Examination of Witnesses (Questions 240-256)
CHANNEL 4, S4C
6 DECEMBER 2005
Q240 Chairman: You suggest that you
might go on to Freesat in time and after you had had a look at
it, but actually will it not be a major disadvantage to Freesat
if it does not offer Channel 4?
Mr Duncan: If there was never
any prospect of it ever being on there, yes, it would be. I think
there are two issues in that there is the issue of Channel 4 itself,
the core channel, and the issue of the digital channels. On the
digital channels, both More4 and E4, it is simply an issue for
when the contract comes up in 2007-08 and for core Channel 4 there
is some question, which we are looking into at the moment, that
legally we might be obliged to offer it anyway via a Freesat platform,
so we are looking into that detail of our contract with Sky. I
think probably the material issue is, if Freesat does get launched,
whether we are ever able to get some sort of perspective of what
will happen in due course, so clearly if you are a consumer and
you know in due course that certain channels might be going to
join, that is a different perspective from knowing it will never
join, but it is something we are working through at the moment
and we are, I think, shortly due to have a meeting with the BBC
and ITV to understand what they have got to do with the project.
Q241 Alan Keen: One of the reasons
for our embarking on this inquiry was the problem of the actual
date of switchover. You have mentioned already the people with
a third set and I presume you agree with me, that the people with
a third set, all they need is a firm, clear announcement that
that third set is not going to work if they do not do something
and then they will just spend the money and convert it. Would
you like to describe the people who will still be left there reluctantly,
hopefully not right on the day, but six months before the date
of switchover? Could you describe those sorts of people and what
we should do about those? I know you do not want to broadcast
adverts to help them on Channel 4, for instance, but—
Mr Duncan: Sorry, just to clarify
that, are you saying what you think Channel 4 should do or are
you saying—
Q242 Alan Keen: No, it is just a
very general question. What do we need to do about the people
who, if we do not do something, will still be sitting there and
their sets will not work on the switchover date?
Mr Rasul: If I can perhaps come
in there, the marketing plan, the information plan that Digital
UK is working on at present works on two years out on a regional
basis, so although there is an overall full UK marketing plan
in place, as each region comes up two years out until switchover,
it becomes concentrated at the regional level and I think that
is the time at which the message needs to be got across, that
when switchover arrives, all of the analogue devices will actually
cease to work unless you have a converter, and that is the message
that we need to build in. The other aspect is obviously the fact
that the transmission service needs to be able actually to be
received correctly on those portable sets and that is another
issue which is now being addressed with the different ends for
receivers and outlets for reception which I believe in the next
year or two when switchover is approaching will be available for
products, so those two factors, public awareness and the actual
kits which will actually make the portable sets.[2]
Ms Jones: But then there will
undoubtedly be some point at which some public intervention may
be required in order to facilitate that more for certain consumers
or citizens.
Mr Scott: One of the advantages,
I think, of DTT is the ability to get the signal through a set-top
aerial, so there will be no need actually to cable around the
house to get it to a dish or to a rooftop aerial. I think you
will find that for the second, third and fourth sets in homes,
people will decide how much they value them and I am certain that
a lot of existing sets can be moved out into secondary rooms and
are hardly ever used and they are just sitting around, but people
who do value them and are using them will be able to buy a box
and get them to work.
Q243 Alan Keen: What about older
people?
Mr Scott: Certainly I think that
some of the work which the DCMS is doing at the moment in thinking
through the targeted assistance which will be necessary, there
is an interesting trial going on at the moment and in the next
few months the Government is going to come forward with a scheme
where I think something like six million homes maybe could be
helped.
Q244 Alan Keen: There is a very firm
divide, is there not, between those people who will use, as a
result of the commercial advertising, all the wonderful advantages
of digital television, but there is a big difference, a big divide,
between those who will be influenced by that and those who will
not be influenced by it and will have to be helped? Should there
be plans for aiming at these people, and nobody has mentioned
old people and that is what I was getting at, so are there plans
to advertise to younger people who are connected with older people?
