Examination of Witnesses (Questions 400
- 411)
TUESDAY 20 JUNE 2006
CHANNEL 4
Q400 Mr Sanders: The second part
is we keep hearing about this shift with advertising revenue going
to the internet. Studies must have been done on the effectiveness
of that advertising. I just get the impression that going on to
the internet is more about reach, putting a product in front of
people, rather than sales; it seems to me that the tradition of
the television advert is to encourage people to buy a product,
although obviously there are people there who want to identify
with a product. Is there a difference in where advertisers are
coming from?
Mr Duncan: There are lots of points
of view on this. If you look structurally at how internet advertising
breaks down, roughly half is search, paid-for search, something
like 20% is classified advertising and only about 30% is so-called
display advertising. Certainly one of the points the television
industry would make is that television advertising remains by
some distance the best brand-building mechanism so, if you are
really trying to build a brand, that is really what TV advertising
is brilliant at and you can get a high impact and get to big audiences.
The internet is more akin, in some ways, to direct marketing,
or sales promotion, where you get more of a direct response mechanism.
You used to get, you still do, lots of envelopes delivered to
your doormat, well now you can do it electronically. I do think,
in that confusion, some clients are taking decisions to take money
out of brand-building television advertising and putting it into
the internet, and the jury is still out as to how effective the
internet is on that side of things. My own experience is that
it is very effective at things like pay-for search and micro-targeted
detailed information, but I do not particularly get what I call
brand-building messages from the internet that I pay much attention
to; but that is a sample of one.
Q401 Helen Southworth: We have had
quite a bit of evidence that was not very happy with the BBC's
Creative Future initiative, the digital land-grab concept. How
are you going to ensure that your own new media initiatives, which
build on your own privileged public service position, do not distort
competition?
Mr Duncan: To start with the BBC,
if you have been hearing concerns, we would share those concerns.
I think it is entirely appropriate that the BBC does things in
new media; they have done a lot of very innovative new things.
I think our concerns are that, we have coined the phrase, some
of their creative futures already are the creative present. There
is a BBC philosophy that they have got to do everything all the
time, everywhere, which would worry us, and I think it is incredibly
important that any new service, even before the formal new Charter
comes in, goes through a public value test and a market impact
test, and it is essential. That should not be just for big, high
profile services, like the iPlayer, which I think the BBC have
now said they will do, but there is quite a lot of new services
and new activities that are going up slightly under the radar.
We are not suggesting that a new website, for example, should
go through that sort of onerous process. To give you two examples,
the BBC are planning to extend their education activities, they
do a lot for pre-school and younger teenagers, they are looking
to extend their education up to older teenagers, which directly
overlaps with our public service provision of education, where
we particularly prioritise 14-19-year-olds. That is a good example;
if the BBC want to do that, again, that should be treated as a
new service. There has also been talk of a new BBC teen brand
on the web, which again is effectively a new service. Of course
they need to do things, but they should be properly assessed in
a public value test and market impact test, and I do not think
they should do everything, is the truth. They have got finite
resources, the licence fee debate is a live one at the moment,
but they have got to pick and choose priorities and I think, in
particular, they should not feel they have to do things which
other people, including ourselves, are doing. I think, in terms
of our activities, the danger of us distorting the market is nil;
quite the opposite. Our challenge is can we get into this big
new space where you have got Google, Yahoo!, Sky, BT, BBC; our
real challenge is can we get out there and make an impact. We
need to get our brand out there, we need to get to our audiences
out there, and I am passionately of the view that we need to deliver
public service plurality on a range of channels and platforms
where the audiences are going to be. I would have the opposite
worry, can we make a big enough impact, but we are not going to
distort the market.
Mr Taylor: I do agree with that.
We will replicate the Channel 4 model in new media, in that we
will fulfil our remit through commercial means, so if we do not
benefit from any gifted spectrum online and we are competing with
other new media players I think the chance of us distorting the
market is really nil.
Q402 Helen Southworth: Can I ask
you about the state of the creative industry in the UK. You have
got a responsibility to commission outside the M25, which you
are taking extremely seriously, I think, is it, 30%?
Mr Duncan: Yes.
Q403 Helen Southworth: What do you
think the creative skills needs are outside the M25, what do you
think the creative skills opportunities are for the UK creative,
new media industry?
Mr Duncan: I think Channel 4 has
an extremely good track record of its contribution to the creative
economy. We actually invest a huge amount of money into original
programming and, as you say, over 30% of that is invested regionally.
This year we are spending something like £625 million in
total, across all the channels and on new media activities, and
the vast bulk of that is original commission programming. We have
always hit our regional target; we have actually invested heavily
in a Creative Cities strategy, which is Birmingham, Bristol, Newcastle,
Leeds and Manchester, and so on, some of our best programmes,
Shameless is a good example, Hollyoaks daily comes
up, on Mersey TV, and so on, all three media now. I think it is
something we have always played a key role in, and a lot of our
training activities and wider contribution to the industry that
Channel 4 makes is based outside London and I think new media
activities will follow that. We are doing a lot, we have always
done a lot historically and we would want to carry on with that
going forward.
Mr Taylor: I think it is very
early days in new media. Most of the conversations, the Pact negotiations,
are all around distribution, so it is taking content that has
been made and how you distribute it on new media platforms. We
are very interested in how you take Channel 4's brand and commission
content that is bespoke to new media platforms, which means we
find ourselves talking to a whole new creative community which
is new media developers. That is really a new and emerging market,
because, apart from Channel 4 and, to a certain extent, the BBC,
there has not been a huge demand for those creative skills yet.
