House of Commons - Channel 4 Annual Report - Culture, Media and Sport Committee

Channel 4 Annual Report - Culture, Media and Sport Committee Contents

1 Introduction

1. Channel 4 is a unique broadcaster in the UK. Publicly owned, it is a statutory corporation, without shareholders, established and regulated under successive Broadcasting and Communications Acts. It generates all of its revenues in the commercial marketplace but is not-for-profit, its principal focus being the fulfilment of its statutory public service broadcasting (PSB) remit. It receives indirect state funding and other privileges such as free analogue and digital spectrum, "must carry" status and due prominence on electronic programme guides.[1]

2. The Department for Culture, Media and Sport (DCMS) is Channel 4's sponsoring department. Major changes to its legal status and remit are a matter for Parliament. Ofcom, the independent regulator, issues the broadcasting licence(s) and appoints the Chair and Non-Executive Directors for Channel 4, subject to approval by the DCMS Secretary of State.

3. Channel 4 is required to lay before Parliament an Annual Report of its financial accounts and performance. However, as we noted in our Report following our inaugural session scrutinising Channel 4's 2007 Annual Report, concerns have been expressed that the channel lacks accountability and external scrutiny.[2] Our establishment of a Channel 4 Annual Report session was a response to this and is intended to provide enhanced transparency and accountability for the report and accounts, and a forum for the discussion of other issues relevant to this publicly-owned organisation.

4. On 12 May 2009, the Culture, Media and Sport Committee held an oral evidence session with Channel Four Television Corporation ("Channel 4") on its Annual Report and Financial Statements ("Annual Report") for 2008, which was published on 6 May 2009. This was the second time that we have held such an oral evidence session with Channel 4, the first being in relation to the broadcaster's 2007 Annual Report.[3]

5. After the session we received a supplementary memorandum from Channel 4, and we asked additional written questions. We concluded correspondence with Channel 4 at the end of November 2009, and publish this written evidence as part of this Report.[4]

6. During the Channel 4 Annual Report session we questioned the broadcaster on a range of matters relating to its 2008 Annual Report and Financial Statements, its strategy, programming and efficiency, and other issues of current interest including:

The extent to which Channel 4 is or is not facing a "crisis";
The preferences of Channel 4 regarding possible partnerships with BBC Worldwide or Five, and the option of direct public funding from the licence fee;
How programme spend and output are being affected by market conditions;
The profitability of non-core, non-PSB channels E4, More4 and Film4;
Investment in and expectations for approval of the (now abandoned) Project Kangaroo;
Headcount, redundancies and remuneration;
Children's and educational programming;
Investment in the nations and regions;
Succession of the Chairman and Chief Executive of Channel 4.

7. We consider that Channel 4 has generally responded to our questions directly and with sufficient information. Where the broadcaster has not addressed the issues we raised as fully as we would have liked, we comment on this in the relevant sections of this Report.

8. As we have previously stated, we intend to hold an Annual Report session with Channel 4 annually. The importance of this enhanced scrutiny of the broadcaster is greater than ever in light of the Government's proposal, contained in the Digital Britain Final Report,[5] to update the statutory remit for Channel 4. Its own desire for a revised and expanded remit was highlighted in its Report Next on 4,[6] which then-Chief Executive Andy Duncan described as "our strategy to accelerate the organisation's evolution from a public service broadcaster to a truly cross-platform public service network."[7] The Government acknowledged that Channel 4 had itself had proposed many of the elements for a new remit and promised that it would take the views of the Channel 4 Board into account.[8] The proposed changes to Channel 4's statutory remit are contained within the Digital Economy Bill which is currently before Parliament.[9] Before considering specific issues raised in the Annual Report session we comment on the bill, and its impact on Channel 4, in more detail.