Examination of Witnesses (Questions 377
- 379)
TUESDAY 20 JUNE 2006
CHANNEL 4
Q377 Chairman: Can I welcome our
next set of witnesses, from Channel 4, Andy Duncan, the Chief
Executive, Anne Bulford, the Finance Director, and Andy Taylor,
the Managing Director of New Media. I will not ask you to go through
the agreement that you have just reached with Pact, since I think
we have heard in some detail about it, but perhaps you could start
off by saying to the Committee what you see as the benefits of
the agreement and what additional revenue you believe can be generated
as a result of the new arrangements?
Mr Duncan: I think the biggest
benefit of the arrangement is that it allows us to get on with
the launch of our video-on-demand service. I think the Committee
is aware of the broad, strategic direction in which Channel 4
is trying to go, in terms of the core channel, developing further
channels, E4, More4, FilmFour, going to "free to air"
very shortly, and the new media platforms is really the third
major area strategically for us to develop onto. That includes
the bid for the DAB spectrum for radio, it includes a lot of our
web-based and mobile-based activities, and video-on-demand is
the other major piece of activity that we want to do. Unquestionably,
the biggest benefit of the deal which has been brokered with Pact
is that we can now get on and make that launch this year and we
believe, hopefully, it will be a very positive development, in
terms of having access to our programmes by audiences. Whether
it brings extra revenue, I think, is much in debate. The jury
is out, I think probably it is fair to say, but typically people
are watching 25, 26 hours of television a week in this country,
depending on what survey you believe; the vast majority of that
is the linear broadcast schedule. My own belief is, over the next
five or 10 years, that level of viewing may well hold up, I think
it is unlikely to increase substantially, and therefore I think
video-on-demand, if it really does take up, rather like PVRs,
we will simply be time-shifting current viewing. My own personal
view is, probably somewhere between a third and a half of TV viewing,
if you jump 10 years from now, might be time-shifted, either by
TVRs or video-on-demand, but the total amount of viewing will
not increase, necessarily. Therefore, the financial revenues and
models that come through in the new world may be needed simply
to replace what will probably be a reduction in the advertising
revenues from traditional linear viewing.
Q378 Chairman: Will all of your content
begin life on your channels and then migrate to video-on-demand?
Mr Duncan: Yes. The way we see
it working is, the vast majority of our programming will start
with the linear schedule, usually on Channel 4, occasionally we
preview something on a digital channel, like E4. We have made
a commitment that all the programming will then appear subsequently
on the PC open access video-on-demand service. There is a capacity
constraint on cable, so there is a limit to how much can go onto
the cable closed-board system, but again we will try to get a
good selection over a period of time. The one thing that we might
do is a marketing preview, on occasion, so we did that, for example,
earlier this year with the IT Crowd, a comedy series, where
we had something like 400,000 downloads ahead of the main series
going out. That sort of sampling-type thing, particularly for
a new show, we think may work but, for the vast majority of programming,
that will come in a windowing arrangement, after the channels
are broadcasting.
Q379 Chairman: In the past you have
said that, because Channel 4 is essentially a publishing house,
you have no in-house production, it puts you at a disadvantage,
in terms of control over rights, compared with, for instance,
the BBC, which has a large in-house production sector. Is that
still going to be the case, do you think, as a result of the new
arrangement, or will this mitigate it?
Mr Duncan: I think we are comfortable
with the deal as it has been struck now. I think at certain points
along the way we were extremely worried that we would be very
vulnerable. The fact that all of our programming comes externally
meant that the risk for us was much greater than it would have
been for the BBC or ITV, for example. I think, with the deal which
has been struck, the major things that we were concerned about
have been kept in place. Obviously, we heard the comments that
Pact made earlier on, but I think genuinely it is a win-win arrangement
that can work for both sides. Time will tell whether we have got
it exactly right and adjustments might be needed, but I think,
broadly, we are reasonably comfortable.
Ms Bulford: I think the key thing
that we wanted to be able to secure was access to new media rights
at the point of commission. The agreement that was reached with
Pact gives us that security, which enables us to get on and launch
the service with the complete range of Channel 4 UK commissioned
programming there, which is something that was very important
to us. We did not simply want to have those which had the most
commercial value cherry-picked out, we wanted the whole range
of our programming there. Also it was very important to us to
secure through a window, or a hold-back period, an appropriate
level of protection for the Channel 4 brand and the investment
that we had put through, which is, of course, much less of an
issue for our colleagues at the BBC and ITV, where 60% to 70%
of their programming is in-house and automatically is with them
and stays with them. I think Andy expressed our position very
well, which is that we are satisfied with the outcome of this
negotiation. It remains our view that being a publisher broadcaster
has huge advantages; we are able to follow the best ideas, commission
the most exciting, innovative programmes that we can find, and
we have a huge commitment to developing the independent sector,
particularly outside of London, and that remains, and that brings
us huge advantages. Over time, the balance of that advantage versus
the disadvantage of being in a market for rights all the time
we have to keep under review, but we are happy with the outcome
of this negotiation at this stage.
|
