Conclusions and recommendations
A funding gap?
1. Having
listened to the comments of the new Chairman and Chief Executive,
we conclude that the question of a "funding gap"—a
central component of the previous regime's strategy— has
indeed been consigned to history, replaced by a more robust assessment
of future advertising revenues, albeit still below previous highs,
and of the potential for further efficiencies. (Paragraph 15)
2. We conclude that
the previous management overplayed its hand on the funding gap
issue, and that Channel 4's need for additional public funding
was not as mission-critical as was claimed. We recommend that
Channel 4 non-executive Board members review whether they ought
to have challenged the previous management more strongly and whether
there are lessons for the future to be learned from this experience.
(Paragraph 16)
The scale of the independent-funding challenge
3. In
the current economic climate, Channel 4's decision to pursue self-reliance
through exploiting existing and new revenue sources and further
reducing operating costs is the right one. However, given the
extent to which Channel 4 has already made efficiencies, and uncertainties
over future advertising revenue trends, it will be a considerable
challenge for Channel 4 to innovate to the extent required to
make available sufficient funds to maintain current levels of
public service content. We do not under-estimate the size of
the task and, for this reason, we will continue to monitor Channel
4's progress closely. We would not rule out re-examining Channel
4's funding regime in the medium term if, despite its best efforts,
advertising revenue were to drop significantly. (Paragraph 24)
Digital Economy Act
4. We note the general consensus that the
Channel 4 sections of the Digital Economy Act helpfully redefine
Channel 4's remit for the new digital era in broadcasting, and
agree that, in broad terms, they do capture the activities it
needs to undertake, and in a number of respects is already undertaking,
to maximise its potential as a public service broadcaster. (Paragraph
30)
Public Bodies Bill
5. We call on the Government to explain why
Channel 4 is included in Schedule 7 of the Public Bodies Bill
and—unless there is good reason—to remove it. (Paragraph
31)
Public service delivery
6. 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. (Paragraph
40)
7. 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. (Paragraph 52)
Nations and regions
8. 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. (Paragraph 56)
Film
9. 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.
(Paragraph 58)
Big
Brother
10. 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. (Paragraph 60)
Remuneration
11. The remuneration package that Mr Duncan
received was unacceptably high. The award of a loyalty bonus for
only two years service was wrong and should not be repeated. We
deplore the decision process that previously inflated the remuneration
packages of top Channel 4 management to indefensible levels, and
welcome signs that Channel 4 is now taking steps to adjust senior
remuneration downwards. We will continue to keep a close eye on
senior remuneration in future Annual Reports. (Paragraph 67)
12. We continue to find Channel 4's arguments
in relation to non-disclosure of costs by individual digital channel
unconvincing on commercial sensitivity grounds and deficient on
transparency and accountability grounds. We remain unclear as
to the exact nature and scope of the potential damage that Channel
4 fears the additional financial disclosures we recommend would
cause. We urge Channel 4 to review its position. (Paragraph
75)
Transparency and accountability
13. We recommend that Ofcom undertake a review
of, and public consultation on, the Schedule 9 arrangements, in
order to ensure that the adequacy and transparency of the arrangements
have been considered fully, and that the arrangements are updated
as may be appropriate in light of changes to Channel 4's remit.
(Paragraph 76)
14. The Digital Economy Act sets out sensible
primary functions for Channel 4 to work torwards, and Channel
4 has identified the correct method—self-reliance—to
deliver them. However, aligning all its portfolio of channels
in support of these primary functions will not be easy, and it
is very important therefore that there is adequate external scrutiny
of Channel 4's progress. In this context, we are not convinced
that Channel 4 is sufficiently accountable for its output outside
its core channel. We recommend, therefore, that the Government
review Channel 4's governance arrangements to determine whether
they are fit for purpose for a public service network. We also
recommend that Ofcom clarify its understanding of its role and
its plans for oversight arrangements under the new framework.
(Paragraph 79)
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