Examination of Witnesses (Questions 2222
- 2239)
WEDNESDAY 19 MARCH 2008
Mr Luke Johnson and Mr Andy Duncan
Q2222 Chairman:
Good morning. Thank you very, very much for coming at relatively
short notice. We are very grateful; we know you are both extremely
busy. It is very good to have both the Chairman and the Chief
Executive here. You know what we are doing; we are looking at
news, we are looking at its impact on the citizen and about ownership.
I know, because there has been a presentation and we have had
conversations on this, that Channel 4 has set out its new vision
and, if you will forgive us, we will not go into every detail
of that new vision at the moment. I will keep very much to the
news and current affairs. I wondered, therefore, if you would
begin by saying to what extent news and current affairs is part
of that vision for the future?
Mr Duncan: We would see it as absolutely central,
arguably the most important programme in terms of part of the
provision going forward as it has been over the last 25 years.
We have obviously identified some quite specific public purposes
that we think Channel 4 has been serving but needs to continue
to deliver against going forward, in particular helping people
understand the world around them is the purpose that is most relevant
to the news and current affairs side of things, and also exposing
people to different points of view and different perspectives
which is another purpose that Channel 4 has always done very well.
The news itself, the seven o'clock peak, lunchtime and also on
More4 are absolutely crucial, but also current affairs. Over the
last few years we have strengthened quite heavily our current
affairs programming with things like Dispatches where from
only about 15 episodes a year we are now doing 41 programmes in
peak and we also do a number of other important current affairs
programmes, including ones that cover international issues like
Unreported World. I think they have been important, we
have been strengthening them over the last few years and they
are absolutely central to the Next on 4 future role as
we see it.
Q2223 Chairman:
That is an interesting point you make about Dispatches.
In my view you did a very good programme last Sunday on Iraq but
you have actually increased the number of those programmes, have
you?
Mr Duncan: That is correct. If you go back about
three years we were doing something like 15 per year and we have
progressively increased and now have up to 40 a year. Most of
them are on at eight o'clock on Monday nights for a full hour;
some of them occasionally run Thursdays at nine o'clock, for example.
They are always in peak and they have done extremely well. I think
I am right in saying that we are the only people to have actually
increased that over time. Obviously if you look at what has happened
elsewhere one or two broadcasters have cut back in terms of their
serious current affairs coverage. In my view rather disappointingly
the BBC reduced Panorama from one hour to half an hour;
perhaps even more frustratingly they counter-scheduled it against
Dispatches on a Monday night which I think was a very poor
thing to have done. If they are only going to do half an hour
in the whole week on current affairs with Panorama why
choose Dispatches to schedule it against?
Q2224 Chairman:
Do you two organisations not communicate?
Mr Duncan: Not about scheduling.
Q2225 Chairman:
That is quite an important point. There is not that much of current
affairs of that kind to actually have them showing at the same
time. It seems very daft.
Mr Johnson: I suspect it would be considered
improper, possibly illegal, to conspire over scheduling, but also
the BBC are a very, very competitive organisation.
Q2226 Chairman:
We will stay with Channel 4 actually because you are quite a competitive
organisation too. What improvements can we expect under your plans
in the news and current affairs area?
Mr Duncan: With news specifically I think the
strengthening we have done over the last few years we hope to
continue with. Although there are a lot of economic forces that
would drive you the other way, we are very much committed to keeping
the one hour of news at seven o'clock. I think that is the key
centrepiece and it is unique in terms of British broadcasting.
We have a full hour which does allow the programme to go into
much more depth on political issues and on international issues;
you can have, as happened last week, the opening item running
for 20 minutes whereas most of the other half hour bulletins can
normally only give a maximum of five minutes to an article. The
in-depth analysis and the length of time we give to issues on
Channel 4 News are crucial and we want that to remain.
We have, as I said, introduced a lunchtime news programme over
the last few years and we are committed to keeping that. Most
recently we added More4 News at eight o'clock on
digital channels. Again I think we are unique in adding a half
hour news programme on a digital channel; no-one else does that,
including the BBC. In terms of news I think that is where we are
on the linear schedule. We are looking to further strengthen online.
We have experimented and done some quite interesting things in
terms of how Channel 4 News can be there on an online basis.
The other thing that we talked about in the document and we are
very interested in is how can we take that news traditional strength
and try to put it in different environments. Most interesting
for us are teenagers where we announced a pilot with Bebo
to look at how news and current affairs programmes might be able
to work in the context of social interaction sites online. That
is complementary to rather than instead of the existing commitment
on the linear schedule.