You must have seen the evidence we have got from the voluntary
sector that there needs to be a tremendous amount of effort going
into that. Do you feel that there are plans really to do this
yet or is it still in the melting pot?
Mr Scott: Certainly Digital UK,
in its communications, is conscious of this and has been setting
up helplines and call centres which will particularly target groups
as well.
Mr Duncan: I think the general
planning is very good at this stage. I think the first test area
is going to reveal a lot, to be honest with you, and I think there
will be a lot of learning from that which will be able to be taken
forward. I certainly think that our view is that the most important
role we can play, and it will not completely address the issue
you are raising, but the most important role we can play is to
continue to come up with the imaginative and interesting services
and programmes that are an incentive to people to go positively
for digital. There will be that issue you mention, but I think
Digital UK are planning sensibly for it.
Q245 Chairman: Do you see it as your
role also to carry some public services announcements to advise
people to prepare for this great event?
Mr Duncan: I think we have some
responsibility to do that, under our licence. I think we are concerned
that not too onerous a responsibility is placed on us. To be very
specific I think the best thing we can do, to repeat the point,
is to promote services like More4 or exciting new digital channels
and programmes as a positive incentive to go. I think there are
some logistical issues about being able to do things regionally
for us, so putting trails out that are not particularly targeted
is, practically, quite inefficient. I think the general plan that
Digital UK have a big chunk of money, a couple of hundred million
pounds, some of that clearly can be spent on television, commercial
television as well as, potentially, posters and other forms of
media seems sensible as well. So there will be a role, perhaps
a limited role, but I think it is quite right that the brunt of
the responsibility will be borne by the BBC where they have the
space to do that without impinging on their commercial model.
Mr Scott: Under our digital licences
from Ofcom we do have some responsibilities for communication.
Q246 Chairman: But you were implying,
Andy, that Digital UK should take, pay for advertising spots on
Channel 4?
Mr Duncan: Yes, correct.
Q247 Rosemary McKenna: You both have
a different relationship with the government in terms of your
requirement and therefore obviously you are in discussions with
them as to how best to continue to provide the service that is
required of you. Take it that this is your opportunity to say
publicly what you would like the government to do between now
and switch-off to enable you to continue not just to provide the
service you are providing, but also to improve on the service.
Mr Duncan: It is very similar
to what I said earlier on. We would like the transmission build-up
costs funded by the BBC licence fee, which is currently planned
but we would like that to definitely happen; and we would like
that to be agreed by the White Paper and the subsequent licence
fee settlement so that we know for certain. I think one or two
people have suggested that it could be kept as a possibility should
it be needed a few years down the line, but frankly that would
be a bit of a waste of time; I think we need the certainty to
plan, which, as far as we can see, most other broadcasters now
have. We would absolutely like indirect forms of help, most noticeably
capacity to be put in place, and we would like the possibility
of public funding to be kept open for later. I think the key issue
for us is one of timing. We think it is imperative that these
decisions are taken in the next six to 12 months, perhaps, so
that you have the BBC Charter being agreed for 10 years, a licence
fee settlement being agreed for 10 years, a switchover programme
that will roll through, really kicking in in 2007, 2008 right
through to 2012. We have to plan our business some years ahead,
commissioning cycles and distribution deals and so on, and because
we are currently enjoying a lot of short-term success I think
people are making a very elementary mistake of thinking that the
channel is doing fine in the short-term and what is the problem?
The message we are trying to get to the outside world—albeit
we are sometimes accused of crying wolf, but I firmly believe
that is not the case—is that now is the time to underpin
public service broadcasting as a system and now is the time to
address the S4C issue, to address the Channel 4 issue, and there
are remaining issues regarding the other public service broadcasters
as well. To repeat my earlier point, clear government policy on
the BBC, clear government policy on switchover, we would like
to see decisions and clear things put in place in the next six
to 12 months to underpin the whole system.
