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

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

4 Public service delivery

Core Channel

32. Before the Digital Economy Act, Channel 4's formal public service responsibilities were focused almost exclusively on its public service broadcasting (PSB) obligations on its core Channel.[60] The Act leaves unchanged Channel 4's core channel public service remit to "provide a broad range of high quality and diverse programming which, in particular—

· Demonstrates innovation, experiment and creativity in the form and content of programmes;

· Appeals to the tastes and interests of a culturally diverse society;

· Makes a significant contribution to meeting the need for the licensed public service channels to include programmes of an educational nature and other programmes of educative value; and

· Exhibits a distinctive character.[61]

33. The Act also leaves unchanged the terms of Channel 4's TV licence, which specifies targets for hours of news, current affairs, schools programming and for percentage of programmes that are original productions, independent productions, subtitled, audio-described, and regional productions as a means of measuring the extent to which Channel 4 is delivering its public service remit on its core channel.

34. Our predecessor Committee was somewhat sceptical about the volume of PSB on the core channel, commenting that: "it is far from clear that the level of PSB content that is broadcast has been properly examined. Indeed at times, the core channel's output appears composed largely of non-PSB programming."[62] Some statistics in Channel 4's 2009 Annual Report support this concern. In 2009, Channel 4 spent £145 million on what it terms as its key UK-originated, PSB genre programming on the core channel.[63] This was 5% less than the previous year (down by £8 million from £153 million in 2008). [64] Moreover, this comprised a minority of the £341 million expenditure spent on all UK-originated programming on the core channel, and an even smaller proportion of the expenditure of £471.9 million on total programme and other content on the core channel (down 8.5% by some £44 million in 2009 from £516 million in 2008).[65]

35. On the other hand, Channel 4 also recorded in its 2009 Annual Report that it had met or exceeded all the PSB programme obligations placed on it by Ofcom.[66] Mr Abraham further defended the balance between PSB and non-PSB programmes to us, arguing that:

The Fairy Jobmother

4Thought.TV

Channel 4 News

Network of services

36. In supplementary evidence to this Committee, Channel 4 argued further that its public service delivery "should be assessed more broadly than by sole reference to total expenditure on first-run originations in "key PSB genres" on the main Channel 4 service," noting in particular that "the updated remit recognises the public value provided by Channel 4 beyond the main Channel 4 service."[68] This is a very important observation, which raises the issue of how the Committee, and Ofcom and viewers, should assess Channel 4's public service performance following the passage of the Digital Economy Act.

37. This may be quite challenging. As set out in paragraphs 25-26, Channel 4 now has primary functions and tasks relating to its whole portfolio of services with a clear public service component. However, Channel 4's licence and measurable targets still focus solely on its core channel's PSB remit. As Lord Burns pointed out in supplementary evidence to the Committee "the Act does not give the digital channels public service status—with commensurate public service obligations and benefits."[69] The Act provides a framework for recognising the public value of the digital channels, "their role in creative and public service terms,"[70] as Channel 4 put it. There is, however, as yet no clear external guidance as to how their contribution might be measured and assessed—though Channel 4 does include them in its own assessment of its Public Impact, published as a separate Report within the Annual Report.

38. It is unfortunate—a consequence perhaps of the lack of proper scrutiny of the Bill by the House of Commons during the final period before the general election— that the Act does not do more to clarify the status of Channel 4's network of services. As a consequence, Channel 4 appears to have far greater leeway as to how it delivers a public service-orientated remit outside the core Channel.

39. One cross-network obligation Channel 4 does have under the Act is to produce an annual statement of media content policy. In November 2010, Ofcom published, for consultation, draft guidance for Channel 4 on how to complete this document. For Ofcom, this guidance note "represents a new approach to the regulation of C4C's duty to provide public service content across the full range of its media platforms." We infer from this that the Government and Ofcom are looking to the media content policy as the key means of establishing Channel 4's public service content-related obligations outside the core channel. If this is indeed the case, then we would expect to see emerging from this process, measurable performance targets for its new primary functions, similarly to those contained in the TV licence for its core channel, building-on and validating Channel 4's own Public Impact assessments. The draft guidance does provide some reason for optimism in this regard. We welcome, in particular, the proposal that the media content policy statement "should discuss overall strategy and the balance between content provision on the various platforms—including the reasons behind decisions to deploy different platforms."[71] We also agree that "C4C should "review its actual performance against the stated policy goals. The review should be rooted in measurable data, but include narrative assessment where appropriate."[72] On the other hand, the draft guidance note also states that the measures that may—as opposed to must—be included. Furthermore, the proposal that Channel 4 should provide "an indication of the relative levels of investment involved" when discussing overall strategy and the balance between content provision on the various platforms, is potentially weak, leaving unclear, for example, how much Channel 4 is spending on public service content on each digital channel.[73] This is, perhaps, indicative of the caution with which Ofcom is approaching its oversight role of Channel 4's new remit. In turn, this gives rise to a concern that the eventual final guidance might allow Channel 4, should it be so minded, to cherry pick favourable measures rather than present a more rounded picture of performance across its network.

