide an appropriate service in Welsh."
Mr Jones said that there should be a comprehensive discussion in Wales and beyond to prepare for a sustainable future for the channel.