Select Committee on Communications Minutes of Evidence

Examination of Witnesses (Questions 2222 - 2239)


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 costs—which is all of £10 million a year—is 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 act—the extraordinary sort of amalgam that has been Channel 4—of 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 benefit—investment in other genres, investment in British film—which 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 up—if anything in some places they are cut—such 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-DSO—after all we have about three and a half years to go—but 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 say—I would like you to clarify this if you would, please—that 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 is—part of its DNA—and 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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