Ms Jones: The costs of rollout
need to be borne either directly or indirectly: that is to say,
that either we are given funding in order to facilitate that,
or that it is paid for from elsewhere, either directly from government
or through the BBC. It is an invitation which I welcome to put
a bid in, if you like, but because we have so many unknowns and
we are pressing quite hard to get some firm figures from the BBC
on costs, et cetera, it is actually quite difficult to see how
big the gap is and therefore how much assistance we may need.
Q248 Rosemary McKenna: But as soon
as possible, in line with what Andy has just said?
Ms Jones: Yes, absolutely.
Q249 Rosemary McKenna: So that you
can plan ahead to get the solution as quickly as possible.
Ms Jones: Yes, because, as Arshad
was mentioning earlier, subject to going in 2009 the whole campaign
will start in 2007 and therefore the way in which we are
commissioning content, our interactive strategies will be in place.
We are putting them in place as of now so the timescale is very
tight and very pressing.
Q250 Chairman: I understand that
you do not know the details of, for instance, the transmission
costs in future, but the issue we referred to earlier, the fact
that you are going to lose a lot of money from no longer being
able to benefit from the sale of Channel 4 advertising time, that
is a known, and how do you think that gap should be filled?
Ms Jones: We have some commercial
freedoms which we have exploited in the past and plan to do so
in the future. For example, we were part of the multiplex operation
known as SDN and we have receipts from the sale, which we are
planning to invest in order to part fund the gap. So that is at
our disposal and that was part of the planning for the decline
in airtime at least. We are also very keen to retain our guaranteed
capacity, which we currently exploit for commercial purposes,
over and above the two public services that we provide currently,
S4C Digital and S4C2.
Q251 Adam Price: Presumably because
you take a significant share of your programming from the BBC
you may not be in as good a position to exploit any future flexibility
with product placement or programme sponsorship as some of the
other commercial broadcasters may be?
Ms Jones: Yes, though we actually
do take commercial breaks during BBC programming and some BBC
programming on S4C is also sponsored, which is probably a unique
position in UK broadcasting.
Q252 Mr Yeo: Just going back to Channel
4, have you ever contemplated Pay Per View as a way of supplementing
your income?
Mr Duncan: Yes, we model various
options all the time. Not specifically Pay Per View but clearly
subscription channels is something that we have done both in terms
of E4 and Film Four. The short answer to our experience so far
is that we cannot make enough money. What tends to happen is that
the majority of the money in Pay is made by the platform owners
or the rights holders, whether they might be Hollywood studios
or sports rights holders and so on, and for us, bluntly, they
lost huge amounts of money. What we are finding is that despite
the uncertainties about the advertising model in the medium to
longer term, things like taking E4 free are substantially more
attractive for us in terms of the advertising money we can make.
So I think for linear pay channels Pay Per View is quite difficult
for us, not being somebody that owns content. I think what we
are looking at very hard, which is of more interest, is the possibility
of getting new pay revenues on some of the new media platforms.
So we are currently in discussions around on demand, for example,
on broadband, the possibility of things on mobile channels. One
can see that there might be interesting potential new revenue
streams from consumers, but our big problem with that is that
again we do not technically own rights, so the current rights
review with Ofcom, for example, is a very profound review as far
as Channel 4 is concerned, and what we are able to negotiate with
the Hollywood studios is largely dependent on them believing that
partnering with us and our brand and our marketing power would
be a more attractive model than simply going direct to the phone
company, or whoever it might be, or they might miss us out altogether.
I think the short answer is that the typical pay linear channels
are quite tough for us, new media platforms possibly very interesting
depending heavily on the rights outcome from the Ofcom review.
Q253 Mr Yeo: I see the point about
the new media, but given that with digital more households will
have the facility to pay a subscription channel, for example,
you do not think that will alter the financial balance?
Mr Duncan: Not massively, no,
partly for the reasons I have said, and I think also because you
have two other additional factors. One is the presence of the
BBC, which I think is a very positive intervention but the truth
is that it has a huge impact on the market, and they obviously
as a starting point tend to offer their services for free. Secondly,
I do think back to our core remit, that we are a public corporation,
public remit happening to rely on money commercially to deliver
that end, but ultimately we have a responsibility as well to make
our services available to as many people as possible, and I would
hate the day where you could only get Dispatches, current
affairs, which we offer 30-odd episodes of a year, if you are
prepared to pay for it. I think the fact we offer that to everyone
is a really important part of what we are about.
