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


Conclusions and recommendations


Digital Economy Bill

1.  The impact on markets in which a public service broadcaster operates can be both positive and negative. Much concern has been expressed - including by this Committee - about the negative impact of the BBC as it has expanded both its public service and commercial activities. The extension of Channel 4's primary functions beyond the core PSB television channel, along with the growth of its non-PSB activities, means the market impact this public organisation has might increase significantly, raising questions about how this impact should be monitored and controlled. We recommend that the Government consider and address these issues now, during the passage of the Digital Economy Bill. (Paragraph 17)

2.  We agree that any expansion of Channel 4's remit, and any extension of its statutory public service activities to services beyond its single traditional PSB service, the main Channel 4 television channel, requires provisions for monitoring and enforcing the new functions. It is far from clear, however, that the monitoring and enforcement provisions proposed will be the most appropriate and effective means for achieving this. (Paragraph 22)

3.  Nor is it clear that the existing governance framework for Channel 4 is the most appropriate for its proposed new status. While the BBC and Channel 4 retain different funding models, the evolution of both as publicly-owned, not-for-profit multichannel, multiplatform public service broadcasters, benefiting from direct and/or indirect public funding, calls into question the rationale for maintaining dramatically different governance systems. (Paragraph 23)

Annual Report for 2008

4.  We are grateful to Channel 4 for the provision of the information which we sought, but we do not agree that withholding from the public the figures relating to its individual digital channels, E4, Film4 and More4, is justified. Channel 4 occupies a unique position as a broadcaster in the UK and should be transparent on the costs and benefits of its non-PSB channels. It is not obvious to us what, if any, commercial disadvantage Channel 4 could suffer if this information was in the public domain. (Paragraph 39)

5.  Moreover, we find this lack of transparency on its digital channels incompatible with Channel 4's ambitions for them to be part of a public service network, as proposed in the Digital Economy Bill. (Paragraph 40)

6.  While in principle we support the inclusion of a public service broadcasting requirement relating to older children in a revised Channel 4 remit, it is clear that Channel 4 did not achieve its aims of demonstrating via a pilot fund its capability to commission engaging content that connects with its intended audience, or successfully demonstrate what it could do with further resources. (Paragraph 49)

7.  We find it difficult to accept Channel 4's claim that competition authority reference of Project Kangaroo "was a surprise to most people" and that "the general view [of Project Kangaroo] within the industry was that it would be a good thing and clearly in the public interest", with "only one or two" complaints from competitors. This is contradicted by the number and weight of representations to the competition authorities, and their findings regarding the threat to competition in the VOD market. (Paragraph 54)

8.  There is clearly a disparity between Channel 4's depiction to us of the BBC Executive's expectations for BBC Trust approval of Project Kangaroo (based on the Executive's reported dealings with the Trust), and the position of the BBC Trust. However, we believe that, given the level of investment involved, Channel 4 was unwise to rely on the assurances it received from the BBC Executive, and to make such heavy investment in advance of a decision of the competition authority. This is especially the case given the financial cutbacks by Channel 4 in other areas, such as its pilot fund for children's programming. (Paragraph 58)

9.  There is a clear disparity between Channel 4's initial claim that the BBC outbid it for Harper's Island, and the BBC Director General's claim that Channel 4 withdrew from the bidding for editorial rather than economic grounds. However, we agree with Channel 4 that there does not seem to be any reason for the BBC as a licence fee funded public service broadcaster to acquire programmes such as Harper's Island, let alone outbid others using public money, thereby reducing the resources available for original UK production and talent. (Paragraph 64)

10.  We cannot agree with the assessment that such a loss represents a "modest amount". On the contrary, we believe that this represents a significant amount of funding that could more usefully have been used to maintain the public service content on Channel 4's core channel. (Paragraph 66)

11.  Whether or not accounting rules required Channel 4 to detail the costs and losses of its failed digital plans, we believe that public accountability requirements mean that it should have been clear and transparent as part of its annual reporting process. The opposite was the case. In fact, had this Committee not made its own enquiries, the total figures might never have been disclosed publicly. (Paragraph 68)

12.  It must be hoped that the appointment of a new Chairman and Chief Executive at Channel 4 will provide the stability which Channel 4 needs to transform itself successfully into the public service broadcaster envisaged in the Digital Economy Bill. We trust that they will work together effectively and look forward to holding them to account for the future performance of Channel 4. (Paragraph 75)


 
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