40. We welcome Ofcom's attempt to establish a regime for establishing, monitoring, reviewing and enforcing public service-related obligations for Channel 4 across its network commensurate with its new remit under the Digital Economy Act. The final outcome should enable everyone to better understand what Channel 4 can be expected to deliver, and viewers to receive, in terms of public service-related output across Channel 4's portfolio of services and allow Ofcom, and Parliament, to hold Channel 4 to account for the delivery of these undertakings.

Risks and challenges

41. During oral evidence, Channel 4 offered the Committee some examples as to how it expected the non-core services to complement the core channel's PSB remit and enhance its public service delivery. Mr Abraham looked ahead to a future in which Channel 4 would use new technology to increase the reach and impact of its PSB content, building for instance on the success of the Embarrassing Bodies formula which combines TV viewing with internet interaction. He told us that:

42. By way of further example, Mr Abraham also commented that "I am very interested to see what the potential of news provision is in an era of greater convergence."[75]Anne Bulford, Channel 4's Chief Operating Officer, saw Channel 4's coverage of the London 2012 Paralympics Games as a good opportunity to increase public impact through "not just live streaming of events [...] but also the way in which we would want to use social media to join people up and to really make it a participative digitally inclusive event."[76]

43. Channel 4's digital vision, underpinned by the new Digital Economy Act framework, is an enticing one. On a more cautionary note, however, it can be argued that the contributions that, for example, the digital channels have made to public service delivery to date have been small. E4, for instance, showed just 35 hours—less than an hour a week— of first-run UK originated programming in 2009 (excluding Big Brother), a 24% reduction from the previous year.[77] In aggregate, first-run originations across the digital channels (excluding Big Brother streaming) totalled less than one hour a day (0.8 hours, down from 1.1 hours a day in 2008).[78] Channel 4's total investment in UK originated content on its digital channels was only £24 million in 2009, down again from £32 million the previous year.[79] Among the results of the cutbacks was the ending of More4 News.[80] Although it is certainly plausible to argue—as Channel 4 maintains—that Channel 4's digital channels have the potential to provide "valuable opportunities to innovate and experiment and reach diverse audiences such as younger viewers,"[81] this potential would appear to us to have some way to go before it is fully realised. The award winning E4 commissions Skins and Inbetweeners may well point the way forward, but are not sufficient justification on their own for a portfolio of channels.

44. There are questions around the extent to which Channel 4's additional services and new technologies are capable of enhancing the content and impact of Channel 4's public service delivery, not least because of the money Channel 4 has spent on establishing them. As we noted in paragraph 19 above, the narrative in the 2009 Annual Report is that the profits of the digital channels have come to the rescue of the loss-making core channel and that, as then Interim Chief Executive Anne Bulford put in her foreword to the Report, "with so much pressure on the core channel's performance, 2009 was a year when the wisdom of our long-term investment in digital became ever more apparent."[82]

45. It is, however, possible to take a different view. Our predecessor Committee noted that some critics had claimed that:

In supplementary evidence to our predecessor Committee, Channel 4 admitted that its portfolio of digital channels was not expected to fully recoup their costs since inception until 2012.[84]

46. In this context, the fate of Channel 4's 4iP project provides a salutary lesson of the perils inherent in using a full portfolio of channels and services to deliver an acceptable return of public service content. In Next on 4, Channel 4 committed itself to growing its presence across digital platforms, including by launching a major digital media pilot fund—4iP—for content and services with clear public service ambition. The document further explained that:

Significantly, Next on 4 termed 4iP: "one of the biggest and most exciting calls-to-action to new and emergent digital media companies in the UK. For Channel 4, it represents a significant step towards our transformation into a truly cross-platform network."[86]

47. Channel 4's update on 4iP in its 2009 Annual Report—one year into the pilot fund—hinted that progress had been slower than originally envisaged. While Next on 4 envisaged a fund that would invest up to £50 million over the next two years, with Channel 4 contributing £20 million, the Annual Report noted: "Since 4iP's launch [at the end of 2008] Channel 4 has invested a total of around £3 million in approximately 40 companies. [...] a further £2 million was leveraged from regional funds [...][87],raising questions as to the amount of public service content that it was generating.