Q254 Helen Southworth: What evaluation
have you made of the opportunities that digital is going to give
to your relationship with development in the creative industries?
Mr Duncan: Do you mean specifically
things like the independent production sector?
Q255 Helen Southworth: I suppose
new talents.
Mr Duncan: I think we are doing
a lot of different activity in terms of new talent development.
We do not talk widely about it, but both in our annual report—and
we have just produced a year book—we have listed the sorts
of schemes that Channel 4 is currently involved in and we do a
phenomenal amount, and probably after the BBC by some distance
we do the most in terms of talent development schemes, whether
that is film related, theatre related, animation related, new
director related and so on, and we have certain schemes around
ethnic diversity—a whole range of things. We are trying
very hard and doing a lot to take those on to new media platforms
in terms of digital. Probably the best example this year was the
launch of our 4 Documentaries service, which we think is a world
first. Basically, it is a really good, new broadband based documentary
site where any film maker can upload a four-minute documentary,
they get advice on how to light and make their film, they get
advice on commercial affairs issues, they get advice on legal
issues. Some of the best of them may well get selected to go on
and be shown on some of our channels, and we are hoping to find
a great new documentary maker to actually commission to make films
for us. Also there will be hopefully a library of some of the
best documentaries ever made on there in time as well. So that
is a very good example of taking that talent and training tradition
that is deeply ingrained at Channel 4 but using new technology
as a way to drive it through, and it is linked to a big investment
to support the British Documentary Foundation, costing us over
£1 million, and the commitment to documentaries for More4
as well. So that is quite a good example, and going forward I
would really like us to do more things like that. They tend to
have a cost to them—they do not tend to bring back money—but
I do think that Channel 4 going forward is very much central to
the vision that we are delivering our remit through the core channel,
through multichannel and through new platforms. Back to the earlier
point, if we got a sustainable business model we could carry on
doing that. One final point, given that the BBC operates across
multichannel and multi platform, plurality means other people
like us have to also be similarly diverse.
Q256 Helen Southworth: Have you made
any evaluation of the kind of economic impact that that is having
on the creative industries?
Mr Duncan: Yes, but it is somewhat
superficial. We do pump literally well over £10 million a
year into a combination of training and talent development schemes
and £10 million a year into the British film industry as
well. So in terms of pure money that is about £20 million.
There is also, to be honest, the 100s of millions that we pump
into programming, all of which is produced externally, all of
which therefore goes into the independent sector, which I think
is by some distance the biggest impact we have in terms of creating
economy—30% of that is spent outside London. So I think
we are a very important part of contributing to a wider creative
economy but, to be honest, we probably could do more analysis
and more work on it. I do not know if there is anything David
would want to add?
Mr Scott: I think from time to
time we have tried to look at the overall economic effect of that
spending power, but I think there are a number of answers which
come out of that and it is probably not Channel 4's job to do
that analysis.
Ms Jones: S4C has adopted the
promotion of the creative industries in Wales as part of its corporate
aims, and as part of our programme strategy leading towards digital
we have placed emphasis on creating excellence and have invested
£1 million in five companies to create a sustainable framework
for talent development, including new entrants, because I think
it is very important that when people enter our industry there
is some sense of continuity after the initial period of training,
and that they are able to have the benefit of being surrounded
by more experienced people in a very productive environment. We
also, like Channel 4, have major initiatives in training in Wales
and also in England through the NFTS and Skillset. We have a UK,
if not global reputation in the field of animation and we continue
to make great investments in that particular genre as well.
Chairman: Can I thank you all very much
indeed.
2 Note by Witness: That is an issue which is
now being addressed with better front ends for receivers and diversity
reception, which I believe in the next year or two, when switchover
approaches, will be available in products. So those two factors,
public awareness and the kit which will allow portable sets to
receive better, will, I think, be the mechanism to get that objective
achieved. Back
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