The large ISPs predominantly have been around looking for, again,
television programming that has been made and then distributing
it, so we are really keen to replicate the Channel 4 model. We
have stimulated since the eighties the TV production community;
how can we stimulate, in the new media space, a whole new production
community, and there are not many companies out there doing that
at the moment. For example, we have FourDocs, with our broadband
documentary channel which we launched last year, and again we
used the commissioning model so we worked with the company Magic
Lantern. We are aiming to launch For Laughs, which is a
comedy version of a user-generated comedy channel online. Again,
we have outsourced that using Conker, which is affiliated to Mersey
TV, and Baby Cow, which is a north-west production company, so,
again, it is taking the Channel 4 model that we have had on TV
and how you replicate that in new media.
Q404 Helen Southworth: We have been
getting international evidence that content is the driver for
new media developments. What opportunities have we got in the
UK creative industries, from your perspective, to boost development
and then export within the sector, and what do you think Government
needs to do in order to drive that along?
Mr Duncan: We are trying very
hard to put a lot of investment in this whole area. The truth
is, at the moment there is very little coming back into us as
revenue stream, so whether it is spin-offs of programming that
appears on the television channels, whether it is original, generated
content of our own, or whether it is user-generated content that
we are facilitating, with the sorts of things Andy mentioned,
we are being very, very proactive in this area, but actually it
is a cost rather than an income source, and that is a worry for
us. Very specifically, I think that over the next few years, if
we are going to carry on with that sort of investment, particularly
if carrying advertising comes under pressure, the underpinning
of the whole Channel 4 model is a Channel 4 issue. More widely,
I think it would be a good idea to encourage the BBC, both in
their programme production WOCC system and potentially their new
media activities, to do more outside London, because often we
find that we are trying to do more regionally but actually the
independent company infrastructure is not as strong as it could
be. Although the BBC have made a commitment to increase WOCC,
then there is some encouragement to make sure enough of that is
spent outside London, we do not think that is as robust as it
could be. There is no reason why they should not have a kind of
regional quota on their indie production, in the same way that
they do for their overall production and, to some extent, on new
media, because that, I think, would really stimulate the independent
sector outside of London, including new media.
Q405 Helen Southworth: Could I ask
you about the Regional Development Agencies. Within the Creative
Cities initiative you referred to relationships with the Regional
Development Agencies. Are you confident that they are capable
of what is necessary, or are there things which need to be done
to improve their performance; what is the position?
Mr Duncan: We work very closely
with a number of the Regional Development Agencies. Stuart Cosgrove,
who is our Director of Nations and Regions, would probably be
able to give a better view, but my sense is that some are better
than others. Some have been very productive, good partnerships
that have actually been going for a number of years and going
very well, and others are more patchy. I think it is true to say
that generally we feel that direction, doing more to encourage
things outside London regionally would be helpful, because we
are trying to spend our money there and there is not the infrastructure,
and the Regional Development Agencies are trying to do things
also to stimulate that. Probably, as I say, the clearest opportunity
to do something about this would be to encourage the BBC to do
more.
Q406 Helen Southworth: You think
they should move to Greater Manchester as well?
Mr Duncan: I think they should,
as long as they do not put in an artificially high bill which
then justifies an artificially high licence fee increase; so,
based on realistic improvement costs, yes.
Q407 Chairman: You mentioned the
dreaded subject, and therefore I shall bring it up, Big Brother.
How do you react to the charges that, in order to maintain audience
interest, you are having to turn this ever more into a sort of
freak show and that actually you are exploiting some quite disadvantaged
people?
Mr Duncan: I do not agree with
that, as you might expect.
Q408 Mr Hall: With which bit do you
not agree?
Mr Duncan: Big Brother,
right from when it first came on air, in series one, has always
been polarised, is the truth, as is much of Channel 4 programming.
Much of Channel 4's output upsets one person and somebody else
loves it, so that tends to be what we do. I think Big Brother
has reinvented itself each series, that it has tended to go in
a slightly different direction, with different characters and
different things happening, and it tends to be a bit of a "love
it or hate it" show, so there are those people who have hated
Big Brother ever since it came on air and still hate it.
I have to say, those people particularly, not that it is specifically
generational but typically, it is partly generational, the older
generation seem to love it and we are getting higher figures now
than ever, so we are about another 11% or 12% up year on year
and most nights it is peaking at over five million, even when
the World Cup is on; it is very compelling. In a sense, it is
our soap opera really, it is our equivalent of EastEnders,
but it is real people in an everyday setting. It works, it is
very polarising, it is something on which, I think, we spend a
lot of time and energy and attention to make sure we are putting
it out appropriately, in conjunction with Endomil. It is part
of the schedule and works well for us, but it is only one part
and we have got a lot of other things that are on during the summer
months, we had more focus on history last night and there is always
a range of things on.
Q409 Chairman: Are you not worried
by the criticism, particularly from some of the charities?
Mr Duncan: It has always drawn
criticism, is the truth, and we are always considering carefully
have we got the balance right, have we got the pitch right. I
think we are very comfortable that the show is working well this
year.
Q410 Chairman: The fact that mental
health charities have expressed concern is not something that
causes you any particular worry?
Mr Duncan: We are concerned when
people express concern but, having looked into it carefully,—
Q411 Chairman: You just do not agree
with them?
Mr Duncan: We do not agree with
them, no, and we have gone through a very rigorous screening process
and we stand by the decisions we are taking.
Chairman: Thank you very much.
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