48. In October 2010, Channel 4 announced the cancellation of the 4iP project and the end of the 4iP brand.[88] According to media reporting, some £12 million of Channel 4's own budget had been spent on the project, whilst generating few if any successful businesses.[89] Daniel Heaf, Channel 4's former digital commissioner, was reported by the Telegraph as saying that "I think 4IP was absolutely set up to fail. Not deliberately so, but it didn't have any clear objectives, so how could it have worked in the long term?" Revealingly, in terms of the capacity for new technology projects to draw funds aware from core PSB programming, Mr Heaf was also reported as commenting that ""Andy Duncan was 4iP's founding father, so it is hardly surprising that it is no longer a priority for the new chief executive—who has a lot of fires to put out at Channel 4, and is choosing to focus on the TV schedule, which has a bit hole in it, [since Big Brother finished]".[90] The head of a project funded by 4iP was quoted in the press as commenting that "They could have created a lasting edifice, but where did that money go?"[91]

49. The Head of 4iP, Tom Loosemore, who is leaving Channel 4, wrote on his blog that the upsides of 4iP were "a truly, truly, fantastic team. The excitement of doing risky new stuff. And the joy of working with so many wonderful small companies." But he also commented that the downsides were: "Pretty much as Dan Heaf described, I'm afraid. No-one could ever agree what 4iP was for, a failure for which I must take some responsibility."[92]

50. Channel 4 has a difficult balancing act to maintain if it is to reap maximum public service impact from its full portfolio of channels and services. On the purely financial side, it must assess whether they have the potential to generate profits that can then be used in support of public service content, or whether their associated operational costs risk diverting money away from it. On the creative side, it must balance the need to sustain public service content on its core channel—where the audience is highest—with the potential of its new platforms to reach new audiences. Channel 4's new portfolio of channels have greatly increased the volume of non public service content that it broadcasts If Channel 4 makes the right choices, then its new framework will deliver on its promise to provide additional public service benefit to viewers. If Channel 4 makes the wrong choices, then there is a risk—not least given that its new portfolio of channels have greatly increased the volume of non public service content that it broadcasts— that the new framework will lead to PSB content becoming diluted or ghettoised. Mr Abraham's observation to us that: "[...] I am looking carefully at some of the fundamentals. How do we take our overall budget and allocate it between the genres? Which genres are delivering more directly and more indirectly?"[93] implies that he is aware of the tensions.

51. There is also a further issue arising from Channel 4's new portfolio of services and the increasing volume of non public service content that they generate, namely the competitive impact of its activities on the wider market. As our predecessors observed, "the extension of Channel 4's primary functions beyond the core PSB television channel, along with the growth of 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."[94] This is an important issue, which the Committee may consider in more depth next year, as more evidence emerges of the overall impact on the markets of Channel 4's new remit.

52. Channel 4's new remit and its plan to operate as a public service network beyond the core channel has some financial and creative risk. We recommend Channel 4 clearly articulates its strategy for the amount of public service delivery to be returned from its commercial activities for each individual channel and online. The Committee will be looking to Channel 4 to demonstrate that its growing empire is constructed so as to support its primary functions, and not detract from them.

Nations and regions

53. Channel 4's 2009 Annual Report emphasises the importance it attaches to supporting creativity across the UK, recording an investment of "more than £100 million on programming outside London in 2009, including some of Channel 4's most popular series, from Location Location Location to Skins."[95] It also noted that: "notwithstanding the reduction in total programming budgets in the year, and resulting decrease in the volume of first-run originations, there were increases in the proportion of commissions made outside London both by volume and by expenditure."[96]

54. However, during our oral evidence session we observed that, in percentage terms the amount Channel 4 was spending on regional production (32% in 2008, 37% in 2009)[97] was not far above the minimum 30% requirement set by Ofcom. We asked whether Channel 4 had an aspiration to do better. Both the Chief Executive and Chief Operating Officer were keen to reassure us on this point. Mr Abraham explained that:

Hollyoaks,

Ms Bulford further observed that:

55. We pressed in particular on the percentage of programming coming from the nations, noting that the quota of 3% of network spend on originated programming coming from Northern Ireland, Scotland and Wales was rather low, given a total population share of 15% of the UK population. We suggested that Channel 4 should be setting more challenging targets, and received a holding response from Mr Abraham: "[...] three months in I probably need a little bit of time to give you a more informed response, [...] but I can give my commitment that when I sit here in a year's time I will give you a fuller assessment".[100]

56. We also asked whether Channel 4 could consider taking a leaf out of the BBC 's book and move commissioners out of London to stimulate commissioning outside the M25. Mr Abraham gave us some encouragement, observing that "I am not aware of whether that has been looked at from a cost or feasibility point of view, but it is certainly something that I will look [at]."[101] We urge Channel 4 to redouble its efforts to increase the proportion of UK-originated commissioning from the nations and regions. We propose that Channel 4 set a medium term target of 15% of network spend on originated programming coming from the nations, in line with their total population share. We look forward to hearing next year the results of the Chief Executive's reviews of targets for commissioning from the nations and the potential benefits of re-locating commissioners out of London.

Film

57. Channel 4 has an enviable record of supporting the British film industry. Its 2009 Annual report noted that "the Oscars that Film4 achieved for Slumdog Millionaire in February were a reminder of Channel 4's special creative alchemy and our ability to shape the [British] culture."[102] The Report also noted that the success achieved during 2009 by a number of other films with Film4 investment behind them, including Nowhere Boy, Looking for Eric and The Lovely Bones, and recorded that Film4's early involvement in films helped to attract additional funding worth four times its own investment.[103]

58. Historically, Channel 4 has spent £10 million annually on film production. However, more recently this had fallen to £8 million as Channel 4's revenues have fallen. During our oral evidence session we welcomed Channel 4's new commitment to increase the annual film budget back to £10 million. We asked, given that film production was now explicitly within Channel 4's PSB remit under the terms of the Digital Economy Act, whether we could expect the budget to grow further. Mr Abraham was non-committal, although he did acknowledge the importance of Film4, suggesting that it is "at the very upstream end of idea development of unique British writers and filmmakers"[104] and observing that it "is certainly something that I would be very passionate about protecting and building on."[105] Subsequent to our evidence session, on 14 October 2010, Channel 4 announced a further increase to Film4's budget to £15 million per annum, effective from 2011, guaranteed for the next five years. We commend Channel 4 for increasing its financial commitment to UK film production, which is particularly welcome in the present climate of public sector austerity and following the Government's decision to close the UK Film Council. We are considering the decision to close the UK Film Council in more detail as part of our ongoing inquiry into the funding of the Arts and Heritage.

Big Brother

59. Big Brother has been a lucrative fixture of Channel 4's schedules for nearly a decade, though opinion remains divided on whether it has been a PSB success as well as a commercial one. Its end leaves a big hole in Channel 4's schedules, and we were keen to hear how Channel 4 planned to replace it. Mr Abraham was predictably upbeat, telling us that:

Big Brother

106

60. We are encouraged by Channel 4's intent to replace Big Brother with a more balanced and diverse schedule, but do not underestimate the size of the challenge facing Channel 4 to achieve this while holding on to ratings. We look forward with interest to Channel 4's assessment next year as to how successful these efforts have been.

60 The requirement to produce school programming online being the only exception Back

61 Communications Act 2003, Section 265 Back

62 Culture, Media and Sport Committee, Third Report of Session 2009-10, Channel 4 Annual Report, HC 415, para 13 Back

63 First-run Uk-originated content in the following genres: News, Current affairs, Education, Comedy (part of the Entertainment category) single dramas, drama series, and Film4 productions (part of Drama), Religion and Arts (part of Arts and Music). See Channel 4 2009 Annual Report, p 69. Back

64 Channel 4 2009 Annual Report, p 69 Back

65 Ibid. Back

66 Channel 4 2009 Annual Report, p 137 Back

67 Q 23 Back

68 Ev 23 Back

69 Ev 21 Back

70 Ev 23 Back

71 Ofcom Draft guidance note for completion of C4C combined statement of programme and media content policy, published 24 November 2010 p 2 Back