Q2227 Chairman:
Turning to how we are going to afford all this, we took evidence
from Dorothy Byrne, the Head of Channel 4 News and current affairs
who told this Committee, "I am proud to say that Channel
4 News loses more money for Channel 4 than any other programme
that we make". That is a curious thing to take pride in.
I am not sure what the current funding gap is but I think it is
about £10 million. Is that right?
Mr Johnson: No, it is not. When you look at
commercial television there are two issues. There is obviously
the cost of production but there is also the opportunity cost
of the broadcast time and that is mainly about peak. The fact,
as Andy stressed, that we broadcast an hour in peak means that
the gap between advertising revenue received during that hour
and production costswhich is all of £10 million a
yearis only half of the cost. The other cost is what, if
we scheduled Ugly Betty or Desperate Housewives
or, shall we say, an overtly commercial broadcast, then potentially
we would be making more money out of the advertising because of
the higher audiences. That is an underestimate of cost.
Q2228 Chairman:
So in fact she understated what the cost is and the actual cost,
taking into account opportunity cost, is about £20 million.
Mr Johnson: I would not necessarily say that
much, but it is certainly a lot more than £10 million. I
think her phraseology was not ideal; we do not set out to lose
money. Obviously what we set out to do is an outstanding job of
public service broadcasting. There are costs attached to that
and, as Andy says, our hour long prime time news broadcast is
at the very heart of our mission. She is proud of the quality
of that transmission and the fact that it offers an alternative
to the other broadcasters.
Q2229 Chairman:
She gave some good evidence to us but, as you know, we always
just take the odd phrase. Given the fact that you are losing so
much money by the news have you not been tempted to say, "If
we move this news to later in the evening, something of that kind,
we will actually lose less"? Has that every proved to be
a tempting option for you?
Mr Johnson: We obviously have a lot of pressures
commercially, as do all traditional media organisations across
newspapers, radio, television, et cetera. It is a balancing act
which is going to become increasingly difficult. If the public
wants this sort of alternative news provision of the quality we
like to think we provide, that comes with a price. I have just
explained the double cost, the deficit on production and the opportunity
cost of broadcasting at peak. News is a flagship and I think it
would almost be the last thing we would conceivably diminish because
I think it is vital in what we set out to do, but the fact is
it is effectively an increasing burden in the sense that there
is a very major deficit of one sort of another surrounding it
by committing an hour of prime time television to news.
Q2230 Chairman:
Would it be fair to say that unless you could get some kind of
support from elsewhere you are not going to be able to support
the news of the revenues you actually generate yourself?
Mr Johnson: We will do everything possible,
including every possible form of self-improvement and internal
remedies. We will try, as far as is humanly possible, to generate
revenues from other sources to continue to provide that news.
As I say, I imagine it would be the last thing we would dream
of cutting. It may come to that if there is no support.
Q2231 Chairman:
In other words you are saying that; you are saying that the revenue
from Channel 4 does not and cannot continue forever to sustain
the news and current affairs programmes that you are providing.
Mr Johnson: It is obviously impossible to predict
the future but our projections suggest that in the coming years,
as digital switchover continues, as online advertising continues
its growth, the balancing actthe extraordinary sort of
amalgam that has been Channel 4of commerciality paying
for public service broadcasting will become an increasingly difficult
act to pursue.
Q2232 Chairman:
So we need to look very carefully at this funding gap.
Mr Duncan: I think it is fair to say that in
terms of a balancing act what we think is incredibly important
is that when we are making programmes that they continue to have
a real impact. The obvious thing you could do is move it to other
parts of the schedule, but we still have to pay for production
costs but you do not have the same opportunity cost as Luke explained.
However, the impact of that would be that we would get to much
smaller audiences and therefore the benefits of that in terms
of public purpose would be significantly reduced. I think within
priorities the news would almost certainly be the last place you
would go. There are other areas of obvious public benefitinvestment
in other genres, investment in British filmwhich are all
under some economic pressure as we go forward. I think it is fair
to say that we probably regard the news as probably the most important
priority of all and therefore the last place, as Luke has said,
where we would want to make any changes.
Q2233 Baroness Bonham-Carter of Yarnbury:
We have talked a lot about quantity of news and current affairs
and the increase in Dispatches is much to be welcomed,
however quality is absolutely central. I am interested in your
discussion about potential funding gaps how you feel the balance
there should be struck.
Mr Johnson: It is extremely difficult. All our
productions are produced by independent companies and they constantly
complain that budgets are not going upif anything in some
places they are cutsuch that it is becoming increasingly
difficult to get providers of documentaries, for example, because
they feel it is not economic for them to make it. Budgets are
under pressure and the whole organisation is only too aware of
the stresses. The whole traditional media industry is facing the
same issues; we are not alone. There is no doubt that if we have
to cut budgets further then quality would inevitably diminish.
Mr Duncan: As things stand, without going into
the detail of the book, there is a whole chapter in here based
on audience research and what other people think of what goes
on. There is quite a big section in there on news and as things
stand today the quality of Channel 4 News is rated very,
very highly by the audience. It is also rated very highly by politicians,
for that matter. Interestingly the independence of the news ranks
very highly; we are by some distance seen as the most independent
news which I think is also important. The qualities of impartiality,
fairness, accuracy, breadth and analysis are there and there is
plenty of data in there if the Committee is interested that supports
that.
Q2234 Baroness Eccles of Moulton:
If I could return for a moment to the funding issue which, after
all, is absolutely crucial, I think Lord King is going to ask
you about post-DSOafter all we have about three and a half
years to gobut as I understand it you have the gifted spectrum
which is the analogue bit of it, but your predictions over the
next three and a half years are quite grim really because your
public service income is diminishing. I think it would be quite
interesting to understand why it is that the gifted spectrum is
being eroded before digital switchover.
Mr Johnson: Our advertising income is under
pressure, not our public service income. We do not have any public
service income but we have free spectrum. The implicit value of
that is eroding because more and more people are getting Freeview
or Sky or cable and in all those homes there is an instant diminution
in our audience share, which hits our audiences and which has
a knock-on effect in terms of advertising.
Q2235 Baroness Eccles of Moulton:
So the gifted spectrum, as it were, the amount of financial benefit
you have derived from that is influenced by the number of viewers.
Mr Johnson: Yes. Historically the scarcity of
spectrum meant that there was very little choice and there are
still a surprising number of homes that only get five or even
four channels. Obviously you will get a higher audience share
than in a Sky home where you might get 400 channels. Even before
switchover when they turn off the analogue signal more and more
homes throughout the rest of the country are adopting digital
television be it terrestrial through Freeview or be it satellite
through Sky or be it cable.
Baroness Eccles of Moulton: That is very
helpful because I think it is important to understand the link
between actual viewing numbers and the benefits to the public
service aspect of the work that you do and the relief on spectrum
charges. That is what I was wanting to understand.
Q2236 Lord Corbett of Castle Vale:
Can I just make sure I understood what you said earlier in response
to a question from the Chairman? You started off by saying that
news and current affairs are really at the heart of what you are
in business for and yet you then went on about the costs, for
example, on the back of what Dorothy Byrne said. I thought I heard
you sayI would like you to clarify this if you would, pleasethat
there may come a time when that news and those current affaires
programmes are really under threat and if you were going to survive
they would have to be reduced. That is what I heard you say; was
that right?
Mr Johnson: Ultimately it may come to that.
It depends whether we are, for example, as stewards of Channel
4, willing to run the organisation at a loss. It obviously depends
on the overall economy and advertising revenues. It depends on
how the opposition schedule against us. As Andy said, it obviously
depends on how we allocate budgets towards other genres. I think
we have both made it very clear that news and current affairs,
be it Dispatches, be it Unreported World, be it
Cutting Edge, be it obviously Channel 4 News or
More4 News are central to what Channel 4 ispart of
its DNAand they would essentially be the very last thing
that we would chop. However, if we fill the entire rest of the
schedule with utterly commercial broadcasts then I think there
would be a very considerable amount of criticism. At the edges
you would have to start taking very difficult, painful decisions
about scheduling and budgets.
Q2237 Lord Corbett of Castle Vale:
If you were driven to that you would lose what is distinct about
Channel 4.
Mr Johnson: Yes, these are very difficult editorial
decisions and we do not feel we want to have to go down that road
because I think it would greatly diminish Channel 4 and we would
become a wasting asset. As a steward of what I think is a great
public asset, I think that would be tragic.
Q2238 Lord King of Bridgwater:
This is a very interesting document but it does not have any figures
in it, does it? It would be very interesting to see a trading
statement and matters of that kind.
Mr Johnson: You will have the annual report
in a month.
Q2239 Lord King of Bridgwater:
You talked about increasing the number of Despatches programmes,
what does that represent in budgeting terms? To what extent did
you up your expenditure on those programmes?
Mr Duncan: We would need to check the exact
figures and come back to you on that, but if you we take news,
for example, we have increased slightly our overall budget; we
have also got some production efficiencies from a new contract
with ITN two and a half years ago (we are about half way through
a five year contract). Through modernisation techniques we have
some efficiencies and rather than take that as a saving we reinvested
all those efficiencies back into editorial, for example, we had
a new bureau in China and things like that. Similarly, the thing
I mentioned earlier on More4 News was a new spend on news
on that digital channel.
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